mick silver
15th November 2014, 09:25 AM
Gold Sector Analysis: OPEC's Gift - Gold Rides High on Speculation of Rising Oil PricesNovember 15, 2014
The week looked dim for gold and then all of a sudden it looked bright, thanks to speculation about OPEC's ability and willingness to fix oil prices at a higher peg when OPEC next meets.
This Week's Monetary and Industrial Trends
Oil went up, and so did gold, against the dollar. Bloomberg describes the action:
Gold futures jumped, capping the biggest two-day gain since June, as an oil rally damped concern that inflation will remain low and revived demand for the metal as a store of wealth. Silver surged the most in nine months.
Blame OPEC to begin with, according to various weekly posts. OPEC ministers are huddling before the group's Nov. 27 meeting, trying to figure out how to revive oil prices that have reached a four-year low.
The oil/price action played out all week long. At the beginning of the week, gold had bottomed at US$1,130.40; energy prices continued lower while equities climbed to record highs.
But by the end of the week gold was climbing hard against the dollar, helped by oil price nervousness and a stronger U.S. dollar against the yen and euro that suggested further diversification into precious metals.
Impact on Gold
This trend could continue for the next week or two or even longer. If OPEC (http://www.thedailybell.com/definitions/params/id/1964/) does decide to cut production, gold may benefit further from expectations of higher oil prices that could import price inflation into numerous sectors.
According to market observers, the near-term resistance to gold's rebound would be seen around $1,200 – a price that gold penetrated on the downside several weeks ago. But gold has actually seen an upward trend against the dollar since November 5th when it bottomed around US$1143.
http://www.thedailybell.com/images/library/kitconov14.jpgThe Week's Political and Military Trends
Big news at the end of the week when CNSNews among other news websites reported on a new audio message from the Islamic State.
The message emphasized the failure that the US faced in trying to combat recent IS gains in both Iraq and Syria. The message was supposedly released by Abu Bakr al-Baghdadi – who according to the US military was either wounded or dead. But maybe not ...
Here's more from CNS:
An audio recording has surfaced in which he references recent events such as President Obama's decision to send and addition 1,500 military advisors to Iraq. This seems to point to him being alive, at the very least.
Multiple times throughout the speech, al-Baghdadi references the "failure" of the U.S. and coalition mission to destroy the marauding terrorist army. While directly referencing President Obama, al-Baghdadi claimed that due to the early failure of the mission, Obama would be forced to send ground troops.
The message also aroused speculation that ISIS and al Qaeda may have reached an accord in Syria. According to CNS, "Regardless of what further action the United States takes in fighting ISIS, al-Baghdadi claims that his fighters will never abandon fighting, even if only one soldier of them remained."
This bellicose talk did not have a direct impact on precious metals (http://www.thedailybell.com/definitions/params/id/804/) this week so far as we can tell but there are other significant events lurking that may. Chief among them could be the Swiss referendum on gold backing for the Swiss National Bank.
This past week Deutsche Bank released a note stating that the possibility of a Swiss "yes" vote was a good deal more feasible than has been portrayed in the recent past. According to Deutsche Bank:
The proposal requires a simple country-wide majority to pass, as well as a majority in at least 50% of Swiss cantons. Current polling shows the 'yes' campaign with a narrow but clear lead and there are reasons to believe that factors on the day could be favourable for the amendment. If an affirmative vote was recorded, there is little political leeway to delay or dilute implementation.
While this is certainly startling news coming from a major bank, the Deutsche Bank report then goes on to discount the impact of such a vote:
We find that some of the concerns over the technical implementation of the 20% rule may be overblown. The SNB should be able to meet its gold demands with relative ease. Nor do we subscribe to the view that this would have a long term impact on gold price trends. In the event of further intervention, SNB rebalancing into gold could have a more marked impact on short term price trends, however. The SNB should easily be able to repatriate its gold holdings from abroad.
However, like the modern trend toward secession, a "yes" vote on central bank (http://www.thedailybell.com/definitions/params/id/2958/) gold-backing might give rise to initiatives in other countries as well. Price action can always be minimized in the near term, but the psychological ramifications may be considerable.
Gold Trend Summary and VESTS Analysis
All the major trends supporting gold against the dollar seem to remain in play, despite gold's often dreary dollar price-action. The Islamic State (whatever it is) continues to issue threatening messages against the West. These certainly have the potential to spook the dollar.
The Swiss referendum remains a potent force in support of gold against fiat currencies generally. And now it seems that price inflation via oil and gas OPEC price fixing may provide a continued price boost to gold against the dollar.
From a VESTS (http://www.thedailybell.com/definitions/params/id/28547/) perspective, a victory for the gold crowd in the Swiss referendum would be a significant setback for anti-gold forces. As mentioned above, victory could stimulate a number of "me too" movements, though how far they'd get remains a question.
Islamic State bellicosity is a different matter, as the various movements seem to be coalescing. Thus, over time we'd expect continued and expanded military action and, yes, troops "on the ground."
There are various key reports upcoming in the next week that may clarify gold's newfound direction, if it is to last. Kitco reports on key upcoming data including "industrial production and the New York Federal Reserve's (http://www.thedailybell.com/definitions/params/id/1855/) Empire State manufacturing index on Monday, the producer price index Tuesday, housing starts Wednesday, then jobless claims, the consumer price index, existing home sales and Philadelphia Fed manufacturing survey on Thursday."
With the end of the year comes holiday season and a potential pick-up of demand for physical gold in Asia and India. This could certainly influence prices regionally if not in the West as well, as we have reported in prior editions.
The possibility of oil price hikes via OPEC has already had a dramatic impact on gold priced against the dollar
The Swiss referendum is suddenly reported as swinging positively toward gold backing of the Swiss franc
The Islamic State continues to make threatening noises in the Middle East and may be consolidating
Upcoming holiday seasons in Asia and India may continue to drive purchases of physical gold
The big news this week was the emergence of OPEC as a major upcoming influencer of the dollar price against gold. We'll see if this holds next week as well.
- See more at: http://www.thedailybell.com/trends-and-sector-reports/35832/Gold-Sector-Analysis-OPECs-Gift-Gold-Rides-High-on-Speculation-of-Rising-Oil-Prices/#sthash.N4PGPy7J.dpuf
The week looked dim for gold and then all of a sudden it looked bright, thanks to speculation about OPEC's ability and willingness to fix oil prices at a higher peg when OPEC next meets.
This Week's Monetary and Industrial Trends
Oil went up, and so did gold, against the dollar. Bloomberg describes the action:
Gold futures jumped, capping the biggest two-day gain since June, as an oil rally damped concern that inflation will remain low and revived demand for the metal as a store of wealth. Silver surged the most in nine months.
Blame OPEC to begin with, according to various weekly posts. OPEC ministers are huddling before the group's Nov. 27 meeting, trying to figure out how to revive oil prices that have reached a four-year low.
The oil/price action played out all week long. At the beginning of the week, gold had bottomed at US$1,130.40; energy prices continued lower while equities climbed to record highs.
But by the end of the week gold was climbing hard against the dollar, helped by oil price nervousness and a stronger U.S. dollar against the yen and euro that suggested further diversification into precious metals.
Impact on Gold
This trend could continue for the next week or two or even longer. If OPEC (http://www.thedailybell.com/definitions/params/id/1964/) does decide to cut production, gold may benefit further from expectations of higher oil prices that could import price inflation into numerous sectors.
According to market observers, the near-term resistance to gold's rebound would be seen around $1,200 – a price that gold penetrated on the downside several weeks ago. But gold has actually seen an upward trend against the dollar since November 5th when it bottomed around US$1143.
http://www.thedailybell.com/images/library/kitconov14.jpgThe Week's Political and Military Trends
Big news at the end of the week when CNSNews among other news websites reported on a new audio message from the Islamic State.
The message emphasized the failure that the US faced in trying to combat recent IS gains in both Iraq and Syria. The message was supposedly released by Abu Bakr al-Baghdadi – who according to the US military was either wounded or dead. But maybe not ...
Here's more from CNS:
An audio recording has surfaced in which he references recent events such as President Obama's decision to send and addition 1,500 military advisors to Iraq. This seems to point to him being alive, at the very least.
Multiple times throughout the speech, al-Baghdadi references the "failure" of the U.S. and coalition mission to destroy the marauding terrorist army. While directly referencing President Obama, al-Baghdadi claimed that due to the early failure of the mission, Obama would be forced to send ground troops.
The message also aroused speculation that ISIS and al Qaeda may have reached an accord in Syria. According to CNS, "Regardless of what further action the United States takes in fighting ISIS, al-Baghdadi claims that his fighters will never abandon fighting, even if only one soldier of them remained."
This bellicose talk did not have a direct impact on precious metals (http://www.thedailybell.com/definitions/params/id/804/) this week so far as we can tell but there are other significant events lurking that may. Chief among them could be the Swiss referendum on gold backing for the Swiss National Bank.
This past week Deutsche Bank released a note stating that the possibility of a Swiss "yes" vote was a good deal more feasible than has been portrayed in the recent past. According to Deutsche Bank:
The proposal requires a simple country-wide majority to pass, as well as a majority in at least 50% of Swiss cantons. Current polling shows the 'yes' campaign with a narrow but clear lead and there are reasons to believe that factors on the day could be favourable for the amendment. If an affirmative vote was recorded, there is little political leeway to delay or dilute implementation.
While this is certainly startling news coming from a major bank, the Deutsche Bank report then goes on to discount the impact of such a vote:
We find that some of the concerns over the technical implementation of the 20% rule may be overblown. The SNB should be able to meet its gold demands with relative ease. Nor do we subscribe to the view that this would have a long term impact on gold price trends. In the event of further intervention, SNB rebalancing into gold could have a more marked impact on short term price trends, however. The SNB should easily be able to repatriate its gold holdings from abroad.
However, like the modern trend toward secession, a "yes" vote on central bank (http://www.thedailybell.com/definitions/params/id/2958/) gold-backing might give rise to initiatives in other countries as well. Price action can always be minimized in the near term, but the psychological ramifications may be considerable.
Gold Trend Summary and VESTS Analysis
All the major trends supporting gold against the dollar seem to remain in play, despite gold's often dreary dollar price-action. The Islamic State (whatever it is) continues to issue threatening messages against the West. These certainly have the potential to spook the dollar.
The Swiss referendum remains a potent force in support of gold against fiat currencies generally. And now it seems that price inflation via oil and gas OPEC price fixing may provide a continued price boost to gold against the dollar.
From a VESTS (http://www.thedailybell.com/definitions/params/id/28547/) perspective, a victory for the gold crowd in the Swiss referendum would be a significant setback for anti-gold forces. As mentioned above, victory could stimulate a number of "me too" movements, though how far they'd get remains a question.
Islamic State bellicosity is a different matter, as the various movements seem to be coalescing. Thus, over time we'd expect continued and expanded military action and, yes, troops "on the ground."
There are various key reports upcoming in the next week that may clarify gold's newfound direction, if it is to last. Kitco reports on key upcoming data including "industrial production and the New York Federal Reserve's (http://www.thedailybell.com/definitions/params/id/1855/) Empire State manufacturing index on Monday, the producer price index Tuesday, housing starts Wednesday, then jobless claims, the consumer price index, existing home sales and Philadelphia Fed manufacturing survey on Thursday."
With the end of the year comes holiday season and a potential pick-up of demand for physical gold in Asia and India. This could certainly influence prices regionally if not in the West as well, as we have reported in prior editions.
The possibility of oil price hikes via OPEC has already had a dramatic impact on gold priced against the dollar
The Swiss referendum is suddenly reported as swinging positively toward gold backing of the Swiss franc
The Islamic State continues to make threatening noises in the Middle East and may be consolidating
Upcoming holiday seasons in Asia and India may continue to drive purchases of physical gold
The big news this week was the emergence of OPEC as a major upcoming influencer of the dollar price against gold. We'll see if this holds next week as well.
- See more at: http://www.thedailybell.com/trends-and-sector-reports/35832/Gold-Sector-Analysis-OPECs-Gift-Gold-Rides-High-on-Speculation-of-Rising-Oil-Prices/#sthash.N4PGPy7J.dpuf