Gold Up, At 3-Week High, On Safe-Haven Demand Amid Russia-Ukraine Tensions
Monday April 14, 2014
Gold prices are higher and hit a three-week high in U.S. trading Monday. The market is supported on safe-haven buying interest and short covering due to anxiety surrounding the Russia-Ukraine conflict. June gold was last up $10.50 at $1,329.90 an ounce. May Comex silver last traded at $20.04 an ounce.
It’s a “risk-off” day in the market place Monday, as Russia-Ukraine tensions are back on the front burner. Asian and European stock markets were under selling pressure Monday and the U.S. stock indexes are seeing follow-through selling from last week’s losses and a good retail sales number, in Monday morning trading.
The 3.4% jump in auto dealer sales provided enough juice to push overall retail sales in the US up 1.1% MoM (beating expectations of 0.8% and with last month's data revised higher). This is the biggest month-over-month jump in retail sales since Sept 2012. The question, of course, is whether this auto spike is sustainable to support the overall sales environment?
Russian separatists completely ignored Ukraine's 0600 GMT ultimatum to hand over their weapons and give up, which means Ukraine now is in the clear, according to its leaders, to engage in the previously warned military "anti-terrorist" operation. As a result, as Reuters updates, "towns in eastern Ukraine on Monday braced for military action. As the 9 a.m. (07.00 a.m. BST) deadline issued by authorities in Kiev expired, a Reuters reporter in the flashpoint city of Slaviansk, where armed men had seized two government buildings, said there was no outward sign the rebels were complying with the ultimatum." Subsequent reports indicated that since the deadline passed, at least 4 people have been killed however since virtually no "factual" propaganda news out of Ukraine is to be believed, we would heavily discount this update.
Early weakness in US equity futures was rescued when Asia opened and JPY was mysteriously bid but it's fading back now as the UN session debates. The bigger moves on the night so far are gold (which jumped back over $1325 and 3-week highs) and EUR which fell around 40 pips to 1.3850. We suspect as Ukraine's red-line deadline draws near the bid for safe-havens may accelerate somewhat.
Russia’s ruble weakened for a third day versus a target basket of dollars and euros as unrest in Ukraine escalated, while China’s yuan forwards fell to an eight-month low on concern the world’s second-biggest economy is faltering.
The euro dropped the most in three weeks against the dollar after European Central Bank President Mario Draghi said further appreciation in the currency would trigger more monetary stimulus.
The euro fell 0.5 percent to $1.3823 at 9:35 a.m. in New York, and lost as much as 0.6 percent, the biggest intraday decline since March 25. It appreciated to $1.3906 on April 11, the strongest level since March 19. The shared currency dropped 0.3 percent to 140.77 yen. The dollar gained 0.2 percent to 101.83 yen.
China Slowdown
Twelve-month non-deliverable yuan forwards fell 0.18 percent to 6.25 per dollar, the weakest level since Aug. 23. The contracts traded at a 0.5 percent discount to the onshore spot rate in Shanghai, which dropped 0.13 percent to close at 6.2191.
China should put in place a “moderate, controllable and targeted loose” monetary policy to meet demand for funds by the real economy, Zhang Monan, researcher at the China Center for International Economic Exchanges, wrote in a commentary in the China Daily today.
Exports fell 6.6 percent in March, a report last week showed, compared with economists’ estimate for a 4.8 percent advance.
“Exports (CNFREXPY) came in well below market consensus, and this is still an important reason” for the yuan’s decline, said Nathan Chow, an economist at DBS Group Holdings Ltd. in Hong Kong. “Room for further big depreciation is limited because, after the release of first-quarter GDP, second-quarter data will show the economy is stabilizing.”
GOLD CHART
Technically, June Comex gold bulls and bears are back on a level near-term technical playing field, but the bulls have momentum on their side. Bulls’ next upside near-term price breakout objective is to produce a close above technical resistance at $1,333-1343. A close above even 1325-1333 would remain constructive. The 1329-1333 area is where the highest resistance should be seen on Monday as reported last night on the website.
Bears' next near-term downside breakout price objective is closing prices below technical support at $1,294-1301, and 1305-1312 would also give some relief to the bears. First resistance is seen at $1,333 and then at $1,343. First support is seen at today’s low of $1,318.70 and then at Friday’s low of $1,314 and $1312.
 
Cycles
the next short term turn is due April 15th (plus or minus 72 hours). Thus the window for a turn is open all week and will not close until the 18th of the month. Key resistance will be 1329-1333 and then 1343-1353. At the moment the short term trend is still up as a major cycle convergence is coming up for the Geo boys. Prices can explode in either direction very quickly at the moment. Closes above 1325-1333 willl remain constructive.
SILVER CHART
May silver futures bears have the near-term technical advantage as prices have traded sideways and choppy for three weeks. Silver bulls’ next upside price breakout objective is closing prices above solid technical resistance at last week’s high of $20.40 an ounce. The next downside price breakout objective for the bears is closing prices below solid technical support at the March low of $19.575. First resistance is seen at the overnight high of $20.14. Next support is seen at the overnight low of $19.72 and then at last week’s low of $19.60.
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