Focus on Funds
By Murray Coleman
After snapping a three-week winning streak, gold and silver traders head into what promises to be a slow-trading Thanksgiving week with lowered expectations.
The SPDR GoldTrust (GLD) was most recently off by 1.8% and the iShares Silver Trust (SLV) was down 3.5%. Still, GLD headed into Monday’s session with a year-to-date gain of more than 21% while SLV — despite a rocky three months in which its net asset value had declined by roughly 20% through last week — was ahead 4.8% in 2011.
For those with longer-term plans to tap into growth in the group, these might be interesting times to consider as entry points. Barclays analysts are looking at gold futures possibly sliding to around $1,680 an ounce, some 1% lower.
“We would fade any further weakness against the $1,600 area looking for a move toward the highs,” they added. For silver, Barclays told clients they “would fade any move below $30 in silver against $28 (an ounce), targeting $35.70.”
Gold for December delivery most recently was sinking by $29.80 to $1,696.30 an ounce on the Comex. Meanwhile, December silver was down $1.57 to $30.85 an ounce in New York.
Analysts at BNP Paribas noted Monday that economic conditions in Europe and the U.S. still seemed in a state of “heightened uncertainty” given political gridlock in Washington over deficit cutting efforts and ongoing debt worries in the euro zone. “In the near term, gold should continue to outperform the rest of the precious metals complex,” the bank wrote in a note to clients.
Interestingly, BNP Paribas predicted that if economic fortunes improve and the “risk-on” trade returns, palladium could “take over gold’s position as the best performing precious metal.”
Along those lines, it’s worth noting that the ETFS PHysical Palladium Shares (PALL) was falling by 2.4% at last glance. But on a relatively light day of activity so far in precious metals, PALL’s volume was notably stronger, trading already near its longer-term full-day average.
In the past three months, PALL’s trajectory has followed SLV’s down by more than 20%.
Analysts at Barclays and Johnson Matthey have recently predicted that palladium’s supply and demand dynamic should swing negative — meaning the market will be in a deficit situation — in 2012.
Miners are also falling today. The Market VectorsGold Miners ETF (GDX) was off by 2.8% while the Global X Silver Miners ETF (SIL) was falling by 5.4% on the day.
Jeb Handwerger, editor of Gold Stock Trades, noted today that the Chinese Metal Exchange has made “ominous noises” about raising the margin rate on silver. “It would seem that the bankers consistently choose to handicap silver and gold while favoring dollars and treasuries,” he added.
GDX has again failed to move past resistance on a technical level, setting the ETF up for a possible test of recent lows at around $52 a share, Handwerger warned. It was trading recently around $55.44 a share.
“Silver also reversed at the 50-day moving average which may indicate that late September lows may be tested,” he wrote.
With Germany again talking tough on a potential European Central Bank bailout of troubled sovereign debt markets, gold futures figure to retest their lows while silver stocks “look vulnerable,” wrote Jordan Roy-Byrne, editor of the Gold & Silver Premium Report.
He told clients this morning:
“This is starting to feel similar to 2008-2009. This Euro crisis could force equities and commodities lower thereby creating the cover for China to re-stimulate, the ECB to print $3 trillion … and then the Fed can print (money) since bonds are strong and the U.S. dollar could be going (higher in the short-term).”
But the independent precious metals analyst did point out that fundamentals remain much stronger for gold than in 2008. He sees some technical clouds forming in the near-term but that a “a breakout in 2012 will have excellent underpinnings and catalysts.”
Read the whole story here: Gold, Silver Slide: Is This Like 2008-2009? Palladium Seen Poised - Focus on Funds - Barrons.com
________________________ The MasterBlog
Central banks made their largest purchases of gold in decades in the third quarter, as a sharp drop in prices in September accelerated the shift to bullion as a means of diversification.
The scale of the buying, at 148.4 tonnes on a net basis, was far bigger than previously disclosed, surprising some traders.
The data were published in a quarterly report by the World Gold Council, a lobby group for the gold industry, on Thursday.
The WGC declined to identify of the central banks behind the majority of the buying citing "confidentiality restrictions", saying only that "a slew of new entrants emerged wishing to bolster gold holdings".
Central banks are one of the most important drivers of the gold market but few disclose details about the changes in their bullion reserves.
Central banks became net buyers of gold last year after two decades of heavy selling – a reversal that has helped propel the price of bullion to a high of $1,920.30 a troy ounce, up 600 per cent in a decade.
This year, led by emerging market central banks intent on diversifying their growing foreign exchange reserves, they are set to buy more gold than at any time since the collapse of the Bretton Woods system 40 years ago, the last time the value of the dollar was linked to gold.
The purchase of 148.4 tonnes in July-September is the largest since GFMS, the consultancy which produces the data underlying the WGC reports, began compiling quarterly numbers in 2002. Before then, the last time central banks were net buyers of gold was in 1988 when they bought 180 tonnes.
Marcus Grubb, head of investment at the WGC, said of the buyers: "We believe it's a number of purchasers from different countries."
The majority of the buying took place in September after prices fell sharply from record levels at $1,900 to a low of $1,534.49, he said. It coincided with growing international tensions over the US dollar after a dispute in Washington about raising the US debt ceiling.
However, Mr Grubb said the buyers were probably pursuing longer-term targets: "Central bank buying tends to follow a different heartbeat than pure investment purchases of gold. It's often based on targets set earlier in the year on gold as a proportion of foreign exchange reserves."
He predicted that central bank buying for the full year could be 450 tonnes, implying a further 90 tonnes in the fourth quarter.
GFMS last month said central bank purchases were likely to be in excess of 400 tonnes and could reach 500 tonnes, an upward revision from its forecast in September of 336 tonnes.
Elsewhere, the WGC reported that China overtook India to become the largest consumer of gold jewellery in the third quarter. Chinese jewellery consumption rose 13 per cent from a year earlier to 138.6 tonnes, while buying from India – traditionally the world's top consumer – fell 26 per cent.
