The Metals Report

This week the February Gold futures traded a choppy and volatile $57.20 range as traders attempted to decipher the geo-political and economic data. The news this week was mostly bullish for precious metals however, the past session and a half has forced traders to liquidate and take profits as the European Union’s financial fragility has once again given strength to the U.S Dollar. Earlier in the week the precious metals rally momentum had been fueled by an assortment of bullish data that is still very prevalent but, is being over the financial crisis in the Euro region. Today we learned that Standard & Poor’s intended to downgrade much of the Euro states with the exception of Germany and the Netherlands…

Thursday:

Today European Central Bank President Mario Draghi stated the underlying pace of the EU’s monetary expansion is moderate and sees tentative signs of stabilization in the economy. He also expects a gradual recovery but, warned the Euro region still has substantial downside risks. Gold also rallied as borrowing costs for both Spain and Italy were lowered. It is my opinion that global investors are speculating that the FOMC, the ECB, and China may all have intentions of near future monetary easing…

Investors are turning toward the precious metals as of late simply because they lack confidence in the world’s fiat currencies. There has been heavy gold buying coming from the Asian sector primarily China and India.

The weekly Initial Jobless Claims number was 399,000. This was projected to be 375,000.

The rating agency Egan James announced that they cut Portugal’s credit rating from BB –B+.

Wednesday:

Today’s February Gold futures traded a choppy $17.20 range as traders used more bullish data to extend yesterday’s rally momentum. Chicago Fed President Charles Evans said the economy was in need of additional stimulus and stated he was in favor of “substantial” additional easing and to continue to leave rates low until unemployment falls below 7% or inflation reaches 3%.... A possible quantitative easing 3 would be negative for the U.S Dollar and therefore bullish for Gold. Evans also added that if indeed there is a need or a QE 3 it would likely be $600 billion.

The Gold market’s recent rally has also been fueled by strong physical demand from India (#1 consumer of Gold) and China (#2 consumer of Gold in the world).China is preparing for the Lunar New Year (January 23rd) which is a key Gold buying period.

Tuesday:

Today’s February Gold futures traded a choppy $32.30 range and traded as high as $1641.50 as much of today’s economic and geo-political news was bullish for the precious metals.

News from Iran indicated that had convicted and sentenced to death and imprisoned an American and former United States Marine Amir Mirzaei Hekmati for espionage.

This conviction will probably be used as a bargaining leverage against the west.
Iran has been defiant in regards to its uranium enrichment process in order to achieve nuclear capability. The west has levied heavy sanctions against Iran and in retaliation Tehran has threatened to close the Strait of Hormuz and disrupting the transportation of Crude Oil.

News such as this raises the warring tensions and therefore causes concerns and speculationsover the worlds crude oil supply. Today’s February Crude oil futures traded as high as $103.41 per barrel. Higher crude oil is inflationary and bullish for the precious metals.

The European Union and Japan announced that they are planning punitive cuts in oil imports from Iran.

After failing to import the 1000 ton on imported gold last year India’s Central Bank allowed four more Banks to import Gold and Silver. Since India is the world’s largest consumer of Gold this is considered to be very bullish Gold as well.

Also Sandra Pianalto Cleveland FED boss who has rotated to become a voting member of the FOMC has hinted that she would support more “Quantitative Easing”….Printing more U.S Dollars would be very bullish for the precious metals…

Monday:

The Gold market‘s momentum was halted as it reached the $1625.00 technical resistance level.

It is my opinion that traders and investors alike are looking to re-enter the precious metals markets due the huge volatility in the global market place. I believe that investors are still a bit gun shy in the wake of the enormous sell-off that occurred in the Month of December. On December 2nd February Gold was trading at $1767.10 and traded as low as $1523.90 on the 29th. That’s a drop of $243.00 in 27 days. I believe all eyes are still watching the situation with Iran as well as the continued concern with the European Union’s fragility. As we know Gold and Silver retain value better than most commodities during times of crisis. The recent spike in crude oil prices is considered to be inflationary. And if there is a warring environment due to tensions with Iran speculators will buy Gold in anticipation of higher oil prices…