Posts Tagged ‘bear market’
“People Running Through the Gate” to Buy Gold?
By Michael Lombardi, MBA for Profit Confidential
As I have been writing in these pages, after a bull market that has gone on for 12 years, the recent pullback in gold bullion prices should be seen as a correction in an ongoing bull market in the metal. I see the pullback as a buying opportunity.
While news headlines flash a bearish sentiment towards gold bullion prices, the gold bears are screaming about how much money central banks have lost due to the plunge in prices and the gold miners are facing pressures. The usual gold bullion consumer countries, India and China, are seeing robust demand.
According to the All India Gems & Jewellery Trade Federation, India is experiencing its greatest demand this year as gold bullion prices have declined. (Source: Bloomberg, April 18, 2013.)
In China, customers are lining up to buy gold bullion. According to the director of sales and operations at Chow Sang Sang Holdings International Limited, the number of gold bullion products sold in the Hong Kong and Macau area during the weekend of April 13 soared 150%.
Other countries in the global economy are witnessing increased demand for the metal as well. As talk of gold bullion entering a bear market continues, consumers from countries like Australia and Japan have ramped up their gold buying.
Gold bullion sales at The Perth Mint in Australia have soared. The treasurer of The Perth Mint, Nigel Moffatt, commented on this situation by saying, “the volume of business that we’re putting through is way in excess of double what we did last week.” He added, “there’s been people running through the gate.” (Source: “Golden times for Perth … Read More
Is Gold’s Near-Death Crisis Over-Exaggerated? Concerns of a Market Meltdown May Not Be
By George Leong, B.Comm. for Profit Confidential
Commodity prices have been heading lower on the charts.
In fact, it has been an awful few days for gold as prices plummeted, failing to hold $1,500 an ounce.
Prices dove right through support at $1,400 to $1,385.62 on Monday—the lowest level since 2011.
The shiny yellow ore is in a bear market. Down 27% from its magical peak of $1,920 in September 2011, it has been nothing but turmoil for investors in the yellow metal.
As I said in a recent commentary, I have lost confidence in the metal as a safe haven investment at this point. I’m not even sure I would enter on the current weakness.
The price chart says “sell.” Follow the trend, and you may be able to squeeze out some profits on an oversold bounce trade; but extending the trend forward, things don’t look good for gold.
Now we will need to see if the precious metal can hold $1,400.
As we move lower, there are now concerns of a meltdown in the gold sector, especially if prices continue to trend lower toward the $1,200 level.
Goldman Sachs, which recently turned bearish and advised shorting the metal, is fearful of gold prices dropping to the $1,200-an-ounce level—as this level also represents the cash cost to produce gold at this point. (Source; Cosgrave, J., “The Scary Number for Gold Investors: $1200,” CNBC, April 15, 2013.)
The $1,200-an-ounce cost of production is clearly an issue, especially for the smaller mining companies that are not as cost-effective or able to survive a cash crunch, compared to the mid- to large-tier producers, like Newmont Mining Corporation (NYSE/NEM). (Read … Read More
Already Fragile Economy Hit with Falling Retail Sales, Rising Business Inventories
By Michael Lombardi, MBA for Profit Confidential
Gross domestic product (GDP) in the U.S. economy mainly consists of consumer spending. Hence, the more consumers spend and buy, the better our economic conditions become. In 2012, consumer spending in the U.S. economy accounted for more than $11.1 trillion. (Source: Federal Reserve Bank of St. Louis web site, last accessed April 12, 2013.)
Unfortunately, as we finish the first quarter of 2013, economic indicators are suggesting U.S. consumer spending is under severe pressure.
Retail sales in the U.S. economy just took a wrong turn and dropped 0.4% in March from February’s sales. Consumer spending at electronics and appliance stores, health and personal care stores, and general merchandise stores posted a negative growth compared to the same period in 2012. (Source: U.S. Census Bureau, April 12, 2013.)
Similarly, a key indicator of future consumer spending, the Thomson Reuters/University of Michigan’s preliminary consumer sentiment index declined to the lowest point in nine months in April. The preliminary consumer sentiment index registered at 72.3 in April, down from 78.6 in March. (Source: Reuters, April 12, 2013.) Remember: consumers turning pessimistic means a pullback in consumer spending.
At the other end of the equation, we see businesses in the U.S. economy increasing their inventories. According to the U.S. Census Bureau, manufacturing and trade inventories in February of this year edged up almost five percent from a year ago. (Source: U.S. Census Bureau, April 12, 2013.)
Businesses often build up inventories in anticipation of demand, but looking at consumer sentiment and retail sales, I highly doubt that’s the case. It’s actually the opposite; business inventories are increasing because of a lack of demand…. Read More
Base Metal Demand Turning Bleak; Not a Good Sign for Global Economy
By Michael Lombardi, MBA for Profit Confidential
The threat of an economic slowdown in the global economy is increasing each day, but thanks to the optimistic stock markets flaring due to easy money, the threat goes unnoticed.
Copper stockpiles in the London Mercantile Exchange warehouses have reached a 10-year high. Since the beginning of this year, copper inventories have surged 84%. (Source: Wall Street Journal, April 11, 2013.)
According to the World Steel Association, steel demand in Japan is expected to decline (for the second year in a row) by 2.2% in 2013 and a further 0.6% in 2014. Similarly, the use of steel in the U.S. is expected to slow this year compared to 2012. (Source: World Steel Association, April 11, 2013.)
Other base metals, often referred to as “industrial metals,” are witnessing their demise as well. Consider the chart below of the Dow Jones-UBS Industrial Metals Index.
Chart courtesy of www.StockCharts.com
This index, comprising different base metal prices, has been declining since February and has shed more than 11% of its price. Base metals are used in many different industries, and if their demand slows and prices decline, then that’s not a great sign for the global economy.
Dear reader, it’s not a hidden fact: major economic hubs in the global economy are slowing down. In the U.S., we have high unemployment. Once-strong nations like Germany and France are being suppressed by an economic slowdown in the eurozone. Japan is in an outright recession. China’s economy is slowing, too.
After the economic slowdown of 2009, central banks in the global economy were able to inject significant amounts of money into their countries. Looking … Read More
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