Physical gold and silver slipped today but the miners took last weeks physical buying as a reason to move higher. Silver was a little more buoyed today with its score moving from -100 to -90. GDX also improved to -90 while gold maintained its -100 score.
Banks Making Calls for Lower Gold
More are coming out and calling for gold to $1,000. Societe Generale sees gold at $1,000 no because of “low inflation.” I don’t know why they just don’t use the word deflation.
Citigroup has some out and simply said “to short gold.”
The stronger dollar is sited as their reasoning for these projections as well.
Richard Russell also Making Warnings about Gold (from Friday)
Gold received a harsh blow today as well, mostly a result of continued strength in the dollar. It’s important to understand that monetary easing from other central banks creates a different dynamic on the price of gold than monetary easing by the Federal Reserve.Generally speaking, the net result of quantitative easing is a weakening of the domestic currency relative to others. It shouldn’t be overly surprising that with Japan and Europe still in easing mode, and the US transitioning to tighter policy, the euro and yen are trading lower relative to the dollar. The issue that comes into play is that gold is priced in dollars. That means when other currencies fall relative to the dollar, it makes gold more expensive to foreign buyers who fund their purchases in another currency.We’re seeing this play out in the price action of gold today. As discussed in my remarks last Friday there were some strong warning signs gold may break below its triple bottom low at 1180. If you have large positions cross your fingers that Gold rebounds above 1180 early next week. This is a very negative technical setup as strong support has been violated. In my opinion the next major level of support sits at 1,000. Miners are collapsing in sync as the price of their coveted product falls and margins collapse. Beware especially of miners with higher all-in costs, as those will be the first to go under if the price of gold continues to fall.
Keep an Eye for a Break of these Price Levels
We didn’t get a lot of selling but the phone did stop ringing like it did Thursday and Friday. Looks like we are at a stand still which could bring lower prices despite the move up in miners. The numbers I mentioned in Sunday’s report are the Asian lows that I would still see if they hold. Those again were $1,160 for gold and $15.68 for silver. I’m not looking higher yet, but I do believe we will get a bounce if we don’t break these lows. A trader might catch JNUG, NUGT or GDX if you see them break to higher highs. If we break these lows, then JDST would be attractive. Right now I would wait and see and not be in them either way. Patience is rewarded while waiting for the right set ups.
UGAZ the Star of the Day Again
UGAZ was up 12% today to close at $13.69 for anyone who is still playing it. Not sure I would hold it much longer, but it could go up into the next supply report on Thursday where I would dump it or hold it based on the numbers. I became bullish on UGAZ when it was just under $11 a share. That’s about a 24% increase in just a few days. One must move up stops on this and by all means lock in some profit. I have no idea whether this will be a mild winter or a harsh one to speculate whether to hold UGAZ until it gets back to over $20. I’m sure it will at some point, but when you are handed over 20% return in a few days, I recommend taking it.
USO
What’s on my radar. Oil is either going to break down further with the deflationary pressures or bounce. I know that’s an either or statement, but looking at the 5 year chart for USO, the 29 price is what I would be looking at for a bounce. It closed at 29.76 today.
10-03-14 GLD CHART
10-03-14 SLV CHART
10-03-14 GDX CHART
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About Doug EberhardtDoug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
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