In any case, with this morning’s rally, the current discount of the noble metal to gold has now narrowed to about $70 from a previous near-$200 differential. Palladium was also a strong gainer this morning, rising $13 to the $710 level. Rhodium showed no change at $1,475 the ounce. In the background, the US dollar did not give up too much on the trade-weighted index, slipping only 0.02 to trade at 79.12, at last check.
CFTC positioning reports covering the latest period indicate that gold has experienced a net decline in speculative length and that, according to Standard Bank (SA) analysis, such a contraction “affirms the view that the aggressive moves at the end of January were largely the result of overexcitement after the Fed’s dovish [rate policy] announcement.” A similar scaling back of speculative optimism was noted in silver- the ETFs turned into net sellers and unloaded 106.2 tonnes of the white metal in the process. The Standard Bank team notes that uncertainties remain manifest among gold and silver speculators despite the recent gains in prices.
On the other hand, veteran market analyst Ned Schmidt, who also remarks that ”current markets for precious metals are more like simple market exhaustion from an overly exuberant run,” does advise that “while gold is the only financial insurance to protect an investor from the ostrich mentality in Washington, we still should recognize the obvious trends in the market. Gold, like silver, is in a bear market. Investors should only buy gold when deeply oversold, not when the small children at hedge funds are playing in the futures market.” Mr. Schmidt, in his latest “Gold Thoughts” places the odds of bear markets in gold and in silver at 70 and 99 percent, respectively with cycle lows that might occur in either April of August (in gold’s case).
PS- I was extremely saddened by the news of the untimely passing of a friend to us all, Mr. David Coffin. On the many occasions that I had to share ideas with him at various industry events, I found him to be a consummate professional, a very knowledgeable source of true facts and figures, and above all, a kind and gentle man, and a welcome breath of fresh air in an otherwise testosterone-laden boisterous group that sometimes unfortunately places hype above integrity. David, you will be sorely missed.
Jon Nadler is a Senior Metals Analyst at Kitco Metals Inc. North America