Computer Programs Give Highest Returns For Hedge Funds

From Bloomberg, Kelly Bit, December 12, 2014

The Quants Are Winning.

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Hedge funds that rely on computer programs to trade are producing some of the highest returns in the industry after a particularly profitable November. Two Sigma, a $24 billion firm run by a former artificial intelligence academic and a mathematics olympian, rose 10 percent last month in one of its strategies and is up 47 percent this year.

Cantab Capital Partners jumped 18 percent in its main fund in November and has returned 32 percent this year and Aspect Capital advanced 12 percent for the month, doubling its return in 2014.

Scientists, mathematicians and engineers are beating star managers by capturing price discrepancies across markets, making money from a plunge in oil prices and on government bonds that human traders dismissed. The Newedge Trend Index, which tracks firms that use models to profit from market trends, has advanced 17 percent this year through November, compared with a 3.7 percent gain for funds across strategies.

“Discretionary traders did not see value in buying and holding sovereign bonds in the U.S., U.K. and Germany,” which benefited quantitative funds, said Anthony Lawler, a money manager for GAM Holding, which invests in hedge funds. “Short energy was a large winning trade, whereas discretionary traders were by and large not in,” he said, referring to bets against the industry made by human decision-makers.

Paulson Loses 27%

Quants are succeeding as some of the most well known stock and bond pickers struggle in forecasting the outcome of corporate mergers or gauging the impact of central bankers on markets. Richard Perry, Jeffrey Altman and Paul Tudor Jones are underperforming equity and credit indexes this year; billionaire John Paulson has lost 27 percent in his event-driven fund and hedge funds are closing at a rate not seen since the financial crisis.

Jim Simons, a former military codebreaker and chairman of the mathematics department at Stony Brook University, is regarded as a pioneer of investment strategies that use computer models. He formed a firm that became East Setauket, New York-based Renaissance in 1977 and hired scientists and engineers to mine data from financial markets looking for relationships among stocks, bonds, derivatives and commodities.

Quant Assets Doubled Since 2008

Assets overseen by quants have more than doubled to $796 billion since 2008 after the firms returned 21 percent that year, according to Hedge Fund Research Inc. and Newedge’s trend-following index. (SPX) The average hedge fund declined 19 percent, according to data compiled by Bloomberg, and the Standard & Poor’s 500 Index dropped 38 percent.

Computer-driven firms haven’t always replicated that 2008 success, losing money in at least two of the past five years, according to Newedge and data compiled by Bloomberg. In comparison, hedge funds on average made money during the period except in 2011.

Quantitative firms this year have been boosted by the more than 40 percent drop in oil prices since June.

Firms that follow trends, such as rising stocks or falling commodity prices, gained an average of 7.3 percent in November and those that use models to make decisions on macroeconomic themes returned 4.6 percent. The average hedge fund rose 1.2 percent, according to HFR.

Two Sigma had the best-performing strategy in its Compass Enhanced fund, which trades futures and currencies.

The New York-based firm was founded in 2001 by David Siegel, the former chief technology officer at Tudor Investment Corp., who received a PhD in computer science from MIT, and John Overdeck from D.E. Shaw & Co., who was an International Mathematics Olympiad Silver Medalist in 1986.

Backgammon And Billiards Champions

Its website boasts of the firm’s technology pedigree rather than connections to Wall Street. Two Sigma touts the first open source software artist, billiard and backgammon champions and the founder of Hungary’s first commercial internet service provider among its employees.

This year isn’t a fluke. The Two Sigma Compass Enhanced fund has posted an annualized return of 30 percent since inception in 2005, according to a person with knowledge of the matter, who asked not to be named because the information is private.

Others making money this year include Aspect, a $4.8 billion London-based trend-following firm. Its Aspect Diversified Fund has gained 24 percent for the year, according to a person briefed on the returns.

Renaissance Returns Up 12% This Year

Renaissance, with $25 billion, rose 4.2 percent last month and is up 12 percent this year in its Renaissance Institutional Diversified Alpha Fund, according to a person briefed on the returns.

The SECOR Alpha Fund gained 7.4 percent in November, bringing year-to-date gains to 23 percent. The $170 million fund, run by Ray Iwanowski, makes bets across asset classes based on global macroeconomic factors. It profited on U.S. and global government bonds and on bets against energy exploration and production companies, according to a person familiar with the matter.

Kepos Capital Management, the $1.8 billion New York-based firm headed by Mark Carhart, posted a 3.1 percent return last month in its main fund, bringing year-to-date gains to 13 percent, according to a person familiar with the matter.

Algorithmic Funds – Not All Perform

Not all algorithmic-driven funds have done well this year. Quantitative Investment Management, the $1.9 billion Charlottesville, Virginia-based firm, fell 8.7 percent in its main fund after losing 0.1 percent last month on bets against German stocks and wagers on the Japanese yen, according to a performance update, a copy of which was obtained by Bloomberg News.

The firm’s more volatile Quantitative Tactical Aggressive Fund surged 27 percent in November to bring year-to-date gains to 2.3 percent, according to the update.

Returns at quant funds can be turbulent. Cantab, the $3 billion firm co-founded by Goldman Sachs Group Inc.’s former quantitative trading head Ewan Kirk, had its best month in November since starting, according to a person with knowledge of the returns. Aristarchus, the largest share class in the $3 billion quantitative fund, is up 32 percent this year after losing 28 percent in 2013.

Ackman Competition – Fund Rises 38% In 2014

This year some stock and bond pickers have also been competitive with programmers. Bill Ackman’s Pershing Square International fund rose 4 percent in November and 38 percent in 2014 by taking concentrated bets on companies. Other luminaries, such as David Einhorn and Daniel Loeb, are up 11 percent and 9.1 percent this year through November.

The upper hand is still with the quants. In previous years the firms had been deprived of markets where assets held direction for an extended period, said Tim Bruce, director of traditional research and partner at NEPC LLC, which advises clients on hedge fund investments.

“If you don’t have a trend that persists for four, eight or 12 weeks, you really can’t get any traction and make money,” said Bruce. “That’s been the challenge for the past couple of years. This year you’ve seen some trends develop.”

More:

Gold – Detailed Charts and Technical Analysis

Monthly Gold Chart Looks Bearish

The MACD, ADX and RSI indicators are negative (bearish).

I did not draw a trend line on the price chart, but if I had, you would notice that Friday’s close was below the trend line.

Monthly gold

Weekly Gold Chart:

Gold Weekly

Gold closed on Friday at 1222. There is resistance at 1250.  ADX indicator shows bears are still in control of this market…the negative DMI is above the positive DMI line. RSI is trending upwards but is only at a 47 level which is not bullish. So both the monthly and weekly charts of gold remain bearish.

What does the daily chart of gold look like?

Gold Daily

You can see the resistance at 1250 more easily on the daily chart. Looking at the ADX indicator, the bears are still in control of this market with the negative DMI above the positive DMI line. The ADX line has just started trending downwards.

I did not mark it on this chart, but if you were to draw a trend line from the peaks of the black ADX line from October to December, this would slope downwards. Any tendency of this market to trend is thus getting weaker and weaker.

RSI has been rising but at 55, it is not convincingly bullish. It looks like it will be tough for gold to break out above 1250.

Let’s look at the tons of gold held by GLD.

Chart GLD Holdings

 

Now this looks more positive at last. Looking at the chart from July to November you can see that the rate at which gold was leaving the ETF was increasing at a faster and faster rate. Since early December this has bottomed out and gold holdings have started to turn up.

Let’s see what the gold stocks are doing. They often lead the price of gold up or down.

HUI Chart

Though the stocks have been on an uptrend since early November, the last three days they have been trending downward again and the HUI closed on Friday at 165. There is some support at 162, but note the ADX indicator which shows that the Bears have just taken control of this market again with the negative DMI above the positive DMI. Also the MacD indicator looks like it is just forming a sell signal.

Conclusions:

The monthly and weekly gold charts look bearish and the daily does not look promising unless gold can break above 1250. The gold shares which normally lead the metals look bearish and the sell signal provided by the ADX indicator may be confirmed shortly by the MacD indicator. The only bright spot on the horizon is that the GLD holdings are increasing once again.

Overall just looking at the above gold, stock and holding charts, the situation looks bearish.

 

 

Spare US Dollars

Peter’s Commentary

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Image from 401Calculator.org

China has accumulated a large amount of US Dollars, almost $4 trillion. This article provides a “heads-up” about what China is doing to try to diminish its pile of dollars.

From Goldseek.com, Alasdair Macleod, December 12, 2014

Last week I wrote that contrary to the prevailing mood US dollar strength could reverse at any time. This week I look at another aspect of the dollar, which almost certainly will become a significant source of supply: a global shift out of it by foreign holders.

As well as multinational corporations that account in dollars, there are non-US entities that use dollars purely for trade. And so long as governments intervene in currency markets, governments end up with those trade dollars in their foreign reserves.

Some of these governments are now pushing hard to replace the dollar, having seen its debasement, which is beyond their control. This has upset nations like China, and that is before we speculate about any geopolitical angle.

The consequence of China’s currency management has been a massive accumulation of dollars which China cannot easily sell. All she can do is stop accumulating them and not reinvest the proceeds from maturing Treasuries, and this has broadly been her policy for at least the last year. So this problem has been in the works for some time and doubtless contributed to China’s determination to reduce her dependency on the dollar.

Furthermore, it is why thirteen months ago George Osborne was summoned (that is the only word for it) to Beijing to discuss a move to urgently develop offshore renminbi capital markets, utilising the historic links between Hong Kong and London. Since then, it is reported that last month over 22% of China’s external trade was settled in its own currency.

Given the short time involved, it is clear that there is a major change happening in cross-border trade hardly noticed by financial commentators. But this is not all: sanctions against Russia have turned her urgently against the dollar as well, and together with China these two nations dominate and carry with them the bulk of Asia, representing nearly four billion rapidly industrialising souls.

To this we should add the Middle East, most of whose oil is now exported to China, India and South-East Asia, making the petro-dollar potentially redundant as well.

In a dollar-centric currency system, China is restricted in what she can do, because with nearly $4 trillion in total foreign exchange reserves she cannot sell enough dollars to make a difference without driving the renminbi substantially higher. In the past she has reduced her dollar balances by selling them for other currencies, such as the euro, but she cannot rely on the other major central banks to neutralise the market effect of her dollar sales on her behalf.

Partly for this reason China now intends to redeploy her reserves into international investment to develop her export markets for capital goods, as well as into major infrastructure projects, such as the $40bn Silk Road scheme.

This simply amounts to dispersing China’s dollars into diverse hands to conceal their disposal. Meanwhile currency markets have charged off in the opposite direction, with the dollar’s strength undermining commodity prices, most noticeably oil, very much to China’s benefit. And while the talking-heads are debating the effect on Russia and America’s shale, they are oblivious to the potential tsunami of dollars just waiting for the opportunity to return to the good old US of A.  Source

 Conclusion

While China and other countries are trying to use other currencies than the dollar to trade, remember that the trend is your friend. The dollar is currently the strongest currency. This article warns about the debasement of the dollar and the potential of a strong reversal in value should the dollar be sold off  in large amounts by other countries.

If you have money in a big bank – Watch This Now.

Peter’s Commentary

I have written and warned you about this before. In 2008 the banks were bailed “out” by taxpayers funds. In the next monetary crisis which is likely to occur soon… the banks will be bailed “in”.

What are “Bail Ins”? And why is it important to know? Bank Bail Ins are what have been planned for the next crisis. Depositors funds, that’s your and my money that we have left in the bank, will be seized by the big banks to help them weather the next crisis.

This is what the G20 have just met about. Please make sure that you watch the 22 minute video below.

From Ellen Brown, The web of Debt Blog, December 10, 2014

Source

Also, read this article on Ellen’s web site.

Russian Banks Test New Payment System

Peter’s Commentary

Russia is testing a new payment system that will replace the International Swift system currently used for all international monetary transfers. This new system will stop Russia’s reliance on a western system and having sanctions imposed.

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From RT.com, December 8, 2014:

Russia’s Rossiya and SMP banks, which fell under Western sanctions, are among the eight lenders that will start testing the country’s new national payment system on December 15.

“The pilot project involves SMP Bank and Rossiya Bank, those for which the story is very critical and important. These are quite large banks,” the head of the Russian National payment system (NPS) Vladimir Komlev said in an interview with Rossiya 24 TV.

The move comes as a part of Russia’s ambitious initiative to move away from the Western dominance of its financial markets. Last month the Russian Central Bank said it would have its own international inter-bank payment system, an alternative to the global SWIFT network up and running by May 2015.

Eight other banks have been selected to join the pilot project. Some of these banks are: Gazprombank, Alfa Bank, the Ural Bank for Reconstruction and Development and Russia’s second largest VTB.

The VTB bank will soon connect to the NPS to test the system and be ready for any potential difficulties with payments in the future.

Komlev said the new system’s principle of operating will remain the same. The use of the existing formats will be more convenient for banks; they won’t have to reconfigure their software.

The latest version of the NPS technology is being tested by the Russian Openway Solutions company.

“The modules themselves are something unique, independent, only partly related to the Openway. Now all this belongs to us: our code, the knowledge of how the system is built, and its logic. We are able to develop it and provide support,” said Komlev. More:

Conclusion

Development of this system became a necessity for Russia after some of its banks were affected by US and EU sanctions. In March 2014 Visa and MasterCard stopped processing payments due to sanctions. NPS was established to roll out a new system for international payments that would not be controlled by the westernized world.

Bitcoin Is the Future?

Peter’s Commentary

John Mauldin has just published one of his letters for “Thoughts From The Frontine”.  I advise everyone to read this article in full. I have included a couple of excerpts below:

From: Thoughts From The Frontline, John Mauldin and Worth Wray, 12/2/2014

The Five Phases of Adoption

In an effort to understand how Bitcoin could continue to mature, I sat down with Barry Silbert, founder of the Bitcoin Investment Trust. As one the most active venture capitalists in the industry (with investments in over 30 bitcoin-related portfolio companies through the Bitcoin Opportunity Corp), Barry has gone all-in on Bitcoin and Bitcoin-related businesses.

He believes the halting rise of Bitcoin from 2009 to 2014 is just the beginning… and that the virtual payment system may be approaching a big inflection point as Wall Street takes the baton from Silicon Valley.

Barry thinks about Bitcoin adoption in five general phases:

  1. Experimentation phase (2009 – 2010)
    • No real value associated with Bitcoin. Hackers & developers playing around with the source code. Experimenting with Bitcoin as a medium of exchange.
  1. Early adopters phase (2011 – 2013)
    • Interest from investors and entrepreneurs started to grow with substantial press coverage in the wake of the Silk Road bust. First generation of Bitcoin-related companies (exchanges, merchant processors, wallet providers, etc.) started. Potential began to shine through poor management.
  1. Venture capital phase (2013 – present)
    • World-class VCs started investing in Bitcoin companies, and rapid ramp-up is already outpacing the early days of the internet. VCs poured more than $90 million into Bitcoin-related businesses in 2013 and are on track to invest more than $300 million in 2014 (compared to $250 million invested in internet-related businesses in 1995).
  1. Wall Street phase (2015?)
    • Institutional investors, banks, and broker-dealers begin moving money into Bitcoin. Rising price and volume (in addition to development of derivatives) become the catalyst for mass adoption as retail investment follows.
  1. Global consumer adoption phase (?)
    • Only happens if (a) companies continue to innovate and make it easier for consumers to buy, hold, and spend Bitcoin, (b) volume expands dramatically so that large merchants can start accepting payment in Bitcoin, and (c) Bitcoin awareness continues to rise with these developments.

If Barry is right, Bitcoin’s continued rise depends on (1) Wall Street money flowing in to deepen the digital currency’s trading volume and fuel the development of hedging instruments, (2) continued innovation to make Bitcoin more secure and more user friendly, (3) broad acceptance by merchants as a medium of exchange, and (4) an explosion in public awareness.

It’s impossible to know for sure yet… but it looks like all four of those are taking place.

Satoshi’s Revolution Crosses the Chasm

While search volumes have moderated, the trend in broad public interest is rising.


Source: Google Trends

And while the price of Bitcoin has continued its downward trend, it seems that the network continues to deepen and mature.

Over time, many investors have realized that it was not a problem with the Bitcoin protocol that allowed the security breach at Mt. Gox or the frequent theft of unsecured bitcoins, it was inadequate security – basically, poor business practices – at the exchanges and wallet providers. Rather than exposing some flaw in Bitcoin, the collapse of Mt. Gox revealed the desperate need for better management and the opportunity for improving the services that surround the Bitcoin network. And the venture capital community has certainly responded.

This year, by the end of Q3 2014, over $290 million of venture investments had flowed into Bitcoin-related businesses, compared to the $250 million that poured into internet-related businesses in 1995.


Source: CoinDesk

And the trend toward greater average daily trading volume has continued to rise.


Source: Blockchain.info

Not only is real money starting to flow into the growth industries surrounding Bitcoin, but real businesses are starting to accept bitcoins as payment. At the end of Q3 2014, the top eight companies accepting payments in Bitcoin had annual revenues totaling more than $85 billion, and among them was Dell.


Source: CoinDesk

The price of Bitcoin may swing dramatically in the coming days, months, quarters, and years. The currency may not survive in its current form… but the technology underpinning it is not going away any time soon.

Thoughts on Bitcoin from John

If you ask me whether I truly believe that in 2050 the main medium of exchange will be paper money, the very quick answer is that I don’t. I also think there is a better than reasonable chance that it won’t be a fiat currency. But will it be Bitcoin? My best guess is that it will not be Bitcoin as currently constructed but rather an evolved version.

I know the following will be somewhat controversial, but work through with me on what I hope will be a helpful way to think about money in general. The current structure of Bitcoin carries the same inherent flaw that gold does (and to some extent the euro, too): in a world of ever-increasing abundance, gold is massively deflationary and provides unreasonable “rents” to those who hold it. Even given that inherent flaw, it has been the most stable store of value for millennia.

To think about what money will be in the future you have to shake off the chains of the past and your preconceived notions of what money is. Money is not just, or should I say, is more than a medium of exchange. It is also a medium of information. It tells us what the marketplace wants and the price it is willing to pay for a particular good or service. The (often fatal) flaw in fiat currencies is that they manipulate and distort the information contained within the currency, thereby damaging the information flows involved in the exchange of goods and services. For instance, the practice of quantitative easing engaged in by major central banks has encouraged money to go into certain markets (such as stocks), distorting the information reflected in the price.

Rather than looking for the information provided by the market and adjusting our investments and purchases accordingly, we are forced to focus on the information provided by the Federal Reserve and its quantitative easing. To confuse the actions of the Federal Reserve with the actions of the market is to miss the point that the Federal Reserve is actively manipulating the market for its own purposes, however positively motivated.

Advocates of gold believe that a gold-backed currency would eliminate that price distortion, and they have a point. However, if we were to decide to use gold as the sole basis for our currency, we would have to value it at some order of magnitude higher than it is today in order not to create massive deflationary instability. I’m not sure that $10,000 or even $20,000 per ounce of gold would be nearly high enough, given the massive amount of sovereign debt in the world.

But even supposing that we (as a global system) could somehow manage to deal with the logistical nightmare of moving to a single, physical, commodity-backed currency, future growth in the world would soon overwhelm the limited supply of gold, and the prices of goods and services would deflate over time, creating their own backlash. History buffs will recall William Jennings Bryan and his famous cry, “We [mostly referring to farmers] will not be crucified on a cross of gold!”

Now some might see ever-falling prices as a good thing, but they would induce a different type of instability in the system. Given the overwhelming extent of global debt, I think the chances of moving to a physical currency based on gold are slim to none, and Slim left on the morning train. Go back and read the economic history of the latter half of the 1800s in the US. From one point of view it was a golden era of growth and prosperity driven by huge leaps in technology. But it created serious problems for many of those on the lower economic rungs. If you think income inequality is a problem today, then you won’t like what happened in the late 1800s.

The leaders of that era came together to try to create a new system that could prevent the frequent panics and crashes that were inherent in the financial system of the day, and eventually we got the Federal Reserve and other ostensible improvements. But that does not mean the current system of central banks and fiat currencies does not have its own flaws. We should not limit our thinking to the economic systems of the past or present as we think about a future economic system. How do we create a truly stable, equitable, and efficient basis for exchange?

While I think that Bitcoin as currently configured has limitations, the technology of the blockchain is one of the most potentially revolutionary developments of the last century. I think we evolve to Bitcoin 2.0 or 3.0, using the same blockchain technology, but with a way to make the new currency a truly stable medium of information that can be easily exchanged for goods and services.

Why not create a currency that is backed by a number of commodities, with gold perhaps as the backbone? Why even limit ourselves to commodities? Bitcoin as currently configured could be part of the basket. Anything that can be represented in a digital form and has a reasonably stable long-term value could be considered.

All I want from my currency is to be able to buy and sell goods and services, make investments, and have a reasonable expectation as to what my currency will be worth in terms of purchasing power if I hold it for months or years.

I think that some of the clever venture capitalists who are exploring Bitcoin will join forces with one or more large international investment banks and create something along those lines. And once someone shows the way, breaking the chains of the past, we will have a period of innovation rivaling the Cambrian explosion.

The vast majority of my purchases are electronic today. I think that percentage will continue to grow. Frankly, I really don’t care what happens inside “the system” after I wave my iPhone over the new Apple Pay device (or use my credit card). I just want to walk out of the store with my purchases. (In the not too distant future there will be an extremely tiny RFID chip embedded in my hand, or at least on my person, which will also serve 100 other purposes.)

The Bitcoin blockchain technology allows for the most secure electronic transactions ever devised. Its adoption and acceptance seem inevitable to me. It will be used to validate everything we purchase: stocks, homes, investments, airplane tickets, etc. It will be a far cheaper and much more secure way to validate your ownership of anything, from your home to your stocks.

The blockchain will form the basis for the perfect medium of information exchange (at least as perfect as we humans can create), which in turn will be the basis for whatever electronic medium of financial exchange we evolve in the future. The market (that would be you and me) will move to whatever new medium serves our purposes best.

Satoshi, as technologically brilliant as he (or she or they) was, was limited in his understanding of economic exchange. He was trying to create electronic gold. To some degree, he was confusing technology with money. He was trying to overcome the flaws of our current monetary system (a very laudable goal, I might add) but limited himself to thinking within the box in which the current monetary system placed him.

The next generation of Bitcoin developers are going to crawl out of that box and create whole new realms of possibilities. Once you realize that money is just information, and all you need to do is to provide the most stable mechanism of the transfer of information, you turn thinking about money on its head.

This is going to be massive amounts of fun to watch. More

Ukraine Turns On Its Central Bankers After Discovering Gold Gone

Peter’s Commentary

Ukraine’s people are getting angry about their missing gold.

From ZeroHedge, 12/2/2014:

As reported two weeks ago, following a stunning announcement by the head of Ukraine’s central bank, Valeriya Gontareva, on primetime TV we learned that (virtually) all of Ukraine’s gold was gone, or – in the parlance of Jon Corzine – had “vaporized.”

And as we also predicted two weeks ago, it was only a matter of time before Ukraine’s people – the vast majority of whom are innocent pawns in a vast game of realpolitik between the west and east – finally got angry and demanded some answers, if not heads.

That time came earlier today when as Interfax.ua reported “a Kyiv-based court has instructed Kyiv prosecutors to bring an action against National Bank of Ukraine (NBU) Governor Valeriya Gontareva on charges of abuse of power or misuse of office to obtain illegal profit, the Vesti newspaper reported on Tuesday.”

According to Interfax, “This decision was taken by Kyiv’s Pechersk district court on December 1 after it had examined case No. 757/33660/14. It ordered the Kyiv prosecutor’s office to launch an investigation and include it in the register of pre-trial investigations,” the newspaper reported.

Gontareva is charged with abuse of power or misuse of office under Article 364 of the Criminal Code of Ukraine.

The plaintiff is lawyer Rostyslav Kravets, the newspaper said. He confirmed this information in his post on Facebook, saying that the decision was taken by the court at the third attempt, and in November 2014, the prosecutors declined to bring an action to meet his claim.

The charges against the chief banker involve foreign currency interventions by the Central Bank in August 2014: On August 5 the NBU bought U.S. dollars on the interbank forex market for UAH 11.93 per U.S. dollar and sold them for UAH 12.26 per U.S. dollar.

During the same week, on August 8, it traded in foreign currency at a higher rate: UAH 12.45-12.6 per U.S. dollar. First it sold $69 million on the interbank forex market at a lower rate, and some days later it bought $35 million at a more favorable price.

As a result of these transactions, the NBU lost 19 kopecks per U.S. dollar, Kravets said. More:

SSS% – Silver Soars Seventeen Percent

Peter’s Commentary

Silver soars more than 17% from its intraday lows.  That’s huge! Gold is also up more than $70 to over $1210.  Volume is also high.

From Zerohedge, 12/1/2014:

The biggest intraday positive swing on record… ($16.82 is next test for SIlver at 50DMA)

 

And gold and silver are exploding… (gold has broken above its 50DMA at $1205)

 

Silver & Gold are back above pre-OPEC decision leak levels…

More

A Quick Look at Copper and Silver

Peter’s Charts:

Precious metals and copper got absolutely hit on Friday, so I thought I’d post up some charts of copper and silver this weekend.

Here’s the copper daily chart:

Copper Chart

 

Straight away it is apparent that the bears are in control of this market. The chart looks like a bear chart – since early July with lower lows and lower highs. DMI is above +DMI. And with the drop in copper to 2.86 on Friday, the gap between the DMI’s has grown significantly larger. RSI is also bearish and heading lower with a reading of 30. Looks to me like this market is going lower from here, just from studying the daily chart…So let’s look at the monthly one too:-

Monthly Copper

There is some support at 2.80. This is more obvious on the weekly chart (not shown). But once again on the weekly and this monthly chart, the –DMI is above the +ve DMI and RSI is bearish. So with the monthly, the weekly and the daily copper charts all in alignment and looking bearish, it does not look too rosy for copper and thus the economy going forward.

 

So let’s take a look at silver now, as it is mostly a by-product of copper mines.

Silver with ADX 1

With the big drop to $2,86 on Friday, the -DMI is now above the +ve DMI again, showing the bears are once again in control. For a brief week or so, the +ve DMI had the “upper hand” until Friday’s rout.

Silver with ADX 3

As shown in the chart above, the RSI was getting close to turning bullish, but after Friday’s drop, this is no longer the case. You can see that with a reading of 33, it is now firmly in bearish territory. There is also a support zone between 14 and 15, mainly derived from price levels set back between 2006 and 2010. You can see the top of this zone in the chart below:

Silver 10 year support at 15

I have also included a chart of the bull and bear market phases for silver:

4 Silver Market Phases

Silver seems to be setting up a bear flag. If so, this is a bearish situation. Makes one wonder how low silver could go. Do you think it will break through that $15 to $14 dollar zone? Let’s take a look at the long term monthly silver chart and see if that gives any indication:

6 silver monthly

Blimey.  The bears are in control of this monthly chart too. Note the -ve DMI above the +ve DMI. Also the RSI trending downwards and in bearish territory at 34.95. Do you think that silver could go below its 200 MA line at 13.58?

 

When you consider the copper chart in conjunction with the charts for silver, we certainly seem to be skating on thin ice.

 

 

India Removes Restrictions On Gold Imports

Peter’s Commentary

The Indian Government’s decision to remove gold restrictions is unlikely to change the near term bearish outlook for gold prices.

Gold Indian Jewelry

Adam Jones Photo

From Kitco, Neil Christensen, November 28, 2014

On Friday, the Indian government removed its current 80:20 import rule, which said that 20% of all imported gold had to be mandatorily exported before any new shipments could be brought in. Analysts have pointed out that the news is a surprise because recently there was speculation that the government would tighten import rules.

 

Although the 80:20 rule was curtained, the government did not mention whether it will reduce the 10% duty on all gold imports.

Analysts, though, are not expecting gold demand in India to drastically change because of the eased restriction as smuggling has increased significantly since 2013.

“On the margins it’s positive for gold but I don’t see it as a game changer,” said Bart Melek, head of commodity strategy at TD securities.

Melek added that “informal networks” filled the void created by the import controls. However, he admitted that now that those restrictions have been lifted, premiums should end up dropping, which could increase demand throughout the country.

Julian Jessop, chief global economist at Capital Economics, agreed that the government rules on gold imports weren’t very effective and although the news is bullish for the market, it will not drive prices significantly higher in the near-term.

Jessop added that Indian economic specialists are still going over the government’s statement regarding its decision to erase the 80:20 rule and said that it is not clear if it will be replaced with a different rule.

More