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Gold Could See $1,800/oz On Seasonal Strength And Deepening Eurozone And U.S. Debt Crisis

Tyler Durden's picture




 

From Gold Core

Gold Could See $1,800/oz on Seasonal Strength and Deepening Eurozone and U.S. Debt Crisis

Gold is trading at $1,504.13/oz, €1,039.34/oz and £933.89/oz. 

Gold is higher today and showing particular strength against the euro
and the Japanese yen. The relief rally seen in equities since the
latest Greek ‘bailout’ is under pressure as S&P have said the debt
rollover proposal would be a “selective default”. The ECB may
selectively reject the S&P Greek downgrade and arbitrarily select
the best credit rating being offered.   

Gold in USD – 1 Year (Daily)

The risk of contagion in Eurozone debt markets and banking systems
remains. Portuguese, Spanish and Italian debt has been sold this
morning. Systemic risk from contagion in the credit-default swaps market
also remains a threat.

In the U.S. political squabbling over raising the $14.3 trillion debt
ceiling continues. However, it is likely to be resolved as the massive
liabilities incurred (not including unfunded liabilities of over $60
trillion) simply cannot be paid back. It is therefore likely that more
debt monetization (creating money to buy government bonds) will occur
leading to further currency debasement and the risk of stagflation and
severe inflation.

Cross Currency Rates

Gold's Seasonal Strength - July to December Could See $1,800/z Challenged

Gold has been supported in the traditionally weak “summer doldrums”
period due to institutional demand and strong physical demand at the
$1,500/oz level, particularly from Asia.

The summer months of June and July normally see seasonal weakness and it is thus a good time to buy on the seasonal dip. 

Gold is now entering its period of traditional seasonal strength which is seen between July and December.

Gold tends to take a break in October and then has a second period of
seasonal strength from the end of October to the end of December.

This has been primarily due to Indian religious festival, store of
wealth, demand in the autumn and western jewellery demand prior to
Christmas. 

Since the liberalization of the gold market in China in 2003, demand
for jewelry and bullion from China for Chinese New Year (mid to late
January) is also becoming an increasingly important factor.

It is likely that seasonal weakness in equity markets, with both the
‘sell in May’ factor and tendency of stock markets to be weak and
occasionally to crash in October may also lead to safe haven demand
during this period.

As noted in the chart above, gold rose strongly (by 22%) from July
2010 to December 2010. This trend was also seen the previous year in
2009 when gold fell in June, rose marginally in July, was flat in August
and then rose strongly from September into early December.

As shown in the excellent Erste Group report on gold released
yesterday, the strongest months for gold are September, August and then
November (see table below).

Thackray's 2011 Investor's Guide notes that the optimal period to own
gold bullion is from July 12 to October 9. During the past 25 periods,
gold bullion has outperformed the S&P 500 Index by 4.7 percent.

"In GOLD we TRUST" - 5th Annual Special Report by Ronald-Peter Stöferle of Erste Group

While meeting clients and industry associates in Austria last week, I
had the pleasure of meeting Ronald-Peter Stöferle. We had a great
conversation about gold and silver bullion, the markets and the
challenges facing us today. He is very astute, knows his history and
understands monetary economics. 

Unfortunately we had to cut short our wide ranging conversation as he had to put the finishing touches to his excellent report. 

The report is extremely comprehensive and is an important read for
anyone wishing to properly understand the gold market today and why gold
remains a safe haven asset and an essential diversification.

"In GOLD we TRUST" covers the following highlights:

*    The foundation of a return to "sound money" has been laid
*    Guilt without atonement? Excessive structural debt suggests further appreciation of gold
*    Negative real interest rates continue to provide gold with perfect environment
*    No reason for "AUROPHOBIA"
*    Adieu "Exorbitant Privilege"
*    US Treasuries: from the risk-free fixed income paper to the risky no-income paper
*    Why gold is (still) no bubble
*    Excursus: the creation of money from the perspective of the Austrian School of Economics
*    Gold and silver as official means of payment vs. "Gresham's Law"
*    The monetary system at the crossroads - on the way to a new gold standard?
*    Gold as portfolio insurance
*    Renaissance of investment demand - institutionals as "elephant in the room"
*    Gold mining shares with historically low valuations
*    Risk/return profile of gold investments remains very favorable
*    Next target price at USD 2,000
*    At the end of the parabolic trend phase we expect at least USD 2,300/ounce

In our commentary section today - http://www.goldcore.com/commentary
, we feature an excellent interview between Lars Schall and Ronald and
we also feature Fuller Money’s synopsis of "In GOLD we TRUST". The
report itself was picked up by Zero Hedge yesterday and can also be read
in our commentary section.

SILVER 
Silver is trading at $34.71/oz,€23.98/oz and £21.55/oz. 

PLATINUM GROUP METALS 
Platinum is trading at $1,723.25/oz, palladium at $764/oz and rhodium at $1,925/oz. 

NEWS
(Reuters)  
Gold edges down on dollar gains, technicals weak

(Ottawa Citizen)  
Canadian mint cashes in after posting $2.2 billion in revenues

(The Telegraph) 
Gold and gems worth up to £14 billion unearthed from Indian temple

COMMENTARY
(Lars Schall)  
Schall Interviews Stoeferle: “Gold Will Continue To Thrive”

(The Globe And Mail) 
Gold entering its season of strength

(Zero Hedge)  
Moody's July 4 Bomb: Rating Agency Finds 10% Of Chinese GDP Is Bad Debt, Claims "China Debt Problem Bigger Than Stated"

(The Market Oracle)
Gold and Silver Investors, Don't Underestimate The Chinese

(The Telegraph)
Down on the Fourth of July: the United States of Gloom

(Fullermoney)
Fuller Money on the Definitive Gold Report

 

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Tue, 07/05/2011 - 07:41 | 1426136 johngaltfla
johngaltfla's picture

I still think gold is seriously overdue a 10-25% correction and consolidation between $1400-$1550 for a period of time before moving forward as the dollar is due for a technical rebound and attempt to kiss 84-86 on the USDX also.

Tue, 07/05/2011 - 07:44 | 1426139 slaughterer
slaughterer's picture

Gold will sell below $1450/ounce in two weeks time once the Eurozone debt crisis fades from attention and the implausability of a QE3 in 2011 sinks in.   Short gold. 

Tue, 07/05/2011 - 07:45 | 1426140 johngaltfla
johngaltfla's picture

I can't disagree with that but anything below $1400 it becomes time to back up the trucks for the phsycial, not the paper.

Tue, 07/05/2011 - 08:16 | 1426175 Transitory Disi...
Transitory Disinflation's picture


Moody's Investors Service believes that the French housing market is overheating and that less
cautious lenders could face large losses if house prices were to fall significantly. Analyst Stephane

Herndl said: "French banking groups' inherent exposure to the country's housing market is the
principal reason why a potential correction in house prices poses material credit risk.”

http://www.homesgofast.com/view_news/2183/

Tue, 07/05/2011 - 09:03 | 1426223 wandstrasse
wandstrasse's picture

As a TA newbie I dare to post my analysis of the 1day chart since fall 2010... I still see an intact upwards trend which started 28 January (after a correction which started 7 December 2010). This trend would only be broken if the price gets below the 1,444 from 12 April. The trend would be confirmed above the 1,576 from 2 May.

Within this cycle, an 'inner' - upwards trend started on 5 May. This 'inner' one was broken on 24 June. The downward bars show a little more momentum than the upward ones. But overall I cannot see a clear direction of the actual 'inner' cycle. If I traded with real money, I would only open intraday positions. If I had 10,000 Euros to spend for physical, I would buy 3 ounces today and wait 1-2 weeks to spend more.

Tue, 07/05/2011 - 11:27 | 1426534 Bay of Pigs
Bay of Pigs's picture

TA is more for short to mid term traders and market timers. It is not as helpful for a long term buy and hold strategy (accumulation). For over ten years I've heard people say the same thing, "I'm waiting for it to go lower", and they never get a position. 

To be honest, I'm surprised gold and silver are this low.

The worldwide economic and financial backdrop is the worst (and by far) that I've ever seen. 

 

Tue, 07/05/2011 - 10:21 | 1426371 GetZeeGold
GetZeeGold's picture

 

I still think gold is seriously overdue a 10-25% correction

Sure...............because everything else is going so well.

Current condition : EPIC FAIL

 

Tue, 07/05/2011 - 15:33 | 1427475 lawrence1
lawrence1's picture

Based on what, your crystal ball?

Tue, 07/05/2011 - 07:50 | 1426146 overmedicatedun...
overmedicatedundersexed's picture

yahoo message boards for SLV and ZSL shut down by yahoo..wondering why??

Tue, 07/05/2011 - 09:10 | 1426244 AGORACOM
AGORACOM's picture

They look shut down to me as of 9AM EST 

George ... The Greek ... From Canada

Tue, 07/05/2011 - 09:11 | 1426246 AGORACOM
AGORACOM's picture

You can't reach either by clicking message boards from within each symbol

Strange

Tue, 07/05/2011 - 10:30 | 1426406 GetZeeGold
GetZeeGold's picture

 

Backdoor bitchez.

From the SLV board.

...."you need the keys to the rear. lol they are getting desperate. ".....

 

Tue, 07/05/2011 - 09:13 | 1426249 knowless
knowless's picture

i had never been to the yahoo boards, so never really got the reference when people would say things like "go back to yahoo" or whatever.. but they are seriously pointlessly, depressingly awful..

Tue, 07/05/2011 - 10:49 | 1426465 gmrpeabody
gmrpeabody's picture

+1000

Tue, 07/05/2011 - 08:01 | 1426159 Peter Pan
Peter Pan's picture

Has ZH  missed the latest from the International Swaps and Derivatives Association which says that the French plan would probably NOT trigger a default event?

It is clear we are in for a roller coaster of a ride and despite the best laid plans of mice and men, the proof of the pudding will be in the eating. In other words, let's see if Greece can pay the interest bill on the new arrangement without seeing a further blowout in her debt levels.

Tue, 07/05/2011 - 08:06 | 1426168 Quintus
Quintus's picture

That's only relevant to payouts (or not in this case) on CDS contracts.  

The main issue that the ECB and EU banks face is that holding securities with a 'D' rating on their books at par value is a step too far even in these days of mark-to-unicorn accounting standards.  Nor can they afford any writedowns on the aforementioned debt.

Never fear though, the ECB will simply ignore any rating agency that dares to rate Greek debt at 'D' and find one somewhere that rates it higher.  If they can't find such an agency they'll create one.  The weasels always have a way out of any sticky situation.

Tue, 07/05/2011 - 08:06 | 1426169 Sean7k
Sean7k's picture

Perhaps they have merely considered the source?

Tue, 07/05/2011 - 08:01 | 1426160 Captain Benny
Captain Benny's picture

Is it just me or did anyone else think that equities rally last week was pretty unfounded considering there were no surprises in the Greek vote?  We all know it is a "default" that will occur unless they somehow magically redefine the word or make the deal so complicated that no human can understand it.  Will this week be the real downward move in equities as people realize they've been had once again by the TBTF?  I hope so...

Tue, 07/05/2011 - 08:03 | 1426164 Sean7k
Sean7k's picture

I continue to find these discussions hilarious. As if you can price something of value in terms of currencies that have little to no value and trade off perceptions of the relationship to each other.

The "traders" are trading paper. This is obvious in the Comex settlement process. Furthered by the revelation of 100 to 1 leveraging by the bullion banks.

The silver and gold in vaults are moving from registered. They are being allocated and transferred to safer locals. The withdrawls are mounting and in obscene amounts. One neglects to read the writing on the wall at their own expense.

The willingness of people to overlook counter-party risk for the sake of chasing a few more dollars is laughable. The willingness to overlook the obvious release of trading information to select players ahead of the public is dangerous. The willingness to believe in one's invulnerability as a master trader is karma.

Markets are manipulated, but they still exist. Therefore, the rules that guide them still hold. You can cheat real time markets by obscuring perception, but you cannot deny them forever. 

We are being given the gift of time because of the banker's need to hold down price and create a veneer of respectability for currencies. To refuse this gift, this bird in the hand for the two in the bush is the ultimate folly.

Tue, 07/05/2011 - 10:42 | 1426445 DosZap
DosZap's picture

Holding Pm's in US allocated institutions is akin to self destruction.

I would even go so far as to remove ALL PM's from every SO called safe haven, even overseas vaults.

There are a few left, but if you cannot get to Switzerland, I would prefer to hold personally.

 

Tue, 07/05/2011 - 08:03 | 1426165 The Axe
The Axe's picture

Talking my book:   Friday's GLD downdraft did look fake, but until GLD regains its 50 day moving average I will remain short via a vertical spread. I sense Germany and France will force the some of the PIGS to sell gold holdings to pay down debt. The dollar chart looks to have bottomed. But nice article.

Tue, 07/05/2011 - 08:08 | 1426166 The Axe
The Axe's picture

Talking my book:  

Tue, 07/05/2011 - 08:08 | 1426170 overmedicatedun...
overmedicatedundersexed's picture

bmovers, try going to the link most use: the message link on the stock page..they don't work.

thanks for your link lets see how long it stays up.

Tue, 07/05/2011 - 08:08 | 1426171 Peter Pan
Peter Pan's picture

By the way, gold needs no supervision. With 5000 years of experience and immortality on its side, the long term result is a foregone conclusion. The only thing that pulls gold back from time to time is people who panic into selling it when there is a small movement to the downside which is then manipulated even further down by the JP Morgans of this world.

Tue, 07/05/2011 - 08:22 | 1426177 Jim in MN
Jim in MN's picture

It's very telling how strong gold has been through the most recent couple of rounds of currency/exchange rate turmoil.

You have to average in to your long term physical holding targets.  High or low in the short term is pretty meaningless.  If you want 10% gold at retirement, BUY IT. 

If you don't, you might try...reading harder?

Again, for the 'record' my expectation is to hit 1:1 Dow:gold at 5,000 in the next 3 years.  Is that outside the 90% probablility band?  Are you hedged for it?

(professional traders pls disregard...oh you already did, thx)

Tue, 07/05/2011 - 10:18 | 1426366 DosZap
DosZap's picture

Jm In MN,

Tell me pls sir.

What good is 10% held in Gold?.

When  your chances of losing 90% to inflation or default are almost a given?.

Since the rate of return on your frn's is Zero, really negative factoring in inflation in any instrument held or pushed by an FDIC institution.

Would anyone here be happy with only 10% of their total net worth, after a lifetime of savings?.

Not me.

 

Tue, 07/05/2011 - 11:38 | 1426593 Jim in MN
Jim in MN's picture

There are many audiences reading.  10% is a traditional benchmark, typically only observed 'in the breach' these days, or more likely by the wealthy.  For the average professional reaching something like $100,000 in physical gold is a distant dream.  Therefore worth reinforcing/pursuing.

For others, the entire strategy is different, hard assets only.  Land, gold and certain other accoutrements of the neo-survivalist lifestyle. 

My only point was to keep price in perspective relative to one's own goals.  It might be unwise to postpone investment goals because of the fear of 'missing' a modest price correction.

Tue, 07/05/2011 - 12:54 | 1426820 DosZap
DosZap's picture

Jim in MN,

Thanks for the clarificiation.

Much appreciated.

Tue, 07/05/2011 - 08:29 | 1426183 Southern_Povert...
Southern_Poverty_Law_Center's picture

The amount of hysteria in these comments at "Zero Hedge" is quite alarming. Many of the comments imply that politicians and bankers are somehow benefiting at the expense of the masses in some vast and convoluted conspiracy. Of course, these childish conspiracy theories appeal only to an extreme minority of paranoid lunatics, but nevertheless we remain far from complacent. It is our duty to stop these dangerous views from spreading, and we will courageously expose this nonsense despite the innevitable verbal abuse and immature attacks that we will receive.

Tue, 07/05/2011 - 08:36 | 1426190 Internet Tough Guy
Internet Tough Guy's picture

Trolls should be clever, but you are a dull instrument. :(

Tue, 07/05/2011 - 08:38 | 1426193 magpie
magpie's picture

You are right, on the long run no one will profit from this vast and convoluted conspiracy.

Tue, 07/05/2011 - 09:27 | 1426270 wandstrasse
wandstrasse's picture

on the long run

may I humbly correct: on a long enough timeline.

Tue, 07/05/2011 - 08:41 | 1426197 Sean7k
Sean7k's picture

There is probably nothing more inane and void of prescient thought than the cry of "conspiracy theory". To think that an uber wealthy group of like minds that meet on a regular basis(CFR, TRilateral Commission, Bilderberger, et al) are incapable of creating a uniform plan to determine policy for their own benefit is the height of stupidity.

Tue, 07/05/2011 - 11:23 | 1426547 Bay of Pigs
Bay of Pigs's picture

We've heard this before somewhere haven't we?

Better get TMos to flush him out. I know who I think it is...

Trololololo..... 

Tue, 07/05/2011 - 12:40 | 1426766 Sean7k
Sean7k's picture

Ha! Troll hunter Mosley...

Tue, 07/05/2011 - 08:46 | 1426203 Boston
Boston's picture

Is that you Jamie Dimon?

Tue, 07/05/2011 - 09:24 | 1426262 snowball777
snowball777's picture

+1

Tue, 07/05/2011 - 08:46 | 1426205 Peter Pan
Peter Pan's picture

For a moment I thought you were serious.

Tue, 07/05/2011 - 08:50 | 1426212 DOT
DOT's picture

All your life you have been lied to by those that seek to control you. I suggest you read, learn and discover. 

 

BTW junked for refering to self in the plural.

Tue, 07/05/2011 - 08:59 | 1426224 Bohemian Clubber
Bohemian Clubber's picture

Am a member over there at the Bilderberg club. We see ourselves just like any other NGO, we like to think our organization core values are deeply humanistic at the root.

We love the human race so much sometimes it happens that we rape children all day long while shorting gold. Spread the love bitcheZZ

 

 

Tue, 07/05/2011 - 09:01 | 1426226 Bohemian Clubber
Bohemian Clubber's picture

...

 

Tue, 07/05/2011 - 10:34 | 1426416 DosZap
DosZap's picture

 Many of the comments imply that politicians and bankers are somehow benefiting at the expense of the masses in some vast and convoluted conspiracy.

 

Are they not?, it's easy to point out the contributions, and the bonuses that the Bankers recieve, and the purchasing of political favors with contributions has been pandemic for EVER.

And you call truth Hysteria?.

When you (if you are SPLC) , are on the same dole as they are I would be very hesitant to throw rocks here.

You are part of the problem, not the solution.

Tue, 07/05/2011 - 08:49 | 1426210 Bansters-in-my-...
Bansters-in-my- feces's picture

I see the first two comments are from Fuck-Tards....

Tue, 07/05/2011 - 08:49 | 1426213 MiningJunkie
MiningJunkie's picture

The commentary in here is diametrically opposite to three weeks ago with Au pressing $1560. Same commentary for Ag is outright bullish as no one is even remotely thinking $75 Ag. Long $38 Ag calls at $.50 for a completely contrarian trade against all of this bearish sentiment.

Tue, 07/05/2011 - 09:02 | 1426227 Bansters-in-my-...
Bansters-in-my- feces's picture

Hey...Southern Pervert(Povert)   Fuck Off..

Tue, 07/05/2011 - 09:18 | 1426256 spartan117
spartan117's picture

Tyler, are you ever going to give us an "ignore" button?  I read less and less of the comment section every day because of all the crap being posted.  That means less and less responses, and less and less "clicks" for your advertising income.  Place is getting trashy.

Tue, 07/05/2011 - 12:16 | 1426700 Libertarians fo...
Libertarians for Prosperity's picture

The comments/conversations in multiple threads over the weekend were the best I've seen in a year.  After silver crashed/burned and Turd's blog sucked away a lot of the goofy, doomer riff-raff, this place is actually beginning to remind me of the old ZH.  At least this weekend, anyway.  Time will tell.  

 

 

Tue, 07/05/2011 - 10:12 | 1426350 double 007
double 007's picture

Tue, 07/05/2011 - 10:36 | 1426422 cranky-old-geezer
cranky-old-geezer's picture

Gold (and silver) price suppression is welcomed.  Bring it on.  More opportunities to load up cheap.

When SCO announces abandoning the US Dollar has been achieved, gold & silver will take off and there won't be any stopping it.

Tue, 07/05/2011 - 15:32 | 1427467 lawrence1
lawrence1's picture

Based on what, a crystal ball?

Tue, 07/05/2011 - 16:33 | 1427636 lawrence1
lawrence1's picture

Not just stupidity, but ignorance of history, especially ignorance of banking history.

Do NOT follow this link or you will be banned from the site!