Daily Market Report 6/21/13

GOLD

Yesterday, Gold was unable to find buyers in the face of a strong U.S. Dollar, moderate inflation indicators, a collapsing equities market, a continued drop in the Gold ETF holdings (now down to 995.35 tonnes) and positive U.S. economic news. After gold broke below $1,322 and $1,300 per ounce support levels, we saw professionals and technical traders come into the market, shorting Gold and driving it down to as low as $1,269 per ounce before seeing bargain buying.  Volume for the popular August 2013 COMEX contract reached 369,423 hundred ounce Gold contracts, almost three times Wednesday’s volume. 

This morning we are seeing Gold holding above $1,290 per ounce, surprisingly bullish in the face of both an increase by COMEX’s Gold margin requirements and a sizeable amount of margin calls being sent out today.

 At 11am PDT today, Gold is trading at $1,298 per ounce, up $13 per ounce from yesterday’s close on excellent volume for a Friday. 

A Bullish argument for Gold

The average cash cost for the world’s Gold mines to produce 1 troy ounce of Gold is about $1,200 - $1,250 per ounce. That cost includes employee salaries, admin costs, energy, mine on-site exploration, and financing. With Gold at the current price, the economic feasibility of a Gold mine comes into question. If the Gold price drops any lower mine sites will shut down which will limit the supply of Gold hitting the market.   

SILVER

With Silver breaking down below the $20 per ounce long term support level, and reaching a low of $19.31 per ounce on high volume, it looks weaker than Gold. Today, Silver has rallied back above the key $20 per ounce level on good volume.  

At 11am PDT, today, Silver is up $0.30 per ounce, trading at $20.10 per ounce.