London Gold Market Report: Dismal Jobs Data good for Gold

An unexpected bad print in Friday’s Labor Department’s non-farm payroll report for May is gold bullish, according to premiere bullion storage service BullionVault.

After successive months of hobbling, yet hopeful, job creation in the U.S. (though many economist doubted the overall quality of the new jobs added from the depths of the initial shock to the U.S. economy), the Labor Department laid an egg for May when it was revealed that only 54,000 jobs were created, far less than the mean estimate range of 150,000 to 190,000 by analysts.

Those investors, believing that the Fed may pull off a slow recovery, could be rethinking that premise and instead begin fretting about the possibility of a double-dip recession, while others—who never believed that the U.S. economy ever emerged from recession in the first place—may fear an all out 1930s-style depression and food and energy price inflation to make matters worse.

But for gold and gold stocks investors, the latest data are good news, according to Swiss precious metals firm MKS.

“Speculations of a generous third quantitative easing (QE3) package will grow” if a string of subsequent depressed data come in, MKS told BullionVault. “Expectations in the market suggest that gold prices will benefit in the short term by the belief that slowing growth in the U.S. will prompt the Federal Reserve to maintain favorable monetary conditions.”

That means some form of QE3 by the Fed could be inevitable by as early as the third quarter some economists speculate, which will result in a further expansion of the U.S. monetary base and put a strong bid under the yellow metal.

“This is gold-friendly data,” said Credit Agricole analyst Robin Bhar. “In the worst case scenario, we could have a double-dip in the U.S. economy and possibly deflation, which would also help gold.”

The showdown in Greece over its failure to achieve budget metrics attracted safe haven buying of the metal throughout the past two to three weeks, taking the Euro from the high of 1.49 in May to approximately 1.41 against the dollar as well as providing ammunition for firming gold prices above $1,520.

Following the Labor Department’s disappointing jobs number on Friday, however, the euro soared against the dollar to a one-month high of $1.46, or a 2.3% again, before retracing some of the day’s earlier gains.

“The turning point was Greece, and we can suggest Greece is out of the way for the short term,” said Kurt Magnus, executive director of currency sales at Nomura Holdings, referring to reports that the European Union (EU) and the International Monetary Fund (IMF) have agreed to extend the next installment of last year’s €110 billion bailout to Greece.

Now the focus among traders has shifted to the dollar and its lingering problems accentuated by Friday’s dismal economic data and the partisan stalemate in Washington regarding the U.S. federal budget deficit and debt ceiling.

At 11:40 a.m. in New York, gold trades at $1,552.03, up $10.43.

Richard Russell says Second Half of 2011 to be “Wild and Wooly”–sees “Urgent Buying” of Gold

Richard Russell has warned investors to buckle their seats.  It’s about to get “wild and wooly” in the second half of 2011, he stated in his latest newsletter to investors.

In the Thursday edition of his daily published Dow Theory Letters, the octogenarian survivor of WWII and countless bear markets of one asset class or another, the highly respected and longest-running financial newsletter writer, Russell, stated that he anticipates a 2011 second half replete of serious volatility. That’s great news for traders, but the rest of us, however, may not enjoy the ride—that is, those who don’t possess the precious metals, as Russell has repeatedly recommended holding for nearly a decade.

As the price and gold and, especially silver, took a plunge in the first week of trading in May, Russell stated he wouldn’t be surprised if the gold price retreated down as far as its 150-day moving average of approximately $1,400—a point of near perfect support on several significant pullbacks in the yellow metal since the summer of 2009.

But today, Russell’s intuition tells him that gold may be done consolidating and may again be poised to make another run from near present levels of between $1,480 and $1,510.  Strong buying had come to the gold market at the bottom of the early-May sell off, and Russell knows that when an opportunity to slam the gold price in the midst of a deep (but not unusual) plunge in the commodities sector doesn’t materialize, something must be different this time.

“The latest action shows gold holding well ABOVE its 150-day MA and consolidating,” writes Russell.  “Frankly, I thought gold was in for another test of its 150-day MA, but I may have been too pessimistic. Gold does not seem to want to test its MA (so far) this time, and that’s a bullish factor. As I write this morning June gold is up over 19 points, and there seems to be urgent buying in gold.”

Russell’s excerpts of his latest musings can be found on King World News.

Incidentally, precious metals market guru James Turk, of Goldmoney, has gone on the record this month with a similar assessment that the gold market won’t be correcting below the lows of May 5 of just above $1,460 for very long.  Turk anticipates a break from gold’s seasonal low summer period, in which he sees gold rallying in the summer instead of drifting downward as has been the average case for the past 31 years.

Followers of Russell’s most recent thoughts on the state of affairs in the markets and American-led geopolitical events across the globe are not likely to be surprised by Thursday’s edition of his letter.  In his January “predictions” letter, he dropped a bombshell on his readers.  He wrote:

“This year might even be a black swan year,” Russell wrote. “Certain events are now in place, events that have never been seen before in human history.  We are dealing with debts so monstrous, so huge, that most people can’t fathom them. The Muslim community is huge, and it has moved heavily into many European nations. The radical Muslims intend to express their world leadership. Dictators in North Korea and Burma and Iran and Africa are no longer safe in that they can no longer keep their populations ignorant and in slavery.”

All the makings of a “black swan” event are in place for 2011, he concluded.

Russell’s bulls-eye prediction of social unrest and revolution, kicking off, first, in Tunisia in February, which has since spread across North Africa and to the Middle East, is nothing short of remarkable for a man presumably not tied to any number of government intelligence agencies.

Given the backdrop of Russell’s demonstration of having a sensitive finger on the pulse of these markets and geopolitical events, coupled with FX Concept’s John Taylor’s recent warning of a significant “risk-on” unwind (though, he wouldn’t comment on the gold market, specifically) period for the markets in the near horizon, one has to wonder if another big move higher in the gold price is just around the corner.

The G-7 cartel and Chicago Mercantile Exchange have thrown everything they can at the gold bull, but it keeps on coming.  Russell senses the “urgent  buying,” as he wrote, foreshadows an event, or events, which could provide the catalyst for a stampede in gold, finally, from the retail investor.

 

 

Silver: One Top Trader’s Viewpoint

Starting afresh this week, following a week of death-spiral plunges and rebound, recovery and retest of the $33 level in the silver price, traders have been seeking guidance from their favorite gurus and chart technicians.

Is this the dip in silver that should be bought aggressively?  Or will silver succumb to the seasonal pattern of weakness into the summer months?  Do silver bulls buy now or wait for an opportunity during the seasonally weak summer months of July and August?

One professional trader known for his level-headed perspective, experience and discernment in several active markets has weighed in recently.

Dan Norcini of Jim Sinclair’s Web site, JSMineset.com, told Eric King of King World News (KWN) the silver price looks has looked attractive to traders at the $33 levels, according to volume statistics in the SLV Exchange Traded Fund (ETF) and the cash market, with the latter rumored to be coming from large Asian buyers.

“Trader Dan,” as he’s called on JSMineset.com, told KWN he’s looking for at least one more successful test of the $33 level accompanied with high volume before he’ll feel comfortable suggesting a bottom for silver is most likely in.

On the initial breathtaking 30%+ drop in the silver price during the first week of May, large volume from ‘strong hands’ came into the market as gold’s kissing cousin fell back to the $33-$34 range last Thursday.

After trading briefly above the $39 handle during Tuesday’s New York session, silver sold off again sharply on Wednesday, and again, on Thursday, dropping to Norcini’s short-term target range low of $33 and $34.  Again, very large volume came in during New York’s trading hours, lifting silver to above $35 in its first successful test of Norcini’s target range.

“Well it looks like Eric, based on what I’m seeing on the chart right now for silver, when it drops down below $34, anytime it gets down below there, it seems to be uncovering some pretty good buying,” Norcini told King.  “It does not stay down there very long.  That’s promising. As long as that continues, silver is in pretty good shape.”

If silver can hold the $33-$34 range, the price may trade within a 10% range for a while before making its next move, according to Norcini, who mentioned he saw a lot of hedge funds, who were playing the narrowing price spread between gold and silver, now unwinding their trades, as well as highly leveraged latecomers who couldn’t make margin increases to satisfy the Chicago Mercantile Exchange’s (CME) five hikes within eight days.

So for now, traders could witness the price of silver bouncing around on high volatility until the market stabilizes and demarcates a floor over time, according to Norcini.

“It [silver] will just range trade, Norcini added.  “That would be a good situation for us, to let it range trade between $33 and $34 on the bottom and run up near $36, $37 on the top, maybe work a little higher, but just work back and forth and consolidate, work the froth out of the market, work the emotion out—what we need to get out of the market and calm it down a little bit.”