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Gold To Repeat April, May and Q2 / Q3 2011 Gains in 2012?

-- Posted Friday, 13 April 2012 | | Disqus

Gold’s London AM fix this morning was USD 1,670.50, EUR 1,269.86, and GBP 1,048.91 per ounce. Yesterday's AM fix was USD 1,655.50, EUR 1,261.33 and GBP 1,039.04 per ounce.

Cross Currency Table – (Bloomberg)

Gold rose $17.10 or 1.03% in New York yesterday and closed at $1,675.20/oz. Gold rose sharply in just a few minutes of trade on heavy volume - about 33,000 contracts between 1430 and 1500 GMT. Gold traded erratically but essentially sideways in Asian trading prior to ticking lower in Europe.

Weaker gold prices are being attributed to China's weaker than expected Q1 GDP data. However, Asian equity indices were higher.  A slightly stronger U.S. dollar and oil prices back below $103 a barrel (NYMEX) may be contributing to today’s weakness.

China's GDP grew 8.1% which was well below expectations - expanding at its slowest pace since Q1 2009. GDP growth slowed from the 8.9% rise in Q4 of 2011 and was below the average forecast from economists polled by Dow Jones, Bloomberg and Reuters.

The North Korean rocket launch may have led to a safe haven bid which was taken out of the market after the rocket failure.

Gold bullion remains supported, mostly due to a pickup in physical Indian and Chinese gold demand this week. There are expectations of sustained Indian consumption next week in the lead up to the Akshaya Tritiya festival later this month.

Western physical buying remains unusually anaemic - for now.

In recent years, April and May have been positive months for gold in terms of returns (see table above).

April has returned 1.4% per annum in the course of the current bull market since 2000.

May has returned 1.75% per annum in the course of the current bull market since 2000.

Interestingly, the last month of Q1 and Q2, March and June, have been negative in terms of returns.

March in particular has seen the poorest returns for any month in the last 11 years with average falls of 0.6%.

Therefore the very poor performance of gold in March 2012 (-6.4%) may represent another buying opportunity as it did last year (see chart below) and in previous years.

Gold Daily 2 Year Chart – (Bloomberg)

Gold traded marginally lower last March prior to sharp gains in April 2011 when gold rose 8% (silver rose 28%).

This was followed by a correction in May and consolidation in June prior to further sharp gains in July and August.

Looking at the quarterly performance of 2011, gold traded marginally higher in Q1 prior to gains in Q2 and then strong gains in Q3.

Bullion then encountered a sharp correction and consolidation seen at the very end of Q3 which continued into Q4.

This continued in Q1 2012 but the gains in Q1 2012 (6.7% gain in Q1) were important and make the long term technicals favourable again.

While past performance is no guarantee of future returns, these are monthly, quarterly and seasonal patterns that are worth considering and suggest that diversifying on the dip remains prudent.

For breaking news and commentary on financial markets and gold, follow us on Twitter.

(Bloomberg) -- Gold Set for Rebound With Support at $1,600: Technical Analysis
Gold may rebound in April from two straight monthly declines as the metal has so-called support at $1,600 an ounce, according to a technical analysis from Haitong Futures Co., a unit of China’s third-largest listed brokerage.

“The long-term chart shows the underlying uptrend hasn’t been broken,” Dong Zhuying, an investment consultant at Haitong, said by phone from Shanghai today. “We think gold is ready for a rebound.”

Dong used a straight, upwardly sloping line that touches the lowest gold prices going back to 2008. Support levels are marked by clusters of buy orders, according to technical analysts, who say that past moves may be used to predict trends.

While bullion has rallied 7.1 percent this year, extending an 11th year of gains, it fell 4 percent in February and March on reduced expectations that central banks will add further stimulus to boost growth, cutting haven demand. Spot gold traded little changed at $1,675.02 an ounce at 11:22 a.m. in Singapore.

“Gold has found quite solid support at $1,600, and could rally toward $1,800 if it pushes firmly past the psychological $1,700 mark,” said Dong. “A head-and-shoulders pattern may be forming and this could potentially be bullish.”

That pattern is formed over time as an asset makes three consecutive peaks, with the middle being the highest. The February peak of $1,790.75 -- this year’s high -- may be the initial shoulder, according to Dong.

(Bloomberg) -- Gold at $2,000 ‘Out of Reach’ This Year, Credit Suisse Says
Gold’s previous high of $1,921 an ounce will remain a “formidable barrier” and $2,000 will be “out of reach” this year as the U.S. economy extends a recovery, according to Credit Suisse Group AG, reiterating a call made in January.

The bank left its quarterly forecasts unchanged, and expects gold to average $1,720 in the second quarter, $1,810 in the third quarter, and $1,840 in the fourth quarter, analysts including Ric Deverell and Tom Kendall wrote in a report today.

(Bloomberg) -- Citigroup Countersued by Rajaraman in Singapore Over Gold Losses
Citigroup Inc.’s Singapore unit was countersued by Raghavendran Rajaraman, who claimed the bank breached an agreement by prematurely selling his gold assets held as collateral and closing his trading account.

Citigroup induced and instigated Rajaraman to apply for the maximum $50 million credit facility and then violated an agreement by not giving him ample time to “regularize” his account when gold prices fell in September, he claimed in papers filed at Singapore’s High Court. A closed hearing is scheduled for today.

Rajaraman is seeking damages including bullion valued at $1.75 million he used as collateral and that the bank sold when it liquidated his account. He’s also seeking unspecified lost profits, according to the filing.

Citigroup had sued Rajaraman, a former currency options trader with the bank until 2007, in a bid to recoup trading losses the bank says he incurred after gold fell from a record high in September. Rajaraman had gold valued at $19.2 million, in addition to the bullion used as collateral, leaving a $1.03 million shortfall, according to Citigroup’s complaint.

The loss suffered was “entirely caused” by Citigroup improperly closing out his trading positions, Rajaraman said in court papers. He denied giving the bank instructions or consenting to close his positions or sell the gold, according to the countersuit.

Adam Abdur Rahman, a Singapore-based Citigroup spokesman, declined to comment. Rajaraman’s lawyer Kelvin Chia didn’t respond to an e-mail or return a call seeking comment.

Hedge Fund

Rajaraman denied the bank’s claim that he was a hedge fund manager at 3 Degrees Asset Management. He didn’t provide his current employment details, in the court filing.

Citigroup, in response to the countersuit, said Rajaraman applied to increase his credit line out of his “own volition and on his own judgment.” Rajaraman’s credit facility was raised to $20 million instead of the $50 million sought, according to the court papers.

A disclosure form signed by Rajaraman didn’t constitute an agreement or have any contractual rights, the bank said, denying that it had breached any agreement with him.

Rajaraman had also consented to the bank selling his gold assets, according to Citigroup’s filing.

Gold plunged 11 percent in September, the most since October 2008, after futures reached a record $1,923.70 an ounce on Sept. 6. Spot gold was at $1675.18 an ounce at 6:30 a.m. Singapore time.

The case is Citibank Singapore Ltd. v Raghavendran Rajaraman S826/2011 in the Singapore High Court.

(Bloomberg) -- South African Mine Production Drops Most Since March 2008
South Africa’s drop in mining production in February, the biggest monthly decline in almost four years, may boost prices of platinum-group metals in the near term, BMO Capital Markets Ltd. said.

Total mining output retreated 14.5 percent from a year earlier, the most since March 2008, Pretoria-based Statistics South Africa said in a statement today. Mines produced 48 percent less platinum-group metals because of a strike at the world’s biggest platinum mine and safety-related shaft closures.

“Such a decline in production from South Africa has a material impact on the global supply-demand balance, which could be positive for near-term PGM prices,” Edward Sterck, analyst at BMO Capital Markets, wrote in an e-mailed note. South Africa produced about 75 percent of global primary platinum supply last year, according to BMO.

Workers at Impala Platinum Ltd.’s Rustenburg operation downed tools on Jan. 20 in a dispute over pay. The mine restarted on March 5 and is still ramping up to full production.

“The biggest reason for the decline was the strike at Implats,” Juan-Pierre Terblanche, a spokesman for the statistics office, said by phone. “We’re expecting the figures for March will also be low,” he said. Safety stoppages also contributed to the drop in platinum and gold output, he said.

Gold production slumped 11.5 percent, Statistics South Africa said.

Mine Deaths

Mines in Africa’s biggest economy are facing increasing safety inspections and work stoppages as the Department of Mineral Resources works to cut fatalities, which stood at 123 last year. The platinum industry lost an estimated 300,000 ounces of production last year because of safety stoppages, Anglo American Plc said Feb. 17.

Platinum fell 9.1 percent to an average of $1,658.86 an ounce in February, from a year earlier. Platinum-group metals are typically found and mined together and consist of platinum, palladium, rhodium, iridium, osmium and ruthenium.

Gold rose 27 percent to an average of $1,741.43 an ounce in the month from a year earlier.

The retreat in platinum-group metals production contributed 12.6 percentage points to the decline in total mining output, Statistics South Africa said in the report.

(Bloomberg) -- Silver Prices May Drop to $22 An Ounce This Year, CPM Says
Silver prices may fall to as low as $22 an ounce this year an investment demand declines because of high volatility and as buying from fabricators wanes, Jeffrey Christian, the managing director at CPM Group Inc., said in an interview in New York today.

(GoldCore Editors Note: CPM’s Jeffrey Christian’s track record with regard to forecasting the silver price is poor and he has been bearish nearly every single year since 2003).

Gold edges down after China data boosts dollar - Reuters

Gold, silver fall as China’s economy cools - MarketWatch

‘Sticky’ Gold ETP Investors Holding Gold – The Financial Times

Singapore's SMX to launch new gold, silver futures - Reuters

Crisis Gets Personal After U.K. Traders’ Spread-Better Fails - Bloomberg

QE to Infinity is as Sure as Death and Taxes – Jim Sinclair MineSet

Mauldin - Europe is Destroying Their Currency – King World News

Morgan Stanley's Failure To Segregate Client Assets Creates Default Risk – Seeking Alpha

The War at the End of the Dollar – Financial Sense

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