Bloodbath in the #GOLD Markets - Key Levels Collapse

general equity holders should refrain from schadenfreude

Next support levels seen at $1470 then $1340.

In light of the big gold price dive today, Ross Norman, suggests that gold may yet have the last laugh:

Gold will remain on the ropes until it engenders higher levels of investment demand - for that it will require more sales channels, more product innovation and more education. It is a tiny lifeboat in a sea of economic trouble - this boat ain't sunk yet !

Bloodbath in the GOLD Markets - Key Levels Collapse

ROSS NORMAN - Sharps Pixley

After gold slipped gently below the important technical level of $1540 this afternoon, it appeared that short sellers and heavy long liquidations had done their worst - but more was to come. $1540 was the market low in 2012, a level it tested and held in October 2011 and May 2012.
Gold investors have been noticeably absent and are perhaps now fully desensitized to bad news as the lacklustre price action in the wake of Cyprus, North Korea and weakening US data proved.
Shorting gold will remain a popular sport while there is money in it and there has been a noticeable absence of bounce in the price after each sell-off, prompting repeat attacks to the short side. Next support levels seen at $1470 then $1340.
For those seeking a haven in equities that have been trading at all time highs, we suggest you refrain from schadenfreude - and be careful what you wish for.
Underpinning gold are attractive fundamentals with the price floor in the form of mine costs rising sharply (gold prices rose 6% last year and costs 12%). More of this and a little below the current price and the gold-shorters will be butting up against production cut-backs - this wheeze will run its course.
Meanwhile the total US national debt rises in 2013 from 16.8 to 17.8 trillion dollars - before number blindness creeps in a translation is perhaps in order - that is equivalent to more than 330,000 tonnes of gold, or over twice all of the gold ever produced in history or total gold mine production for the next 120 years - fat chance that is going to be paid down through the fruits of economic labour.
Gold will remain on the ropes until it engenders higher levels of investment demand - for that it will require more sales channels, more product innovation and more education. It is a tiny lifeboat in a sea of economic trouble - this boat ain't sunk yet !

Ross Norman

See the article online here: ROSS NORMAN - Bloodbath in the GOLD Markets - Key Levels Collapse

#Goldman advises to short #gold | FT Alphaville

despite the resurgence in euro area risk aversion, it’s pretty notable (if not remarkable) that gold prices have remained unchanged over that period, something which is pretty visible on the ETF level.


This is from their latest commodity research note:

Turn in gold prices accelerating; closing our long gold position
Given gold’s recent lackluster price action and our economists’ expectation that the acceleration in US growth later this year to above-trend pace will support US real rates, we are lowering our USD-denominated gold price forecast once again. Our new forecast is further below the forward curve with year-end targets of $1,450/toz in 2013 and $1,270/toz in 2014. As a result, we recommend closing the long COMEX gold position that we first initiated on October 11, 2010 for a potential gain of $219/toz, with the risk reversal overlay expired on March 25. Our long-term gold price forecast (2017+) remains at $1,200/toz: while higher inflation may be the catalyst for the next gold cycle, this is likely several years away.
Initiating a short COMEX gold position as our ECS Top Trade #8
While there are risks for modest near-term upside to gold prices should US growth continue to slow down, we see risks to current prices as skewed to the downside as we move through 2013. In fact, should our expectation for lower gold prices continue to prove correct, the fall in prices could end up being faster and larger than our forecast, as aggregate speculative net long positions across COMEX futures and gold ETFs remain near record highs. We therefore recommend initiating a short COMEX gold position as our ECS Top Trade #8, implemented through an S&P GSCI® front-month rolling index to further benefit from the contango in the COMEX future curve, targeting a move to $1,450/toz with a stop at $1,650/toz. While we may be end up too early in entering this trade, we prefer that to being late given our belief that the skew to current prices is to the downside.

The other interesting thing they note, is that despite the resurgence in euro area risk aversion, it’s pretty notable (if not remarkable) that gold prices have remained unchanged over that period, something which is pretty visible on the ETF level.
Indeed ETF gold holdings continue to decline quickly.

 READ THE REST OF THE ARTICLE HERE: Goldman advises to short gold | FT Alphaville

The MasterMetals Blog

Barron's: Bearish take on natural #gas

 there are some signs that demand from utilities is slowing down: data from the U.S. Energy Department released last week showed gas usage by electric utilities fell by 0.6 billion cubic feet (the measure for stockpiles) a day in January compared with January 2012.

 

Commodities Corner

 | SATURDAY, APRIL 6, 2013

Gas Bubble Ready to Pop

By JERRY A. DICOLO  

Prices have climbed 23% this year. But there's too much supply and fading demand, so long investors should think about selling.

DJ-AIG Commodity Indexes

The rally in natural-gas prices looks set to fade.

Futures have surged 23% this year, reaching the highest level in 20 months Friday. But despite the recent gains, many analysts believe that gas futures rose too fast, and are still too high—and ripe for a big pullback.

"Once the cold winter weather passes, we think support is likely to prove flimsy," said Credit Suisse analysts in a research report late last month. The bank recommends that investors start preparing for a price decline.

A blast of chilly weather at the tail end of winter was the primary cause of the rally. March temperatures were colder than normal across much of the U.S., which increased demand for gas-fired heating and resulted in a steep decline in U.S. natural-gas stockpiles.

The drop in inventories removed the biggest weight on prices over the last year and a half—too much supply thanks to vast amounts of the fuel unlocked from shale-rock formations by new drilling techniques, which sharply increased U.S. production. This time last year, U.S. gas reserves stood roughly 60% above five-year average levels—and prices were on their way to a 10-year low of $1.907 per million British Thermal Units, notched last April.

On April 4, the U.S. Energy Department said that stockpiles fell below the five-year average for the first time since September 2011—to 1.687 trillion cubic feet last week, or 2.1% below the average. Natural-gas futures rose 2.5% for the week on the New York Mercantile Exchange, settling at $4.125 per million BTUs Friday. Market analysts are looking ahead to spring, when gas usage by homes, businesses, and utilities typically declines.

Roughly half of U.S. homes use natural gas for space heating, and many more have electric heating powered by gas-burning utilities. When temperatures rise, gas demand drops.

That factor leads to stockpile gains every summer. But gas being pricier near $4 per million BTUs, investors may have reason to worry about a bigger increase in reserves.

SOME MARKET WATCHERS are concerned that the rally that took gas to its current $4 level will also lead to reduced demand from utilities. Over the past year, power plants took advantage of low prices and shifted to burning gas instead of more expensive coal, raising demand for the fuel and helping to shrink the U.S. supply glut. There are signs, however, that utilities are already dialing back their move to natural gas.

Teri Viswanath, senior natural-gas strategist at BNP Paribas, pointed to data from the U.S. Energy Department released last week that showed gas usage by electric utilities fell by 0.6 billion cubic feet (the measure for stockpiles) a day in January compared with January 2012.

Ms. Viswanath says that "unexpected weakness" could mean utilities aren't as keen on gas at these price levels, which could mean price declines are ahead. Meanwhile, Credit Suisse analysts are forecasting a drop in electric-power demand of two billion cubic feet per day this summer, which would likely help to push stockpiles higher.

Natural-gas bulls have fought back from decade lows to stage a startling rally over the past year, but it looks like now is the time to declare victory, and to take profits. 

JERRY A. DICOLO covers commodities and other topics for The Wall Street Journal.

E-mail: editors@barrons.com