KITCO Jon Nadler Analysis
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Gold and silver started the new trading week on a weak footing, picking up where they left off on Friday, with the former touching fresh two-week lows in the cash market at the $1,651 per ounce level.
After having once again failed at the $1,696 resistance level on Wednesday, gold prices headed lower for a third straight session this morning.
The situation is fairly similar in silver. The white metal has the potential to touch its own 62% retracement target at $32.43 per ounce after having rallied to $32.15 on Friday. However, after five consecutive rising sessions, some profit-taking 'fatigue' may set in. If silver falls through the $30.15 January 11th low, the picture might change in that metal's trend as well.
In the markets' background, the US dollar moved to within 0.01 of the pivotal 80 level on the trade-weighted index despite a plethora of bearish calls made against it in the wake of last week's ECB interest rate non-action.
Ironically, Friday's weakness in gold prices was attributed to the same country that boosted sentiment just hours before: China. Whereas China's rise in reported December exports buoyed the gold bulls, the country's latest inflation reading unnerved the bullion bulls as it could portend the curbing of existing stimulus by government officials.
By leaving the ECB's key rate unchanged, Draghi did not imply that victory was at hand over the conditions that roiled Old World markets during most of 2012.
Gold finished the holiday-abbreviated week with yet another loss as investors opted to take profits rather than await the outcome of last-minute Fiscal Cliff negotiations taking place at the White House.
Well, folks, we made it to the end of another wacky year. A year that was dominated by QE hopes and disappointments, Fiscal Cliff hopes and fears, EU/euro hopes and fears, and Chinese economic hopes and fears.
If you are reading this, well, then, it appears that rogue planet Nibiru has somehow managed not to smash into our little ball of dirt called Earth and end life as we know it. This also means that Aussie PM Ms.Gillard was really off-base when she made this Public Service Announcement not that long ago.
There is a school of gold thought that envisions a fast pop to 1900 (maybe more) before Feb and then THE slide to 1250-1450. Stay in school.
Following last week's losses of 0.50% and 2.5% respectively, gold and silver started the final full trading week of the year on a muted note.
You would expect a sizeable pop on the back of rumors that the US is one step closer to avoiding the slide off the Fiscal Curb in two weeks.
Friday's precious metals markets opened a tad higher but continued to how their recent lack of energy.
The US dollar lost 0.30% on the trade-weighted index but the euro did not manage to overcome the $1.30 level despite a rise in German investor confidence. The political crisis in Italy continues to take its toll on the common currency for the time being.
The mining sector has already come under heavy fire this week. The world's biggest asset manager -BlackRock-roundly criticized gold producers for "misleading investors by means of faulty metrics." BlackRock Inc. runs the $12 billion World Mining Fund and has an 8 percent stake in Freeport.
Gold prices broke to under the pivotal $1,700 mark overnight, and did so despite a slightly weaker US dollar, despite a firmer euro, but alongside almost 1% weaker crude oil values.
Spot gold dealings started the final session of this turbulent week with a loss of about $6 in the price of the yellow metal, at $1,720 per ounce. Gold prices had recovered by about half a percent on Thursday but are now poised to record their largest weekly loss in four weeks in the wake of Wednesday's sizeable slide in values.
Last week, the World Gold Council (EGC) issued its report on the gold price performance in the second quarter of 2012, in which it noted that gold prices declined in most currencies with the exception of the euro, the Swiss franc and the Indian rupee.
Gold remains within the 1700-1750 band, palladium outshines the complex (again), and everyone and their cousin still predicts $2K+ gold before New Year's Rockin' Eve.
Gold prices fell to a one-week low and to within less than $4 of the pivotal $1,700 mark on Thursday as a fresh statistical release by the industry's leading trade promotion group revealed a notable ebbing in third quarter demand for the precious metal.
On the physical side of the gold market equation, there appears to finally be some good news coming from India in terms of metal purchases. The first day of the Diwali festival period - a day on which buying precious metals is tantamount to the observance of tradition- generated fairly good but not spectacular levels of local jewellery and coin sales.
The fact that almost all of the QE3 frosting has been removed from the golden cake is not lost on the perma-bulls who were virtually guaranteeing us $2K gold before New Year's Rocking Eve.
The gold business in Saudi Arabia has gone from bad to worse with the closure of the 500th outlet in that country this year. Whereas the Kingdom once had over 4,000 gold shops, more than 1,500 of them have opted to leave the business owing to the elevated international price of the yellow metal and to the waning demand for it by local consumers.
China manufacturing at just above 50 does not by a long shot imply that the bottom is in or that the country is out of the woods. One more serious stumble in Europe and they can start brooding again in Beijing.