Gold was up $2 to $923.20 per ounce in trading in New York yesterday and silver was up 17 cents to $16.87 per ounce. Gold traded flat to slightly up in Asia and then surged in early trading in Europe (from a low of $924 to $936.70) Silver surged to new highs at $17.28.
The monthly close above $900 yesterday, the first ever, is very bullish from a technical point of view and should see $1,000 reached in the coming weeks. With gold up by more than 10% in January, some profit taking and consolidation could be seen prior to then. However, if gold begins to move in a parabolic fashion, as it did in the 1970s, then those waiting for the correction will be left waiting on the sidelines. Our direct experience is that clients in the current bull market who try to 'time the market' end up buying at higher prices. Only some 1 in 100 clients has managed to successfully time the market. Anything can happen in the short term and buyers are advised to make the trend their friend and focus on the strong fundamentals and the very good medium to long term outlook.
Gold is being supported by the dollar which remains under serious pressure and is very likely to remain so (see FX below) and oil remaining at elevated levels above $90 a barrel.
The London AM Fix at 1030 GMT this morning was at $933 (up from $923.75 yesterday). Gold surged to close to new record highs in British pounds and euro. It fixed at £468.75 (up from £463.85 yesterday) and €627.06 (up from €621.59 yesterday).
Support and Resistance
Support is now at $900 to $915 and strong support remains at $845 to $850 which was previous resistance and interestingly the 50 day moving average (DMA) continues to move up and is now up to $846.70.
All eyes will be on the U.S. Employment Report this afternoon, due to be released at 1.30 pm. The Non-Farm Payroll number is expected to show an additional 130,000 jobs were created in January. The recent release of a strong ADP employment number would support this expectation, however sentiment and anecdotal evidence suggest otherwise. As a result the FX market is just marking time until its release. The Euro has been trading in a narrow range and a weaker than expected figure could be the trigger needed to propel the single currency through the psychological 1.5000 against the Greenback. The risk today surely has to be for a weaker number, but either way Non-Farm Payroll Fridays are historically the most volatile days in the FX Market.
This period of consolidation is also manifesting itself in the other FX crosses. Sterling has remained in a relatively small range against the dollar and the euro too, and the yen which had been very volatile of late appears to be consolidating against the major currencies as well.
And finally the commodity markets yet again underpin a bullish market for the commodity currencies with the Aussie, Kiwi and Canadian dollars all strengthening in the Asian trading session. The South African rand remains weak and would appear to continue to weaken as power infrastructure and supply problems persist.
Silver is trading near new 27 year record highs at $17.17/$17.23 at 1200GMT.
Silver has lagged gold in recent weeks but will likely surge in the coming weeks and months and $25 per ounce will likely be reached this year and the nominal 1980 high of $50 per ounce reached in the next 2 to 3 years.
Platinum is consolidating at higher levels and trading at $1717/1723 (1200GMT).
As we pointed out, the production problems in South Africa are not a short term anomaly and production in the world's largest producer of platinum, with some 80% of world supply, is likely to be continually affected by huge infrastructural challenges facing the electrical system in South Africa.
In Goldfield's (GFI) quarterly report, Ian Cockerill, the CEO, said "Current power shortages in South Africa will impact production in the March quarter and into the foreseeable future." Yesterday, ESKOM withdrew authorization for the gold and silver mines to increase to 90% of normal electricity load and informed them they could have only 80% electricity supply. This is barely enough for maintenance and not enough for mining operations.
These are significant and very real supply concerns with platinum in what was already a tight market place with a deficit predicted for this year. Platinum could surge to $2,000 per ounce faster than many participants anticipate. Interestingly the inflation adjusted high in 1980 for platinum is at $2,800 per ounce which will also likely be reached in the next two to three years: http://www.moneyweek.com/file/40649/why-you-should-invest-in-platinum-this-year.html
Palladium has rallied in unison with platinum and was trading at $402/408 an ounce (1200GMT).