Sunday, October 25, 2009

Comforting moving averages

Friday’s NY session featured a $7 surge on the open to the intraday Dec gold high of up $12.20, a steep late morning plunge down $18.40 to the day’s low of down $8.20, and then a modest rally which was half erased to establish a down $2.20 close. Little happened in the aftermarket.

Considering the violence of these swings, estimated volume was not extremely heavy: 147,987 lots of which only 20.5% traded in the second half, the normal pattern recently.

Having peaked up 1.78% and 1.69% respectively, the HUI and XAU showed no inclination to dispute gold’s reversal, closing down 0.95% and 1.17% respectively.

MarketVane’s Bullish Consensus, the HGNSI and the GLD ETF all registered no change:

85%, 53.8% and 1,108.09411 tonnes.

In a somewhat disturbing development Friday’s Gartman Letter displayed some enthusiasm for the gold story:

"When the "Jeremiads" of the "Hard Money" disdainful right-wingers become the order of the day, times are difficult at best. But we shall have to admit that the anti-deficit brawling of the "Hard Money" crowd that seemed for the past many decades to be nothing more than screeds is now coming true.

This is part of TGL’s current thesis that the $US is undergoing a major rerating courtesy the Obama Administration. While at first glance gold’s friends might be heartened by signs of support from this very sensitive gauge of sentiment amongst professionally managed investment pools, the history is that actual gold enthusiasm by TGL has quite often immediately preceded heavy Bear raids. Comfortingly in this respect, TGL made no addition to its gold long.

The 3 week sideways move in gold (slightly down in fact, in euro gold) raises the possibility of a top. Of course, gold did the same thing in September, as JSMineset’s Dan Norcini notes:

"The pattern on the RSI is identical to the pattern back in September. A spike higher followed by a month long consolidation trade which then witnessed an upside breakout as the Dollar swooned."

The Privateer added some perspective on Saturday:

"For comparison, we took the three significant highs in the $US Gold bull market so far and compared them with the level of the 20 and 40-week moving averages at the time.

• In May 2006, the gold price peaked at a level 18.1 percent above its 20-week moving average (MA) and 25.7 percent above its 40-week moving average
• In March 2006, the comparative numbers were 12.5 percent and 20.6 percent
• At present, Gold is 7.7 percent above its 20-week moving average and 9.9 percent above its 40-week moving average

Clearly, at present prices the discrepancy between the Gold price and the long-term trend is a long way below where it was at Gold's two previous peaks."

Early on Monday morning local Vietnam gold stood at an $18.36 premium to world gold of $1,056.92 (Friday $17.37/$1,059.80). Efforts are being made to persuade the authorities to modify the ban on gold imports; no doubt smuggling is underway. See final lines of

http://www.vnbusinessnews.com/2009/10/cpi-rises-037-percent-in-october.html http://in.reuters.com/article/domes
ticNews/idINBOM46869120091026

***

Monday, October 26, 2009

NY sells (shorts?) but East buys

Indian ex-duty premiums: AM $1.33, PM$1.45, with world gold at $1,054.52 and $1,054.99. Adequate for legal imports. The rupee softened 0.3% to close at $1= R46.645 (Friday R46.5) as the stock market closed down 0.42%; so this was a respectable performance. Reuters this morning carries a story

"India gold traders pick up bargains as prices ease" which supports this judgment. See

As noted last night, local Vietnam gold stood at an $18.36 premium to world gold of $1,056.92 early this morning (Friday $17.37/$1,059.80).

Although TOCOM open interest slipped 0.42 tonnes today on day session volume equivalent to 9,179 Comex, the public added 1.382 tonnes to its long. The active contract lost 17 yen, but world gold gained $2.90 over the course of the session, going out $1.10 above the NY floor session close.

Friday’s wide range, erratic trading and ultimate down $2.20 Dec Gold close saw open interest rise 6,300 contracts (19.6 tonnes) to 512,818 contracts. Actual volume was 161,006 lots, 8.8% above estimate. This means that the

"weekend profit taking and investors liquidating their long positions."

cited by MKS was not in fact the dominant force in the day; fresh buying was stopped by fresh selling – short selling, at least as far as Comex goes.

Western dealer-related comment on gold is distinctly more nervous than previously and at present a bear push seems to be underway. Euro gold and $US gold are staying close together. India will be delighted by this weakness. Estimated volume at 10AM was a moderately heavy 53,320 lots.