$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

Gold, Silver, The Fed & What To Expect Next

With gold and silver getting consolidating, today John Hathaway spoke with King World News about what is happening in the war on precious metals.  Hathaway also spoke about the gold and silver shares and what is taking place in the industry.  Hathaway, of Tocqueville Asset Management L.P., is one of the most respected institutional minds in the world today regarding gold, and his fund was awarded a coveted 5-star rating.

Hathaway:  “As far as gold goes, it looks to me like we have made an important low.  A couple of people I respect have called it, McClellan would be one of them.  I don’t know if that means we rocket higher, but it seems to me we have seen the worst….

“McClellan is basically a neutral market observer, and they are seeing very constructive signs from a purely technical point of view.  As far as the shares go, they have to take their cue from gold.

I think that gold has to lead higher, and then I think the shares will respond.  Most of the commentary I see from the ‘sell-side’ is kind of like closing the barn door after the horses have run out.  They are basically doing these very Draconian scenarios with gold not moving above $1,200 — what companies survive, which companies don’t, that kind of thing.  So there is very little discussion about which companies would be really well-positioned in a higher gold price environment.

When I look at the economy right now, it’s very weak.  I see poor housing starts and retail sales.  Corporate guidance has also been very lackluster.  I thought the UPS number was very interesting in the sense that they are seeing lower volumes, particularly from the manufacturing sector.  So the whole pattern to me reflects a very soft economy.

Source: http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2013/7/18_Hathaway_-_Gold,_Silver,_The_Fed_%26_What_To_Expect_Next.html

Esperanza Resources acquired by Alamos Gold for $69.4 million

alamos esperanzaCanadian junior Esperanza Resources (TSX.V:EPZ) has been acquired by Alamos Gold (TSX:AGI) in a friendly acquisition.

Esperanza shareholders will receive C$0.85 in cash for each common share of Esperanza held, representing a premium of approximately 38% to Esperanza’s 30-day volume-weighted average price. The transaction values Esperanza’s equity at approximately Can$69.4 million on a fully diluted in-the-money basis. In addition, Esperanza shareholders will be issued approximately 5 million Alamos warrants in aggregate and existing Esperanza warrant holders will be issued approximately two million Alamos warrants in aggregate.

Both companies work in Mexico. Alamos runs the Mulatos Mine, as well a some exploration and development properties in Turkey. Esperanza is advancing an open pit gold project in Morels State, Mexico.

Esperanza terminated its agreement with Pan American Silver today. In February Esperanza agreed to acquire three advanced gold projects from Pan American all in Latin American in return for a $35 million investment and a $15 million credit facility.

CEOs from Esperanza and Alamos Gold released statements on the deal.

“Alamos is very pleased to announce this transaction with Esperanza” commented Mr. John A. McCluskey, President and Chief Executive Officer of Alamos. “Esperanza is an excellent strategic fit within our existing portfolio and in our view, is one of the best undeveloped opportunities and significant open pit targets in Mexico. We have followed Esperanza’s progress for some time and see this as a truly compelling opportunity for our shareholders. While the transaction represents less than 5% of our market capitalization, it has the potential to grow our production in Mexico by more than 50%, or nearly 30% on a consolidated basis.”

“This transaction provides an attractive and immediate premium to our shareholders,” said Mr. Greg Smith, President and Chief Executive Officer of Esperanza. “Further, the cash consideration provides liquidity and value certainty while the warrants ensure Esperanza shareholders will retain exposure to the success of the Esperanza gold project going forward. Alamos Gold is an industry leader with substantial experience operating in Mexico and the financial and technical capacity to continue advancing the Esperanza gold project. Finally, I would like to thank our employees for their dedication and hard work over the last number of years and all stakeholders of Esperanza for their support.”

Source: http://www.mining.com/esperanza-resources-acquired-by-alamos-gold-for-69-4-million-42678/