pivotal week for markets, page-9

Gold edged higher breaking through another technical level of $1337. What was interesting is that gold broke its short term correlation to US equities with the S&P failing to break through the record high of 1850 & hold. Again, reports I read are looking for excuses to justify the current levels of the US equity markets. This is the old pump & dump & it’s been used time & time again over the years to suck in retail investors so the brokers & hedge funds can on-sell their positions. Quote of the day comes from Reuters, "We're not being aggressive, since valuations aren't spectacular here, but this certainly isn't a time to run to cash," said Rex Macey, chief investment officer at Wilmington Trust in Atlanta, Georgia. How I interpret this is, it’s exactly the time to run to cash & possibly some gold. When do you ever hear a broke or investment manager say to the market, now is the time to be in cash?

The Ukrainian power struggle continues with the balance tipping towards the West with the help of a promised IMF bailout & support of Europe & the US. Russia's offers are being politely snubbed by the new regime, however I suspect there will be a few turns yet in this saga before we know the outcome. Debt concerns for the Ukraine will also be headlining for months & years to come as their sovereign debt is around four times their reserve base. To put that into perspective however the Ukrainian debt is the equivalent of one month of US QE, when the tap was fully open or circa $85 billion.

So where to for gold? It’s had a stellar run being up 16 of the last 21 trading days & put on some $80 in that same time frame. Resistance sits at $1360 & then major resistance at $1420, where gold's previous bounce failed & it then returned to the $1180 lows. So why did it fail last time & is there anything different this time? It failed as the physical buying ran out of steam, India was in the midst of putting in place heavy duties on gold imports, the West was offloading ETF positions & Hedge-funds had an appetite to short via Comex. Producers also joined the party with some hedging seen. We are again likely to see Chinese buying stall & in fact we are already seeing that with the China domestic price having a discount rather than a premium. ETFs however have shown some appetite to buy albeit relatively small. Speculators have cut shorts dramatically & recently have probably had the biggest influence on the POG. So we may see gold start to stall also, however I very much doubt there is the same appetite to short gold particularly, as the equity markets are looking precarious. Producers may put in place some more hedging, however at the current levels would prove foolhardy in my opinion, as the position could actually create financial strain on the company if gold moves a lot higher in the months to come. My view is that just as gold starts to run out of steam in the coming weeks; it will be India that will come to the rescue, with a reduction in gold import duties sometime in March/April. US equity markets will also falter & this to will prove supportive for gold.

Nothing goes up in a straight line; however gold's resurgence has only just begun in my opinion.

An interesting video interview with the CEO of Sandstorm at the BMO conference in Florida. It seems finance may be far more available to miners in 2014 than in 2013 particularly from Private Equity.

http://www.kitco.com/news/video/show/BMO-Metals--Mining-2014/567/2014-02-25/Sandstorm-Looking-To-Invest-$350m-CEO