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Gold and Silver a Little Bit Stronger

First two days of the week were quite normal and both metals stayed plus or minus on the same levels. Both prices significantly jumped on Wednesday. Silver was for a while over $ 20 but then closed a little bit below this level. The next day gold almost touched $ 1300 but as day before silver stayed below it. Silver was more successful and closed the day over $ 20. Friday´s session was quite calm but silver did not hold $ 20 level.

Gold finally closed on $ 1284.8 per ounce what was $ 61 more compared to previous week. Silver closed on $ 19.92 per ounce what was $ 1.02 more compared to previous week. The gold/silver ratio is 1 to 64.51 (i.e. you could buy 64.51 grams of silver for 1 gram of gold, it was 64.75 week before). So silver was a bit successful compared to gold this week. HUI index (index of the most important gold mining companies) was on $ 225.03 and was up $ 9.14 compared to previous week. XAU index (index of gold and silver mining companies) was up as well and ended on $ 89.57 what was $ 3.13 more compared to the previous week. Indexes were up first time after five weeks. Last week data from COMEX showed us that bullion banks significantly decreased their net short concentrated positions on gold but increased them surprisingly on silver. This week report showed us that bullion banks slightly decreased positions on gold and silver as well.

Ben Bernanke was behind the rise of metals prices on Wednesday. First we had the release of the FOMC minutes which were not very much indicative what the FED is preparing for us. The only thing which is more significant from them is that committee is divided over current policy. Than Ben spoke and stated that the FED will continue with accommodative policy. In other words that the FED will very probably continue with purchases of bonds and both prices rose.

This week has occurred one interesting thing. I mentioned it two weeks ago when I wrote about gold and if it is in strong hands. The GOFO rate which indicates stress on the London gold market turned into the negative territory; first time after the Lehman Brother collapse. It means that someone with dollars needs the short term use of gold and is willing to pay the owner of the gold a rate of interest plus use dollars for collateral. It tells us that that the delivery situation (for 400 oz bars) is extraordinarily tight. And you have to realize that we are speaking here about the environment of institutional investors not small investors.

1_GOFO

www.zerohedge.com

GOFO is negative more than 5 days in row on 1, 2 and 3 month rate. This has occurred only four times in the last 14 years. And each time a negative GOFO has been connected to significant bottom in the gold market. Put it into the perspective of the COT report where bullion banks moved into the long side of the market especially on gold and connect it with short term backwardation on both metals and we should state that we are witnessing bottom very probably. On the other hand there are some opinions that we could still go lower based on the simple assumption that corrections like this could hit basically 50 % of the previous peak (which means gold between $ 900 and $ 1000). As usually only time tell us. But what I am not still very sure is the bottom on the silver market especially if anything happens in global economy which could indicate any type of recession.

Overview of the prices of gold and silver for the remaining periods:

1_prices_28

Gold chart

gold_28

Silver chart

silver_28

Source: upner.com, kitco.com

Matúš Pošvanc

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About matus.posvanc

Trhu so zlatom a striebrom sa venujem od roku 2011. Prešiel som rôznymi fázami a pohľadmi na problematiku. "Trh je manipulovaný. To je jasné!" Inak by cena zlata predsa nešla dole. "Zlato na úrovni 100 tis. USD? Žiaden problém." Najneskôr do pár rokov. "Futures trh je najväčšie zlo a tzv. papierové zlato je nutné zakázať". Nuž, po dlhom štúdiu tejto problematiky, som hlúposti a táraniny opustil. Ostalo to, čo považujem za podstatné. Význam zlata je veľký. Avšak bez pochopenia trhu okolo neho, sa sám od seba znovu neobjaví. Kúpiť zlato ako časť svojho portfólia má zmysel. Snažiť sa na zlate zbohatnúť? To je iný príbeh. Jednu jeho časť nájdete na mojom blogu.
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