(Kitco News) – Gold remains near the middle of its range from the past year, making it a tricky call for technically oriented traders looking to establish positions, says Dave Toth, director of technical-chart research at RJ O’Brien & Associates.
Nevertheless, he sees potential for short-term scalpers – who quickly get in and out of the market – to be bullish as long as prices on the Comex division of the New York Mercantile Exchange are above the area around $1,280 an ounce. But for the longer term, he sees gold as still in a corrective bear market as long as gold remains below the Aug. 8 high of $1,324.30 an ounce.
The market has tended to “whipsaw” and be volatile over the last 1 ½ weeks, and in fact over the past five months, Toth noted.
“It’s the nature of the beast and it’s not a surprise,” he said. “Attention to one’s personal risk profile is key under such circumstances. Short-term traders have to have tighter short-term stops. Longer-term traders have to have wider stops….”
Stops are pre-placed buy and sell orders. They are often used by futures traders when they are already in a position to either exit a losing trade or capture a profit on a winner.
“From a very long-term perspective and on the heels of the 2012-2013 collapse, I still think the past year’s range is bear-market corrective,” Toth said. As a result, he sees potential for prices to eventually fall back below $1,179 an ounce.
Nevertheless, from a shorter-term term perspective, Thursday’s recovery above Tuesday’s $1,291.90 high technically breaks the mid-August decline, Toth said. The most-active December contract has been as high as $1,297.60 so far Thursday.
“For short-term scalpers, I think the trend is up,” he said. “I think it’s OK to be cautiously bullish, with a stop at $1,280.80.”
This is just below Wednesday’s corrective low of $1,280.90 an ounce.
“The longer-term trend is down as long as the Aug. 8 high of $1,324.30 remains intact as a resistance cap,” Toth said. “So if you’re a longer-term player, I think you want to I think you want to approach this recovery attempt as a corrective selling opportunity, but you’re assuming a risks to $1,324.30.”
This article appeared on the site of Advisor Perspectives, a group of advisors focused on investment strategy.
We continue from last weeks discussion on the role of interest rates in the gold market by looking at trends in the cost of carry of gold as priced in dollars, euro, yen and pounds. By way of a brief primer we define the cost of carry of gold in dollars as the London Bullion Markets Association 3 month Gold Forward Offered Rate (GOFO). GOFO is published every day by the LBMA and is calculated as US dollar Libor minus the gold lease rate.
Gold Forward Offered Rate = USD Libor – Gold Lease Rate
If we think of gold in terms of being a currency, the gold lease rate is the interest rate at which investors can borrow or lend gold. GOFO is then defined as the interest cost of financing a gold purchase (Libor) less the interest rate that can be earned by lending that gold (lease rate). GOFO is calculated daily via market poll by the LBMA and is the market benchmark for gold funding costs. Interestingly in gold markets there is little trading volume in uncollateralized lending or borrowing of gold (gold leases) with by far the most trading volume occuring in the gold swap market (exchanging gold for dollars today and then exchanging those dollars back for gold at an agreed future date) priced at the GOFO interest rate. In these terms another way to describe GOFO would be the cost of borrowing gold with dollars posted as collateral. This also means that in practice the gold lease rate is typically not observed but rather it is implied by subtracting GOFO from Libor. Finally we also define the cost of carry of gold in a non-dollar currency as:
Gold Currency Cost of Carry = Currency Libor – Gold Lease Rate = GOFO + Currency Libor – USD Libor
gold gofo July 2011 August 2014 category technicals
At a high level we see that the cost of carry of gold in all the four currencies has been low and stable over the last two years. Even though there are meaningful differences between the carry costs for each individual gold/currency pair with Gold/Pound having the highest cost of carry and Gold/Yen having the lowest, on their own the carry cost for each pair has largely stayed within a 0.20% range. The low and stable cost of carry has largely been a function of central bank monetary policy with their respective central banks, even in the US and UK which are experiencing stronger GDP growth, indicating that interest rates are likely to stay low for an extended period of time.
Since the start of the year the carry costs of Gold/Dollar, Gold/Yen and Gold/Pound have trended higher with the primary driver of higher carry costs being a rise in GOFO. In contrast Gold/Euro cost of carry has actually trended lower and moved back into negative territory meaning that a US investor would earn a yield to hold gold priced in euro. Of note the move lower in Gold/Euro cost of carry has been driven by a move lower in Eurozone interest rates as the Eurozone struggles with stuttering GDP growth and rapid disinflation and which has more than offset the rise in GOFO. The previous recent low in Gold/Euro cost of carry was in July 2013 when it touched -0.20% but with the fall being a function of lower GOFO rather than lower euro interest rates and where GOFO itself turning negative for short periods of time.
Finally we note that negative GOFO (indicating that investors earn a yield to hold gold priced in dollars) historically is a fairly infrequent occurrence but instances of negative GOFO have typically been symptomatic of “excess demand” for physical gold and often been accompanied by moves higher in the price of gold in dollar terms. Although counterintuitive, in a previous commentary, we discussed why the cost of carry of gold might turn negative and showed that it is typically caused when gold investors are willing to pay a premium (called the “convenience” yield) to hold physical gold rather than gold for future delivery and which in turn might be caused by market conditions that tighten the supply and demand balance for physical gold.
Written by Ade Odunsi
(Kitco News) – Gold prices ended the U.S. day session moderately higher Thursday, on safe-haven buying interest, short covering and perceived bargain hunting. Geopolitics is back on the front burner of the market place as a three-day U.S. holiday weekend approaches. Some better U.S. economic data did push gold prices down from the daily highs. December Comex gold was last up $7.50 at $1,290.90 an ounce. Spot gold was last quoted up $7.40 at $1,290.50. December Comex silver last traded up $0.13 at $19.605 an ounce.
It was a “risk-off” day in the market place Thursday following reports the Ukrainian president said the Russian military has invaded his country and is occupying eastern Ukraine towns and villages. There is reportedly ongoing fighting between the Russian and Ukraine armies. A Russian official denied that Russian troops are in eastern Ukraine.
Gold, U.S. Treasuries and the U.S. dollar index were all supported on safe-haven demand amid this news. Meantime, world stock markets are saw some selling pressure from the keener risk aversion in the market place Thursday.
It had been a subdued trading week, on this unofficial last week of summer, heading into the three-day U.S. Labor Day holiday weekend. Now, with geopolitical tensions rising, the three-day weekend and all that could happen in world hotspots during that time, many traders and investors will take action the next two trading sessions to reduce their risk exposure in the market place. Such should at least limit any selling interest in gold on Friday.
Gold’s gains were pared in morning U.S. trading Thursday when a stronger-than-expected U.S. second-quarter gross domestic product report was released, at up 4.2%, year-on-year. A bearish weight on gold in recent weeks has been ideas that better U.S. economic numbers will prompt the Federal Reserve to raise interest rates sooner rather than later. The very easy money policies of the U.S. and other major world central banks the past few years have been a significantly bullish factor for the precious metals markets.
The London P.M. gold fix was $1,292.00 versus the previous London A.M. fixing of $1,288.00.
Technically, December gold futures prices closed near mid-range Thursday. Gold bears still have the overall near-term technical advantage as a seven six-week-old downtrend is in place on the daily bar chart. The gold bulls’ next upside near-term price breakout objective is to produce a close above solid technical resistance at $1,300.00. Bears’ next near-term downside breakout price objective is closing prices below solid technical support at the August low of $1,273.40. First resistance is seen at Thursday’s high of $1,297.60 and then at $1,300.00. First support is seen at Thursday’s low of $1,283.00 and then at $1,280.00. Wyckoff’s Market Rating: 4.0
December silver futures prices closed nearer the session low Thursday and saw more tepid short covering in a bear market. Prices did hit a two-week high early on. A seven-week-old downtrend on the daily bar chart was at least temporarily negated today. The bears still have the firm overall near-term technical advantage. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at $20.00 an ounce. The next downside price breakout objective for the bears is closing prices below solid support at $19.00. First resistance is seen at $19.765 and then at Thursday’s high of $19.95. Next support is seen at Thursday’s low of $19.47 and then at last week’s low of $19.355. Wyckoff’s Market Rating: 3.0.
December N.Y. copper closed down 480 points at 315.05 cents Thursday. Prices closed nearer the session low. Copper bears have regained the slight overall near-term technical advantage. Copper bulls’ next upside breakout objective is pushing and closing prices above solid technical resistance at this week’s high of 324.60 cents. The next downside price breakout objective for the bears is closing prices below solid technical support at the August low of 310.20 cents. First resistance is seen at 317.50 cents and then at 320.00 cents. First support is seen at Thursday’s low of 314.25 cents and then at 312.50 cents. Wyckoff’s Market Rating: 4.5.
By Jim Wyckoff
COLORADO SPRINGS, CO–(Marketwired – Aug 26, 2014) – Gold Resource Corporation (NYSE MKT: GORO) (the “Company”) declares its monthly instituted dividend of $0.01 per common share for August 2014 payable on September 23, 2014 to shareholders of record as of September 11, 2014. Gold Resource Corporation is a gold and silver producer with operations in the southern state of Oaxaca, Mexico.
The Company has returned over $99 million to shareholders in monthly dividends since commercial production commenced July 1, 2010, and offers shareholders the option to convert their cash dividends and take delivery in physical gold and silver. For more information on Gold Resource Corporation’s physical dividend program, visit the Company website at http://goldresourcecorp.com/gold-silver-dividends.php.
Dividends may vary in amount and consistency or be discontinued at the Board of Directors’ discretion depending on variables including but not limited to operational cash flows, Company development requirements and strategies, construction, spot gold and silver prices, taxation, general market conditions and other factors described in the Cautionary Statements below and the Company’s public filings with the U.S. Securities and Exchange Commission.
Gold Resource Corporation is a mining company focused on production and pursuing development of gold and silver projects that feature low operating costs and produce high returns on capital. The Company has 100% interest in six potential high-grade gold and silver properties in Mexico’s southern state of Oaxaca. The Company has 54,179,369 shares outstanding and no warrants. Gold Resource Corporation offers shareholders the option to convert their cash dividends into physical gold and silver and take delivery. For more information, please visit GRC’s website, located at www.Goldresourcecorp.com and read the Company’s 10-K for an understanding of the risk factors involved.
This press release contains forward-looking statements that involve risks and uncertainties. The statements contained in this press release that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act. When used in this press release, the words “plan”, “target”, “anticipate,” “believe,” “estimate,” “intend” and “expect” and similar expressions are intended to identify such forward-looking statements. Such forward-looking statements include, without limitation, the statements regarding Gold Resource Corporation’s strategy, future plans for production, future expenses and costs, future liquidity and capital resources, and estimates of mineralized material. All forward-looking statements in this press release are based upon information available to Gold Resource Corporation on the date of this press release, and the company assumes no obligation to update any such forward-looking statements. Forward looking statements involve a number of risks and uncertainties, and there can be no assurance that such statements will prove to be accurate. The Company’s actual results could differ materially from those discussed in this press release. In particular, there can be no assurance that production will continue at any specific rate. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the Company’s 10-K filed with the SEC.
GOLD PRICES held onto a rally in Asian trade Tuesday lunchtime in London, rising to the highest level since Thursday near $1290 per ounce.
Silver tracked and extended the rally in gold prices, recovering almost all of last Tuesday’s 1.5% drop to touch $19.69 per ounce.
World stock markets also rose, with New York’s S&P 500 index set to open just shy of a new record at 2,000 points.
Gold prices for Euro investors meantime held above €975 per ounce – within 3% of this year’s highest level – as the single currency finally steadied below $1.32, a new 11-month low to the Dollar.
Stressing that Eurozone rules prevented its 18 member states from “backloading” fiscal reform in the same way the US and Japan have, European Central Bank president Mario Draghi vowed on Friday to “use all the available instruments” to avoid deflation in consumer prices.
The ECB meets next week to set rates and further outline its bank lending programs.
Apparently speaking to German concerns over quantitative easing and other “extraordinary” measures, “All countries should have an interest in achieving…cohesion” Draghi added.
“Dollar very strong,” says one bullion bank in a note. “Hard to see precious metals sustain rally in this environment.”
The gold price, agrees Germany’s Commerzbank, “is still facing headwinds from the firm US Dollar,” adding that Tuesday’s rally “presumably [comes] on the back of the many sources of geopolitical crisis.”
Moscow and Kiev spokesmen today traded differing stories over the capture of 10 Russian paratroopers inside Ukraine.
Russian president Putin today shook hands at a meeting in Minsk with Ukrainian leader Poroshenko – who Monday called snap elections for October.
Moscow yesterday reported a fourth monthly rise in its official gold bullion holdings, adding over 10 tonnes to reach 1,104 tonnes.
Rising to the highest level in at least two decades, Russia’s gold hoard now outweighs the official reserves of China – widely seen as under-reported by Beijing in a bid to deflect market attention from continued accumulation by the world’s largest holder of foreign exchange reserves.
Gold imports to China through Hong Kong fell last month to 21 tonnes, the lowest level since mid-2011, new data showed Tuesday.
Year to date, Chinese gold imports through Hong Kong now stand 25% below 2013’s record levels, and while the newly opened route via Shanghai’s free-trade zone means the Hong Kong data may “no longer paint a full picture of Chinese gold imports,” notes Commerzbank, recent forecasts of 1,000 tonnes for full-year 2014 from market development group the World Gold Council “may prove to be overly optimistic.”
The Shanghai free-trade zone has already beaten its target membership for a new Yuan-denominated, international gold exchange to be launched this fall.
“It is too important a market to stay away,” Reuters quotes Swiss refiner Argor-Heraeus director Bernhard Schnellmann, which is apparently thinking of joining.
Gold prices on the domestic Shanghai Gold Exchange closed Tuesday higher more than $3 per ounce above comparable London quotes – near the highest Shanghai gold premium of 2014 to date.
By Euan Rocha and Nicole Mordant from Yahoo
TORONTO/VANCOUVER, Aug 26 (Reuters) – Barrick Gold Corp is eliminating its entire corporate development team and more cuts are in the works as the world’s top gold miner looks to trim costs, three sources familiar with the situation said on Tuesday.
The sources, who asked not to be named as they were not authorized to discuss the matter publicly, said Rick McCreary, the development team’s head, is leaving the company this week, with some others on the team set to depart next month.
The corporate development team’s main role was to identify and evaluate assets worth buying. McCreary, a former investment banker with CIBC, has led the team within Barrick since 2011.
A spokesman for Barrick declined to comment on whether the company was doing a wider round of cuts, which the sources said would be announced in the coming weeks. He confirmed, however, that the corporate development team was being restructured with some staff moving into other groups.
“The change reflects our focus on achieving operational excellence across the company, with an emphasis on optimizing our existing portfolio and further improving efficiency across our operations,” said Andy Lloyd, a spokesman for Barrick Gold.
Some staff from the corporate development team will stay on as part of a newly minted business development unit, while most others depart the company.
Barrick along with its smaller peers has been hurt badly in the last couple of years by the decline in the price of gold.
Barrick, in the last few years, has been largely focused on cutting costs and selling over $1 billion worth of assets deemed non-core. Takeovers have not really been on its radar, although it did abort an attempt to merge with rival Newmont Mining Corp early this year.
The latest round of cuts comes a little more than a year after Barrick moved to lay off up to a third of the staff at its headquarters in Toronto and other offices.
Last month, the miner announced that Chief Executive Officer Jamie Sokalsky would step down in September and not be replaced. The move concentrates power in the hands of Executive Chair John Thornton, who earlier this year took the reins from Barrick founder and long-time Chairman Peter Munk.
Thornton, a former senior executive at Goldman Sachs, has already driven many of the company’s recent initiatives, including an ill-fated attempt to merge with rival Newmont Mining and a joint venture with Saudi Arabian Mining Co , which is known as Ma’aden.
Barrick named Kelvin Dushnisky, its head of corporate and government affairs, and Chief Operating Officer Jim Gowans as co-presidents with overall responsibility for execution of the company’s strategic priorities and operating plans, at the time of Sokalsky’s ouster.
The miner said the co-president approach recognizes the importance of jointly managing daily mining operations and relationships with governments, local communities and other external stakeholders.
(Editing by Jeffrey Hodgson, Tom Brown and Lisa Shumaker)