The Metals:

Gold climbed over 1% to $1238.37 in Asia before it fell back to $1227.34 in London, but it then rose to a new session high of $1240.24 in New York and ended with a gain of 0.99%.  Silver surged to as high as $20.311 and ended with a gain of 0.95%.

Euro gold se to over €910, platinum gained $10 to $1408, and copper fell a few cents to about $3.37.

Gold and silver equities saw slight gains for most of the morning, but they then fell back off in afternoon trade and ended with modest losses.

The Economy:

All of this week’s economic reports:

After trim to QE, Fed no less committed to stimulus: Bernanke Reuters

Lacker Says Fed to Consider Further Tapering at Coming Meetings Bloomberg

In wake of QE taper, Fed's Plosser dusts off inflation warning Reuters

Fed's Stein says shadow banking more prone to bank runs Reuters

Next week’s economic highlights include Factory Orders and ISM Services on Monday, the Trade Balance on Tuesday, ADP Employment, FOMC Minutes, and Consumer Credit on Wednesday, Initial Jobless Claims on Thursday, and December’s jobs data and Wholesale Inventories on Friday.

The Markets:

Charts Courtesy of http://finance.yahoo.com/

Oil fell after the Energy Information Administration reported that crude inventories fell 7.0 million barrels, gasoline inventories rose 800,000 barrels, and distillates rose 5.0 million barrels.

The U.S. dollar index edged higher on fed-speak that drove treasuries lower.

The Dow, Nasdaq, and S&P waffled near unchanged in quiet trade.

Among the big names making news in the market Friday were Boeing, AT&T, T-Mobile, Goldman Sachs, Deere, 3M, Jos. A. Bank, and Chrysler.

The Commentary:

“There are a couple of things currently working in favor of gold for the time being. The first I noted yesterday which is index fund rebalancing as those fund managers benchmarking against the various commodity indices are forced to increase their holdings of gold contracts to bring their overall portfolios into line with the new index compositions. That is bringing buying into the gold market from a spec standpoint at the Comex.

The other is more important because it is longer-term in nature and that is the continued reports of very strong offtake of the physical metal in Asia. You might recall that back in June of the past year (2013), it was this soaring Asian demand that put a floor in the gold price when it had sharply fallen to $1180.

I was curious to see whether or not those same buyers were going to show up if gold revisited this area again. It certainly appears that they have.

Why this is important from a trading perspective is that the buying has come in at almost the exact level to the very dollar, namely $1180. I have written previously that this area on the price chart has as much significance from a purely Technical analysis perspective as did the $1530 level in gold. When the latter was violated, it resulted in a huge shift in sentiment in regards to gold and brought large selling into the market as long liquidation then commenced in size along with fresh shorting. The same thing will happen if $1180 gets violated and the market does not almost immediately reverse those losses and rebounds higher - namely, more long-side liquidation and more fresh short selling that will take the price down to near $1150 for starters and possibly to $1100. Remember, large specs are still net longs at the Comex.

So far $1180 is proving to have held, for now. What this looks like is the setting up of a range trade affair with the market moving back and forth between this floor near $1180 and resistance near $1242- $1245. If gold can crack the overhead ceiling, it stands a shot at making a run towards $1260 - $1265 based on short covering alone.

If the market fails to extend past $1242-$1245 odds will favor it dropping back to retest $1220, then $1210 and finally psychological support at the $1200 level.

I remain skeptical that gold prices are going to rally much higher because I believe it will shut off price sensitive buying out of Asia. Western investment demand for the metal is still not there and this requires Asia to do all the heavy lifting. Remember, Asia can bottom a market but it cannot by itself drive prices sharply higher. That requires WESTERN INVESTMENT demand and I do not yet see any strong signs of that.

Let's watch the price action, especially in the shares and see where we go from now. I am especially interested to see how the metal performs at the Comex when the index fund rebalancing is complete. That should be sometime towards the end of next week although the bulk of it is going on right now and should be wrapping up by early next week.

I am also watching silver to see how it holds because it too is benefitting from this same index fund rebalancing. However, with Chinese manufacturing data coming in weaker, according to the data released overnight, copper is struggling this morning and so is palladium. That is bringing some selling into the silver market. Together, the lackluster performance in the metals is eroding some of the gains in gold, especially in light of the firmer US Dollar.”- Dan Norcini, More at http://www.traderdannorcini.blogspot.com/

GATA Posts:

Sean Fieler: How to challenge Yellen -- and big government

China Gold eyes Canadian purchase but says prices still steep

Alasdair Macleod: Time-preference and gold

Ted Butler: 2013 -- the year of JPMorgan

Rickards: No markets anymore but a lot of manipulation of gold

Jim Sinclair's next seminar will be Feb. 8 in Austin

The Statistics:

Activity from: 1/02/2014

Global Gold ETF Holdings

[WGC Sponsored ETF’s]

Note: Change in Total Tonnes from yesterday’s data: SPDR subtracted 3.599 tonnes.

COMEX Gold Trust (IAU) Total Tonnes in Trust: 162.38: No change from yesterday’s data.

Silver Trust (SLV) Total Tonnes in Trust: 9,958.64: No change from yesterday’s data.

The Miners:

WINNERS

LOSERS

Winners & Losers tracks NYSE and AMEX listed gold and silver mining stocks that trade over $1.

Please see Yahoo’s Mining/Metals News Wire for all of today’s mining news.

- Chris Mullen, Gold Seeker Report

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• http://www.capitalupdates.com
• http://www.goldseek.com
• http://www.silverseek.com
• http://www.goldreview.com 

© Gold Seeker 2014

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