Obviously, in recent days, it has been "scary" to buy into gold/silver mining shares. But with BOJ and the FED wanting more inflation, the ECB fighting against deflation-it seems to me inflation has only one way to go-that is up. Central banks will continue to be aggressively accomodative. Don't know when, but that is an excellent backdrop for gold/silver to rise and continue to rise for 1-3 years until inflation is a problem and then they both should rise some more as inflation hedges.
As I posted earlier, the FED had to taper just because the mortgage and treasury markets will be smaller in 2014 and the FED doesn't want to be greater that 80-90% of those markets of new issuance.
FED did taper today 12/18 $10 billion-$5 billion each treasuries and mortgages. Bottom line, still very accomodative. Bought GFI $3.25 and AUY $8.80.
On the taper news, gold fell to $1220, but then rose to $1240+. I expect gold/silver to grind higher starting January as tax-loss selling abates.
In the interim, earnings estimates for the Dow and the S&P500 grind lower for 2014 in recent weeks-stocks headed for a fall.
"GSOL" should have been SGOL-another gold ETF.
W/R to NG, draw on Thursday will be huge vs the 5 yr average. Rest of the month's draws will be greater than 5 yr averages as well, so I don't think NG will pull back much. Sorry, I don't know the 200 day moving average is.
Last week ECA told analysts that 1stH liquids production would not see y/y growth because of cutbacks in capX of some of its properties to emphasize narrowing its focus on its 5 best properties. As a consequence, y/y growth won't happen until the 3rd Q 2014. Stock sold off, earnings estimates cut, but despite the short term setback I'm pleased because capX will come in below cashflow, mgt is not selling any properties-which will be kept to develop later. I continue to buy under $18.
Very few thought NG would get over $4.00 to end 2013, now it is well above that, giving ECA and others, much better cashflows for their non-hedged production and a chance to hedge production at decent enough prices to protect 2014 capX with predictable cashflow. Asset wise, ECA is worth north of $30, and with new mgt's conservative plan, ECA, in a fair price environment, will be able to grow cashflow 10% compounded per year for the rest of the decade. Should NG get to $6-$7 sometime in 2015, as some analysts predict, ECA will be a money machine and be at least a double form current prices. I would encourage all investors to take advantage of tax-loss selling these last few days of Dec and buy alot of ECA.
You wrote: "Technical indicator MACD has been negative but turning neutral in recent days for GLD, GSOL and HL." Was GSOL a typo? It doesn't seem to belong with GLD and HL.
Also, do you think UNG will pull back to the 200ma?
CCRN.....Something has to be up.....Extremely high volume, no sellers and the price just keeps moving up. Just seems like someone is trying to buy all they can quietly!!
Still maintain my view, that the broader averages are moving down because some of the "smart" money is worried that 4thQ and perhaps 1st Q GDP slowdown will hurt sales and earnings. Also, the Euro has been strong because there is a little liquidity squeeze, in the Euro-zone, as their 3-mo Euribor rate is at 15-mo highs. Hot money is chasing that higher yield and has to buy Euros to do so. Other concerns are coming out of China that GDP growth will have to come down to 7% vs the 7.5% consensus for 2014.
Take all three and the "surprise" has a growing % chance that macro-econ softness will translate into S&P 500 sales and earnings misses. Any negative "event" would have the S&P 500 accelerate its recent declines. However, if the FED doesn't taper, it maybe off to the races again. Still slower GDP is already in the cards for the 4th Q and 1st Q.
To complete the thought on gold's physical demand. 2013's demand, 1st 3 Qs, is up 25% or about 600 tons vs 2012's 1st 3 Qs. 90% of that increase is from Asia and the Middle East. Implications; as long as oil does not collapse and China does not go into a hard landing, then demand from those two areas should remain steady. Again, adding any ETF net demand and net increased "Western" county demand should have gold moving higher.
As far as supply, 2014 production should be close to the production of the last several years since 2011-around 2700-2800 tons. From several articles, lower prices will start curtailing supply starting in late 2014 and for the next several years after that. So, with gold, despite all the daily noise, the supply demand situation should turn decidedly bullish by the end of 2014. Of course it could happen earlier, depending upon net ETF action and Central bank actions.
Several followers of the gold market suggest, gold needs a final selling climax to make a bottom. I'm inclined to partially agree, but then again many markets "turn" quietly as sellers get exhausted and volume dries up. Still, technical watchers will want higher volume on moves higher to confirm an uptrend. I suppose the easy way to follow would be to watch volume for GLD.
According to the World Gold Council, demand for physical gold (bars, coins, jewellery) was approx 2900 tonnes through the 1st 3 Qs this year. Take that pace through the end of the year and physical demand will be approx. 3860 tonnes. World production will be about 2750, the net difference will come out of ETF net selling which has been 800+ billion for the 1st 3Qs or an annual pace of about 1100 tonnes.
Once we get out of Dec (tax-loss selling), if ETFs are no longer net sellers and physical demand remains steady, that suggests gold will grind higher. Should ETFs become net buyers, then gold moves up more quickly. Currently, I continue to read articles that gold will get down to $1050-$1085, however given the underlying physical demand, I considerate less likely as each day of Dec goes by. My one big concern is if China had a hard landing sometime in 2014-since they are a huge buyer. If that should happen, all commodities would go down along with the S&P 500. Coming out the other end would be massive stimulus by central banks, which would be very bullish for gold.
LNG export will start the end of 2015. So, starting no later than early 2016, the spread between world prices 3-4X NA prices and NA prices will narrow. The ultimate question is to what extent. If the world econ sees continued growth, with China increasing its use of NG vs coal, then $6+ NA price should be easy-perhaps $8-9. When Marcellas production roles over, that will be worth $.50 higher price in of itself-some in the industry are predicting the 2ndH of 2014 for that to happen.
My biggest concern for all markets is if China has a hard landing sometime between now and 2 years from now.
commandor, nice to see the recent draw reports and news of huge usage by the California electricity utilities this past weekend. There could be plenty of short term support for NG prices this winter season despite production numbers.
A quote by a Devon official caught my eye a few days ago. These are competent people. Regarding Devon's sale of Canadian NG assets, Christopher Seasons, president of Devon Canada, said in an interview "When we look out a few years, we don’t see any major catalyst to move the price of natural gas substantially, and for us to be competitive that is what we need to see". This being said, what do you figure are the odds of us seeing NG prices stabilize in the $5-6+ range within the next year or two? My concern is that chronic oversupply may continue to cap NG and stock prices near recent levels for a surprisingly long time. Further, do you see a likelihood that greater use by vehicles, industrial users and export can trump high production? Best regards.
Should Gold survive next week's taper and hold $1210, upside resistance, according to my research will be at:
Ultimately, I'm looking for $2500-which equals the inflation adjusted high of 1980.
With NG in the $4.20s, it is at 6 month highs-2013 high was around $4.45 in late April/Early May. Monthly production for Sept came out last week at 73.91 down from the all-time high of 74.49 in Aug. With the Sept numbers were downward revisions for just about all months in 2013. I would consider the data slightly bullish.
With last week's big draw down we are now about a 2.8% deficit vs the 5 year average. With the next 4 weeks draw estimated to be larger than the 5 yr averages, the deficit will continue to get larger. Should the colder than average weather continue into Jan/Feb-which many long term forecasters were predicting late last summer-NG prices will make new 52-week highs. With the extreme cold, production problems are curtailing production in some areas around the country, so production may drop further (Dec) vs the Aug all-time high. That data will come out the end of Feb.
Therefore sometime in March, I am calling for NG to get above $5.00. I'm not taking any profits on NG positions (trading shares) until then. Producers will not ramp up NG capX until $5.00+ is sustainable-that will come when Marcellas production growth roles over perhaps the 2ndH of 2014.
So why is gold moving today, up $30+ above a technically resistant area of $1260, so far. A few ideas come to mind.
1)The $, as measured by the DXY, has been weak
2)Gold had been falling on the same "news" for weeks-the notion of a taper by the FED in Dec. Last week, towards the end of the week, gold stopped falling on that "news"
3)Italian finance minister today offered the "proposal" that if the Italian government came to the rescue of its banks, it would have to follow a "bail-in" of bondholders of 8% first. Well, there are dozens of banks in the Euro-zone that need help in just about all the 17 countries. I wouldn't be surprised if some of those bondholders are buying a little gold today.
1)The Euro hit another 5yr high vs the Yen
2)The Euro continues to advance vs the $ nearing its high for the year
Implications for both, the ECB by choice or being "forced" by the markets, is going to have to ease significantly in 2014 to get the Euro down. Currency "war" is great for gold.
Going out on a limb. Technical indicator MACD has been negative but turning neutral in recent days for GLD, GSOL and HL. That along with double bottom last week of $1210, has me calling the bottom in gold, IF gold holds $1210 after next week's taper-which I expect.
In addition to HL and SLW, recent insider buying in CDE has me buying CDE in recent days.
In pat posts, I have written about "credit engines". Western economies need credit to be extended for their to be GDP growth. The US's credit engine is doing OK as mortgages become more available, net mortgages outstanding were $87+ billion in the 3rd Q, the first net quarterly increase since the 1stQ 2008. Auto loans are quite abundant with 26% of them being non-prime. Corporations (large) have had no trouble selling bonds and/or letters of credit as debt outstanding grew 7.5% Y/Y in the 3rd Q. Small business is probably still having trouble, but less so vs earlier in the year as measured by the Thomson Reuters/Paynet index which hit a 6-yr high in Oct.
Contrast that with Italy. For Oct loans to corporations were down y/y 4.9% the worst reading in 2013 and loans to the whole private sector was down 3.5% the worst reading in 2013. Clearly the credit engine in Italy is in reverse. Top that off with the Euro hitting a 5yr high vs the Yen. Bottom line, the ECB will have to "ease" in 2014-perhaps substancially. France is in deep do-do as well as their PMI's have been consistently below 50 all year.
Over time, whether it be the US or the Euro-zone, higher levels of inflation will be needed to get "credit engines" expanding and being able to service past debt.