Sunday, March 4, 2012

Gold Price Today: Gold Monthly Fundamental Forecast March 2012


Outlook and Recommendation

Following the sharp gains for Gold prices during January when gold prices rose by 11% and the situation in February was much different. Gold price increased by only 2.07% from the end of January. What were the events and decisions that may have affected the direction of gold. Part of it might have to do with the recent decision of the EU leaders to approve the bailout package for Greece.

Gold prices started February with little changes; this no-trend, however soon turned into sharp gains.

If we separate February into two parts: with the breaking point at February 17th; during the first part of February, gold declined by 0.8%. During the second part of February, gold price climbed by 2.9%.

During the first part of February, the U.S dollar slightly depreciated against the Euro, the Canadian and Australian dollar; the last two currencies are usually strongly correlated with gold; during the second part of February, the U.S dollar sharply depreciated mainly against the Euro; this shift might partly explain the sharp increase of gold during the second part of the month.

Although this simplifies everything, there were a great deal of geopolitical problems, financial and economic crisis and turmoil, throughout the world, but mostly from the eurozone. When the markets are uneasy they turn to gold, and we saw this several times over the past few months. Global problems have no subsided, but investors are becoming more confident in the handling of these problems by the EU and are therefore taking on more risk. With slow but steady improvement in the US, investors are moving from the USD and Gold looking for more appealing investments. The short term for Gold will be a continued fall to trade between 1675 and 1700 throughout the end of the month and to increase over the second quarter moving towards 1800.

Understanding Gold:

When fundamental AND technical forces are in alignment, as with the current situation in gold, price action traders have an extremely valuable opportunity because trading with price action allows for much more accurate entries than other methods as well as providing traders with a “set and forget” style of trading when used in combination with simple risk to reward scenarios.

Gold prices always rise when there is uncertainty in the global economy. In times of uncertainty, wealthy investors tend to run towards gold. Suppose, rumors are flying high about some event in the world and this is increasing the uncertainty in the financial markets. Gold prices are on the rise again. You now buy three gold contracts. By the end of the week, each contract is up by 100 points. You make a cool $3,000 when you sell the three contracts. This way, you complete your third trade in a series of four trades.

This is a very simple gold trading strategy that depends on pyramiding your position with a series of four trades and removing all the profit from your account at the end of these four trades. With practice, you will find this gold trading strategy very simple and easy to implement.

Gold reacts to uncertainity in the markets A drop in major currencies can indicate a run into gold. Remember investors tend to take profit from gold so watch for trading opportunties when investors are taking profits, not moving out of the markets. Read More

Gold Price Today: Gold futures - Weekly outlook: March 5 - 9


Gold prices ended lower on Friday, as a broadly stronger U.S. dollar reduced the appeal of the precious metal while investors continued to readjust positions after Federal Reserve Chairman Ben Bernanke diminished expectations for more U.S. monetary easing earlier in the week.

On the Comex division of the New York Mercantile Exchange, gold futures for April delivery settled at USD1,713.35 a troy ounce by close of trade on Friday, retreating 3.43% over the week, the largest weekly drop since mid-December.

Gold futures were likely to find support at USD1,689.95 a troy ounce, the low from February 29 and short-term resistance at USD1,726.95, the high from March 1.

Gold’s losses on Friday came as the U.S. dollar rallied against its major counterparts, as investors shunned riskier assets amid fresh concerns over the debt crisis in the euro zone.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, rose 0.82% to settle the week at 79.48, the highest since February 17. On the week, the index climbed 1.32%.

Meanwhile, gold traders continued to rebalance their portfolios after Federal Reserve Chairman Ben Bernanke dampened expectations for a third round of monetary easing in testimony to Congress on Wednesday.

Fed Chair Bernanke acknowledged the recent improvement in the labor market and said that higher oil prices could push up inflation.

Prices plunged almost 5% following Bernanke’s speech, or nearly USD80 per ounce, its largest one-day loss since December 2008, as traders unwound long positions fuelled by expectations a third round of bond-buying was imminent.

Technical selling also pressured gold after it failed to sustain gains above the USD1,790-an-ounce-level and break through key resistance at USD1,800.

Losses accelerated once prices dropped below USD1,700 an ounce, triggering fresh sell orders from hedge funds and large institutional investors and pushing down prices to as low as USD1,686 an ounce, the lowest since January 25.

Further weighing on the metal, market participants noted a large sell order on the Comex, said to have been 1 million ounces, or 31 tonnes, prompted by the Bernanke testimony.

Bernanke's remarks hit gold particularly hard because heavy bullish bets had been positioned leading up to Bernanke’s testimony and after the European Central Bank's second three-year long-term refinancing operation.

Gold prices rallied in recent weeks, boosted by growing expectations for further monetary easing measures from global central banks. Despite this week's pullback, the metal is still 9% higher this year after the Fed said in January it would keep U.S. interest rates near zero until at least 2014.

Earlier Wednesday, gold prices spiked to a three-month high of USD1,792.15 after the European Central Bank allotted EUR529.5 billion in loans to 800 lenders in its second long-term refinancing operation.

Under the operation, banks receive three-year loans in return for collateral at a rate fixed to the ECB's refinance rate of 1%. Together with the first auction, the ECB has now injected EUR1 trillion of 3-year funds into the system.

Gold can benefit from such an environment of easy money because of expectations that ample liquidity would put a damper on the value of paper currencies and boost inflation.

In the near-term, global financial service provider HSBC Holdings sees further downside to gold prices, citing the metal’s inability to clear USD1,800 an ounce and the paucity of emerging-market buying in recent weeks.

In the longer term, however, the bank expects prices to remain well-supported “even without further easing, as monetary policy is still highly accommodative.”

Elsewhere on the Comex, silver for May delivery settled USD34.81 a troy ounce by close of trade on Friday, falling 1.95% on the week in volatile price swings.

Silver prices rallied nearly 4% on Tuesday to hit the highest level since mid-September, after prices broke through a key resistance level close to USD35.73 a troy ounce.

Futures gave back those gains and more on Wednesday, plunging almost 7%, weighed down by the Bernanke speech. Despite the sharp drop, futures are still up almost 25% since the start of 2012.

Meanwhile, copper for May delivery rose 1.2% over the week to settle at USD3.906 a pound.

In the week ahead, investors will be looking ahead to Friday’s data on U.S. non-farm payrolls, to gauge the strength of the country’s economic recovery. Market participants will also be continuing to watch developments in Europe, ahead of an interest rate announcement by the ECB on Thursday.Read More

Gold Price Today : Gold, Silver and Oil Trading GLD, SLV, USO


SPDR Gold Trust (ETF), NYSE:GLD, iShares Silver Trust (ETF), NYSE:SLV, United States Oil Fund LP (ETF) NYSE:USO

Gold, Silver and Oil


The Overall Fundamentals
The commodity sector reversed gains last week due to a number of reasons ranging from concerns over the downside risks to the global economic recovery to ongoing worries on the sovereign debt crisis in the EuroZone to dampened hopes about the the US Fed’s QE-3 intentions.

Precious Metals
The precious metal complex fell led by Gold and Silver. The precious Yellow metal fell more than $100 on the US Fed Chairman Ben Bernanke’s testimony last Wednesday.

Investors viewed that the Chairman’s expectation that growth in the coming quarters would be ‘at a pace close to or somewhat above the pace that was registered during the second half of last year’ is an indication of no further quantitative easing (QE).

The disappointment was exacerbated by St. Louis Fed President James Bullard’s comment that no further easing is needed as US economic data improves. He also expected US’ unemployment rate to drop to 7.8% by the end of this year as a ‘moderate expansion’ helps improve the labor market.

Although speculations of further quantitative easing (QE) by the US Fed have been tamed, this has not dampened LTN’s Bullish POV on Gold’s. Shayne and I both believe that monetary policy by central banks will be positive for the precious Yellow metal.

Note: Gold, despite persistent sovereign debt crisis in the EuroZone, has not been rising in tandem with the USD like it did in last few years. So, we believe that the Fed will continue to weigh growth higher than inflation while the ECB prioritizes price stability. This would give the USD better opportunity to depreciate further, thus boosting Gold price. Another issue is that further rises in Crude Oil prices may deteriorate the US recovery prospect, making the Fed more “Dovish” in its monetary stance.
Energy

In the Crude Oil complex, the front-month contract for WTI Crude Oil fell for the 1st time in 4 wks, by -2.80%, to settle at 106.7 on Friday. The contract rose to a 9-month high of 110.55 earlier in the week. The equivalent Brent Crude contract slipped -1.45% last week, after rising for 5 straight weeks.

As tensions over Iran escalated over the past months, Crude Oil prices rose on worries that Crude Oil suspension in Iran would bid up prices, affecting especially European buyers.

Crude Oil prices continued rallying earlier in the week with WTI and Brent Crude tapped important levels above 110 and above 125 respectively, after a report stating that a pipeline in Saudi Arabia was attacked. The rumor was denied by Saudi’s spokesman, but the dramatic reaction in the Crude Oil market indicated investors’ sensitivity on possible Crude Oil supply shortage.

There has been talk in recent weeks, as Crude Oil prices rose, that the fragile Global economic recovery would be hampered by rising Crude Oil prices. Such concerns became apparent as Brent Crude Thursday breached the Y 2011-high and approached the Y 2008 crisis mark.

In the surveillance note to the G-20, the IMF warned of major downside risks, including risks from high Crude Oil prices, facing the Global economy.

The World lender stated that ‘the overarching risk remains an intensified Global ‘paradox of thrift’ as households, firms, and governments around the world reduce demand…This risk is further exacerbated by fragile financial systems, high public deficits and debt and already-low interest rates’. It went on to say that ‘advanced economies are experiencing weak and bumpy growth, reflecting both the legacies from the crisis and spillovers from Europe’.

Despite approval of the 2nd bailout to Greece, market confidence towards the 17-nation EuroZone has remained weak.

Following S&P’s downgrade of Greece’s rating, Moody’s announced that the debt-ridden Country’s rating to C from Ca, warning that investors participating in the country’s PSI program would likely receive less than 70% of the face value of their holdings as the deal contains ‘a distressed exchange, and hence a default’.

Spain breached its commitment with the EU and raised its deficit target of 5.8% of GDP this year from previous goal of 4.4%. These added worries to the region’s economy as well as the Euro.

Nat Gas prices weakened again last week. The DOE-EIA reported that gas inventory dropped -82 bcf to 2 595 bcf in the week ended 24 February. Stocks were +756 bcf above the same period last year and +780 bcf, or +45.0%, above the 5-yr average of 1 733 bcf.

Baker Hughes reported that the number of gas rigs fell -19 units to 691 in the week ended March 2. Oil rigs soared +28 units to 1 293 and miscellaneous rigs dipped -1 unit to 5, sending the total number of rigs to 1 989 units. Directionally oriented combined oil, gas, and miscellaneous rigs climbed +5 units to 215 while horizontal rigs increased +5 units to 1 170 and vertical rigs fell -2 units to 604 during the week. Read More

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