Adam Sarhan Quoted in Reuters Discussing Gold's Sharp Decline

Reuters

Gold down 2 percent, breaks below $1,600 on euro fears

By Frank Tang
NEW YORK | Wed May 9, 2012 1:28am IST
(Reuters) – Gold fell around 2 percent in heavy trading on Tuesday, briefly breaking below $1,600 an ounce as worries that the euro zone debt crisis could worsen triggered a technical selloff.
Gold retraced some losses as other commodities and Wall Street also recovered. Still, the day’s tumble cut gold’s gain so far in 2012 to less than 3 percent.
Option volatility spiked as investors bought put options to protect against further downside risk in bullion prices. The precious metal breached a series of technical support levels, suggesting more weakness to come.
Bullion this year has tended to trade in tandem with riskier assets such as stocks and oil, and has not staged many safe-haven rallies this year during times of economic uncertainty.
Analysts said political uncertainty in Greece and a change of leadership in France had investors doubting whether Europe would come through with the billions of euros needed to bail out its troubled economies.
“Absent new monetary stimulus, gold doesn’t make sense. When people are fearful of the fiat currencies eroding their wealth, that’s when gold catches its bid,” said Jeffrey Sherman, commodities portfolio manager of the $33 billion asset manager DoubleLine Capital.
Spot gold dropped 1.9 percent on the day to $1,607.70 an ounce by 3:16 p.m. EDT (1916 GMT), its largest daily decline in a month. It hit a session low of $1,594.94 an ounce, its cheapest price since January 4.
Gold’s has declined $180 from its 2012 high of $1,790 on February 29 after Fed Chairman Ben Bernanke did not hint at a third round of government bond purchases, or quantitative easing, which has underpinned the metal. A strong run of U.S. economic data has further reduced hopes for U.S. monetary easing.
U.S. gold futures for June delivery settled down $34.60 at $1,604.50 an ounce.
Trading volume was on track for its strongest showing in more than a month and about 40 percent above its 30-day average, preliminary Reuters data showed.
U.S. Treasuries rallied with the dollar, putting pressure on other commodities such as crude oil and copper. Losses on Wall Street also pressured precious metals.
“With stocks slumping and with treasuries rallying and risks generally rising … investors are withdrawing from the gold market, perhaps as margin calls are made, forcing investors to liquidate precisely when they don’t want to,” Andrew Wilkinson, chief economic strategist at Miller Tabak & Co said in a note.
The CBOE Gold ETF Volatility Index .GVZ, often referred to as the “Gold VIX” — based on options of the SPDR Gold Trust — rallied 11 percent to a reading of 18.6.
Bill Luby, a private investor and author of a blog called “VIX and More,” said there appeared to be lots of put buying in the GLD which has inflated the Gold VIX, which was hovering near a historically low level despite Tuesday’s spike.
TECHNICAL OUTLOOK BLEAK
Analysts said gold could fall further if it fails to hold above $1,600 an ounce as there is little underpinning from technical charts under that level.
“The fact that support has been broken on a daily, weekly and monthly time frame suggest that this selloff could get worse,” said Adam Sarhan, CEO of investment research and consultant Sarhan Capital.
Sarhan said gold was already testing the lows of 2012 when Tuesday’s heavy losses sent the metal below heavy daily and weekly support between $1,620 and $1,630 an ounce as well as its 18-month upward trendline on monthly charts.
Silver was down 1.8 percent on the day at $29.47 an ounce. Platinum fell 1.1 percent on the day to $1,505.74 an ounce and palladium slid 3.1 percent to $621.97 an ounce.
(Additional reporting by Doris Frankel in Chicago and Amanda Cooper in London; Editing by David Gregorio and Jim Marshall)
URL: http://in.reuters.com/article/2012/05/08/us-markets-precious-idINBRE8390RW20120508

Adam Sarhan Reuters Gold Quote

Reuters

Reuters

Gold up 1.7% on inflation fear after cenbank move

By Frank Tang and Susan Thomas
NEW YORK/LONDON | Wed Nov 30, 2011 1:20pm EST
(Reuters) – Gold rose nearly 2 percent on Wednesday, on track for its biggest three-day rally in more than a month, as a move by major central banks to add liquidity to global markets boosted bullion’s inflation-hedge appeal. Bullion was swept higher on a wave of economic optimism after top global central banks led by the Federal Reserve and the European Central Bank acted jointly to allow European banks to borrow U.S. dollars on easier terms. The S&P 500 surged 3.5 percent and copper, an economic barometer, soared 5 percent.
Gold, a traditional safe haven, has recently taken to track performance of riskier assets such as equities. The correlation between bullion and S&P 500 has risen to its tightest positive link in a year.
“Gold is moving higher alongside every other risk asset, which is a bullish sign. That correlation comes into play perfectly here,” said Adam Sarhan, CEO of Sarhan Capital.
Technical buying also supported prices as the metal broke above its 100-day average to reclaim the key resistance it had breached early last week.
“If gold can break above its recent highs and resistance at $1,800 an ounce, it’s in for another leg higher,” Sarhan said.
Spot gold rose 1.7 percent to $1,744.79 by 12:06 p.m. EST, after hitting a two-week high of $1,749.63 earlier in the session. Wednesday’s rally lifted bullion’s performance in November into positive territory, up almost 2 percent for the month.
U.S. gold futures for February delivery rose $29.90 to $1,748.80.
Silver rose 2.5 percent to $32.70.
Gold had reversed losses earlier after China moved to ease credit strains by cutting the reserve requirement ratio for its commercial lenders for the first time in nearly three years. The move by the world’s biggest consumer of copper also lifted the bellwether industrial metal and helped confirm gold’s status as an inflation hedge.
“Now we had a concerted effort to devaluate currencies together to create inflation. That’s very good for China’s economy and every other economy. That’s the simple reason for copper’s rally,” said COMEX gold options floor trader Jonathan Jossen. Jossen reported a sizable trade on the COMEX floor that involves selling two April $2,100 call options with the buying of each $1,800 April call. The so called “bull call spread” strategy is seen bullish for the underlying gold futures.
The 25-day implied volatility in gold options, a gauge of bullion market risk, has fallen to its lowest in around a month, indicating some investors are expecting the recent range-bound trade in the underlying gold futures to continue, traders said. Also boosting gold buying sentiment was surging U.S. pending home sales in October and news that U.S. private sector job growth accelerated in November, prompting some economists to raise their forecasts for Friday’s more comprehensive U.S. government labor report.
Among other precious metals, platinum climbed 1.1 percent to $1,547.65 and palladium gained 3.8 percent to $605.47 an ounce. Leon Westgate, analyst at Standard Bank, said that palladium prices were boosted by a big wave of short covering after a growing number of investors had been recently bearish on the industrial metal.
(Additional reporting by Rujun Shen in Singapore and Amanda Cooper in London; editing by Andrea Evans)
URL: http://www.reuters.com/article/2011/11/30/us-markets-precious-idUSTRE7AK1M520111130