Gold Miners Fly
Gold and Silver Jump Big, Dollar Down
Gold has been moving up and shorts are scrambling to cover.
Word on the street is that high demand for physical gold in Asia has forced selling of paper gold, and investors want their gold delivered now — while there is some left.
This has led to backwardation, wherein the cost for gold today is higher than the cost for gold in three months.
As I write this, physical gold is selling for $1330.30 per ounce.
The ETF, which you see below, is at $128.86.
Paper gold is selling at a discount from delivered gold.
Last week, I wrote in this space that gold was going to bounce due to the technical situation. There was a doji on the chart at the bottom of the trend, and the MACD had crossed well below the zero line...
This call has played out.
Gold is sitting just above the 50-day moving average, but has broken its downtrend.
This downtrend has been in place since April. The longer downtrend dating back to October of last year has yet to be broken.
I expect gold will become more volatile as it sets up a sideways pattern for the rest of the year.
If you're trading options, I would be inclined to take profits here, after this 13% run-up, and wait for the next dip.
Gold Miners Have a Big Day
In other news, the gold miners liked the action.
Gold miners have been hated for some time now. They have been the worst performing sector for about a year, falling 46% before bouncing back hard.
Midday yesterday, they were up big: Barrick Gold Corp. popped 7.1% to $17.71. Gold Fields Ltd. ADS rose 4.3% to $5.78. GoldCorp. rose 6.3% to $29.05, and Newmont Mining Corp. climbed 6.4% to $30.53.
Those are nice moves from companies that were pariahs just a few weeks ago.
Part of this move in gold is based on Bernanke saying he's not planning on stopping his buying of $85 billion in bonds every month. That is to say, the stimulus won't taper off for the rest of the year.
This will keep money at play — and the “Bernanke put” going for the foreseeable future.
June Homes Sales Fall
Add to this the fact that June home sales missed “unexpectedly” and the dollar sold off.
I'm not sure who wouldn't expect real estate to fall off when mortgage rates spiked by 35% in a month, but all bad news is explained as “unexpected” by the major media outlets when it doesn't fit the narrative of slow-but-steady growth.
Couple all this with some short covering, and we've had a solid week in the gold markets.
The Commodity Futures Trading Commission reported options prices in short bets fell 24% last week...
Silver was up 5% yesterday as well, as it crossed over the $20 line to the upside.
All the best,
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