Worth Your Weight In Gold?

While Ben Bernanke remains unable to value the precious metal, it seems the Arabs are very capable of discerning at least one relative value. In a fascinating effort to reign in Dubai’s growing obesity epidemic, the government is willing to pay its citizens (in gold) for losing weight. For each kilo of excess that is lost, the government will pay 1 gram of gold (around $42). There is no discernment – apparently – in the “Your Weight In Gold” initiative that the weight loss be ‘fat’ which make us wonder how many would ‘give their right arm’ for a few ounces of gold?

Via Reuters,

Dubai’s government will pay residents in gold for losing those extra pounds as part of a government campaign to fight growing obesity in the Gulf Arab emirate.

The 30-day weight-loss challenge was launched on Friday to coincide with the Muslim holy month of Ramadan, when the faithful refrain from eating and drinking during daylight hours.

For every kilogram dropped by Aug. 16, contestants who register from Friday can walk away with a gram of gold, currently worth about $42, Dubai’s civic authority announced as part of its ‘Your Weight in Gold’ initiative.

The top three dieters can win gold coins worth up to 20,000 dirhams ($5,400). The contestant has to lose a minimum 2 kgs (4.4 pounds) to qualify for the contest.

Oil wealth and high household incomes have led to overeating, high-sugar diets and a heavy reliance on cars for getting around, leading to an explosion of diabetes and other obesity-related illnesses.

Five of the 10 countries where diabetes is most prevalent are in the six-nation Gulf Cooperation Council, according to the International Diabetes Federation (IDF), an umbrella organisation of more than 200 national associations.

Child obesity is also a growing problem.

Dubai is known for its larger-than-life offers. It has a history of giving away luxury cars and yachts in lucky draws and is home to one the largest gold markets in the region. The emirate even has gold vending machines in shopping malls.

Source: http://www.zerohedge.com/news/2013-07-19/worth-your-weight-gold

Nobody understands gold prices, including me

Good luck trying to predict where gold prices are going, because even the head of the world’s most powerful bank admits he hasn’t a clue.

When asked about the drop in gold prices by U.S. senators during his testimony on monetary policy Thursday, U.S. Fed Reserve Ben Bernanke said decline could mean that investors are less worried about the economy. But he hastened to add: “Nobody understands gold prices and I don’t really pretend to understand them either.”

“Gold is an unusual asset. It’s an asset that people hold as a sort of disaster insurance,” Bernanke said in response to a question at a Senate Banking Committee hearing.

“One reason gold prices are lower is people are less concerned about extreme outcomes, particularly negative outcomes, and therefore they feel less need for whatever protection gold affords,” he said . “A lot of people hold gold as an inflation hedge but the movements of gold don’t predict inflation very well actually.”

Ironically, Bernanke may need to look no further than himself for guidance on gold.

Bullion has tumbled more than 20% this year, losing its safe-haven appeal after the U.S. central bank first signalled it would look to rein in its $85 billion in monthly asset purchases later this year and halt stimulus altogether by mid-2014.

The Fed’s three quantitative easing schemes have boosted prices of gold and other commodities, as they kept interest rates low, which weighed on the dollar, making assets priced in U.S. dollars cheaper for foreign investors.

As if to prove Bernanke’s point, spot gold briefly shot up 1% to a session high of US$1,288.06 an ounce Thursday. That’s following a 1% drop the day before.

Source: http://business.financialpost.com/2013/07/18/ben-bernanke-nobody-understands-gold-prices-including-me/

$1300 Rejects Gold

Gold was stopped cold in its tracks today at the psychological round number resistance level of $1300. It had initially reacted to Ben Bernanke‘s comments, (which most market analysts and players viewed as dovish) by moving smartly higher. During the Q&A session which followed, gold was slammed lower by a wave of very strong selling.

In watching the price action it occurred to me that just as we suspected in our notes from yesterday, nothing new or fresh proceeded from the Chairman. In other words, there was NO FODDER for the bull. Gold had already run higher last Wednesday when Bernanke first reversed himself from his comments in June. At this point in the game however, that is now old news. What gold needed to propel through $1300 was something far more definitive than what Mr. Bernanke gave the markets today.

Think about it this way – the QE will continue as long as the economy needs it. Okay – what is new about that? We have seen this QE going on for some time now and to the minds of most market participants, there is still no real inflation threat looming on the horizon. What is there to make them waver the least in their convictions that inflation is benign? Answer – there isn’t anything… YET.

Now, if crude oil and unleaded gasoline do not soon set back then that might change. But with a large grain harvest expected, food prices look to be moving lower. As stated previously in another piece I wrote – energy prices may be high and moving higher but food prices are going the other way. Just look at a chart of new crop corn or wheat, or sugar, or cattle, etc.

Both of these need to be moving up simultaneously to impact the consumer (and business to a certain extent although that segment is more impacted by higher fuel and energy costs) and to generate the all-important headlines needed to derail an entrenched, “there is no inflation” psyche.

Technically, two things happened today: Gold failed to extend past an obvious chart resistance level while simultaneously, the HUI FAILED TO CLOSE THAT IMPORTANT CHART GAP I noted in yesterday’s missive.

Both occurrences are viewed as technical failures and will bring in additional selling by the shorter-term oriented trader. What will be key for gold is whether or not it can generate enough buying to keep it above the “former resistance zone now turned support” that can be seen on the chart. Let’s call that the zone between $1270 – $1260. If it can hold here, it will bounce back and set up yet another try to best $1300. If not, down towards $1240 it will go.

I should also note that volume in today’s rejection at the $1300 level is very strong. I view that as a bearish sign that a lot of bulls threw in the towel and gave up on a breakout above $1300. Also, guys who have been playing gold from the short side were emboldened to come back in.

I am unclear just yet as to how much of this jump in volume is associated with rollovers as those are occurring in increasing frequency as we move deeper into July. Most traders will be moving out of the soon-to-be-in-delivery August contract and heading into the more active December. That might have distorted the volume somewhat and thus take what I say here about it with a grain of salt but nonetheless, volume was strong regardless.

Silver? What more can you say about it other than the fact that it too failed to push past tough overhead resistance at $20. The level is now reinforced with significance on the technical price chart. For this metal to start any fireworks whatsoever, that barrier MUST BE BREACHED. If not, it ain’t going nowhere. Poor English grammar but solid trading analysis.

Silver bulls simply must prove their mettle or the bears will grab control of that market and take it down for another test of $18.

One more thing I want to note was that the yield on the Ten Year note closed the day just below the 2.5% mark ( 2.491 to be exact). Interest rates have set back ever since Bernanke made those comments last Wednesday. Here we are now a week later and they have yet to exceed their recent peak. That being said, it might not be too much longer before they try sneaking up again. Everything will depend now on the content of each piece of economic data that gets released.

Source: http://traderdannorcini.blogspot.in/2013/07/1300-rejects-gold.html