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Gold Seeker Closing Report: Gold and Silver End Modestly Lower
By: Chris Mullen, Gold-Seeker.com

 -- Published: Monday, 2 June 2014 | Print  | Disqus 

 

Close

Gain/Loss

Gold

$1243.10

-$7.70

Silver

$18.75

-$0.06

XAU

84.45

-0.52%

HUI

204.56

-0.60%

GDM

615.25

-0.67%

JSE Gold

1373.31

+20.89

USD

80.63

+0.24

Euro

135.98

-0.39

Yen

97.64

-0.62

Oil

$102.47

-$0.24

10-Year

2.534%

+0.077

Bond

137.25

-1.00

Dow

16743.63

+0.13%

Nasdaq

4237.19

-0.13%

S&P

1924.97

+0.07%

 
 

 

The Metals:

 

Gold dropped down to $1241.12 in Asia before it bounced back to $1249.61 by a little after 10AM EST, but it then drifted back lower into the close and ended with a loss of 0.62%.  Silver slipped to as low as $18.672 and ended with a loss of 0.32%.

 

Euro gold fell to about €914, platinum lost $18 to $1431, and copper climbed 5 cents to about $3.17.

 

Gold and silver equities traded mostly slightly lower and ended with modest losses.

 

The Economy:

 

Report

For

Reading

Expected

Previous

ISM Index

May

56.0

55.6

54.9

Construction Spending

April

0.2%

0.7%

0.6%

 

Tomorrow at 10AM EST brings Factory Orders for April expected at 0.5%.

 

The Markets:

 

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

 

Oil fell and the U.S. dollar index rose as the euro dropped on expectations for more stimulus from the ECB this week.

 

Treasuries fell on decent economic data while the Dow, Nasdaq, and S&P waffled near unchanged in mixed trade.

 

Among the big names making news in the market today were Chrysler, KKR, and Ventas and American Realty Capital Healthcare.

 

The Commentary:

 

Last Friday was the end of the month and with that, came the usual book squaring and position squaring that typically accompanies that. The result was a round of short covering in the mining shares as the bears rang the cash register to realize some sizeable gains over the month of May. The new month of June is starting off with more selling in the mining sector as it looks like some of those players are repositioning once again and taking short positions to start the month.

Overall trading today seemed to be relatively quiet; at least thus far it has been.

Gold was weaker overnight as it came into very early European trading when it bounced off of the support region near $1240 and stabilized heading into New York. The yellow metal did manage to get a bit of a pop higher off of the ISM number this morning. The May number came in at 53.2 versus the April 54.9 reading. The market was expecting a 55.6 reading.

NOTE: Around mid-morning ISM sent out a CORRECTED reading for May at 56 and NOT the 53.2 reading that they reported early this AM. Private economists noted the error after the release of the data. ISM noted that the error was due to their use of the wrong seasonal factors. Stocks moved higher when the news of the error hit the wires and gold dropped a bit deeper into the loss category.

That was offset by another piece of economic data showing April construction spending rose 0.2% with the March number being upwardly revised from 0.2% to 0.6%. Gold faded lower as soon as that number hit the wires.

I expect this to be the pattern for gold for the near future; it will be caught in a tug of war between conflicting sets of economic data with a steady grind lower barring any sort of wildly impressive economic data.

The biggest reading that traders/investors will be looking for is on the employment front. That is the key data set as far as the broader market is concerned. Will the moribund jobs picture show any signs of real life or will it continue its pattern very slow improvement?

Along this line, we were greeted with news of yet another job-killing initiative undertaken by the current "we hate business" administration. We have had the disastrous oxymoronically named "Affordable Care Act", the refusal to build the Keystone Pipeline and now we get its war on coal. Again, using its favorite method of doing end-runs around the Congress, the Administration unveiled a new set of EPA regulations which most analysts predict will end up costing 250K jobs.

Every single one of the above have resulted in either job losses or the prevention of the formation of new jobs. The problem for this economy lies not so much in what the Fed is doing or not doing at this point, but in the current administration and its allies in Congress. Simply put, they are at war with the true creators of wealth in the nation. I wonder just how much this economy could actually have grown over the past couple of years had we had an administration that favored and initiated pro-growth policies which would get Americans back to work. It shows just how resilient American business truly is and how much potential our national economy has that in spite of one millstone after another hung around its neck, it still manages to actually manage some growth, even if that growth is rather anemic.

I envision American business as a runner loaded with lead bricks on its back by the current administration valiantly straining to run the race nevertheless. It is ironic that this administration, which constantly touts itself as a champion of the working class, has ruined that same working class with the sort of ideologically driven policies which have been proven time and time again to curtail growth and engender job loss, ESPECIALLY among those who need those jobs the most.

The reason I bring this up is because as long as the current administration is in office, I cannot see this economy really accelerating to the upside any time soon. I see instead it continuing to limp along showing some growth, but that growth will be subdued at best. The TIPS spread is showing the same thing - sluggish growth with little to no inflation. We will hopefully get a change in the Congress in this fall's election but as long as the Obama administration is in office, I cannot envision anything drastically changing on the economic front.

What this translates to in my view is that stocks will continue to be the "Go-To" asset class and where the investment gains are going to be made while bonds will remain in a range trade. Gold will struggle to find any sort of sustained rally as players will look to sell the metal on strength. I would have to see something that radically alters this outlook to have a corresponding change in expectations.

That being said, any sort of shift in the current sentiment, will be reflected on the price charts. That is why all of us, myself included, are served best by not becoming married to any viewpoint that we may or may not have and remaining flexible enough to allow for shifts in investor sentiment.

I should note here that European manufacturing data out this AM further fanned the flames of negative Euro sentiment. Throw in some additional data showing the German inflation rate fell almost by a half and the likelihood, at least among market players, that the ECB is going to take some sort of action on the stimulus front at its meeting this month, increased. That pressure the Euro down towards that 1.36 level once more with the result that the US Dollar was lifted ever closer to its key chart resistance level near the 80.70 - 80.80 level basis the USDX.

With the US expected to see higher interest rates sooner than the Eurozone or Japan, both the Yen and the Euro are losing ground against the Dollar. Today the yield on the Ten Year jumped rather sharply to 2.534 as I type these comments. It had briefly fallen below the 2.50 level last week dipping as low as 2.402 before bouncing.

This stability in the Dollar is going to create more headwinds for gold.

News out of China on its manufacturing front was completely different than the weak news out of the Eurozone. Its manufacturing purchasing managers index rose to 50.8 from April's 50.4. The market was looking for a 50.6 reading. While not exactly a gangbuster reading (anything below 50 is considered contraction) it alleviated fears of any short of sharp contraction in that key region. Copper responded by moving higher with its strength dragging silver up somewhat.

On the grains front - soybeans - the market that keeps on proving that only those with some sort of masochistic tendency will trade that old crop contract. Its unpredictable price action continued today with the July soaring back above the $15 level again. There appears to be a contingent of either pit locals or some commercial interest which look as if they are trying to squeeze the shorts in that month. Some days they have better success than others it would seem. Today was one of those days. Once again the focus was on the tight carryover. I still wonder how many beans from last year's harvest that farmers might be sitting on in their shiny new silos.

As far as the new crop goes, the weather, for now, looks ideal. We will get a look at the status of those bean and corn crops this afternoon when we get the conditions reports. Wheat continues to lose any gains it received from hot and dry conditions a while back. The rains that have fallen in the hard winter wheat region have taken that right off the radar of the trading world. Instead the focus has shifted to the lack of competitiveness of US wheat prices compared to other global wheat competition.

Crude oil is weak today with nat gas getting a bit of a bump off of that news about the administration's war on coal. WTI has trouble whenever it nears the $105 region. There are an awful lot of hedge fund longs in that market that is making some nervous. It has managed to stay afloat above the $100 mark in spite of the rather flaccid economic readings of late so demand must be there but it cannot extend higher either. Markets like this, where there are a great number of big long positions, that stall out, are always at risk of a significant round of long liquidation from stale longs that run out of patience. We'll see if that is the case or if the bulls remain resolute and refuse to cede ground.

Here is the gold chart.

The ADX continues to rise but remains below 25. The negative DMI however is well above the positive DMI indicating a market in which the bears are in control which is grinding lower. The price did bounce from that support level noted (next support zone) but has not managed to extend even so far as last Thursday's and Friday's high. It looks heavy, especially with the mining shares coming under more pressure in the session thus far.- Dan Norcini, More at http://www.traderdannorcini.blogspot.com/

 

GATA Posts:

 

 

China's gold hoarding hinders price suppression scheme, Hong Kong analyst says

China explores bond buying in first hint of QE

European Central Bank expected to push key interest rate below zero

 

The Statistics:

Activity from: 5//2014

Gold Warehouse Stocks:

8,262,710.946

+32,147.24

Silver Warehouse Stocks:

175,266,774.063

+538,935.88

 

Global Gold ETF Holdings

[WGC Sponsored ETF’s]

 

Product name

Total Tonnes

Total Ounces

Total Value

New York Stock Exchange Arca (NYSE Arca) AND Singapore Exchange (SGX) AND Tokyo Stock Exchange (TSE) AND Hong Kong Stock Exchange (HKEx) AND Mexico Stock Exchange (BMV)

SPDR® Gold Shares

785.279

25,247,501

US$31,475m

London Stock Exchange (LSE) AND NYSE Euronext Paris AND Borsa Italiana AND Frankfurter Wertpapierbörse (Deutsche Börse - Xetra)

Gold Bullion Securities

138.13

4,441,056

US$5,528m

London Stock Exchange (LSE) AND NYSE Euronext Paris AND Borsa Italiana AND Frankfurter Wertpapierbörse (Deutsche Börse - Xetra) AND NYSE Euronext Amsterdam

ETFS Physical Gold

152.66

4,908,200

US$8,004m

Australian Stock Exchange (ASX)

Gold Bullion Securities

11.16

358,789

US$446m

Johannesburg Securities Exchange (JSE)

New Gold Debentures

41.68

1,339,954

US$1,709m

 

COMEX Gold Trust (IAU) Total Tonnes in Trust: 163.41.

 

Silver Trust (SLV) Total Tonnes in Trust: 10,284.40.

 

The Miners:

 

Banro’s (BAA) corporate update, Centerra’s (CG.TO) potential mine shutdown, Timmins Gold’s (TGD) board of directors, Alamos God’s (AGI) new chairman of the board, Gold Fields’ (GFI) resumed operations, and Santacruz Silver’s (SCZ.TO) first quarter results were among the big stories in the gold and silver mining industry making headlines today.

 

WINNERS

1.  Timmins

TGD +9.60% $1.36

2.  New Gold

NGD +1.55% $5.37

3.  Yamana

AUY +1.49% $7.47

 

LOSERS

1.  Almaden

AAU -4.44% $1.29

2.  Gold Resource

GORO-2.97% $4.25

3.  Rio Alto

RIOM -2.65% $1.65

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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Additional Resources for today’s Gold Seeker Report can be found:

© Gold Seeker 2014

Note: This article may be reproduced provided the article, in full, is used and mention to Gold-Seeker.com is given.

 

 

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