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    Gold Continues Firm but Lackluster

    Last updated 17 hours ago

    Commentary for Monday, July 18, 2014 (www.golddealer.com) – Gold showed just mild gains today moving higher by $4.50 to close at $1313.70. And the overnight trading pattern remained modest – within an $8.00 trading band from Hong Kong and London into the domestic market. So escalation in Gaza and continued trouble in Ukraine do not seem to be getting more traction relative to gold.

    Gold tested recent lows last week ($1292.00) and its close today at $1313.70 would suggest an upward bias but not really much in the way of safe haven buying. This looks more like an insurance bet to me especially because the dollar index is firm at 80.58. But still the technical advantage is pretty much a draw at this point – the bulls and bears continue to battle short term while the longer term remains range bound.

    What will happen to those responsible for the Malaysian tragedy? I am glad I don’t have to make my living in this area – it’s pretty sleazy. The Russians have blood on their hands but their financial relationships with Europe preclude sanctions with any bite.

    So the initial pop in the price of gold will probably fade as the investigation moves to the back burner. I can’t believe more is not made of the Iran/Hamas connection – an arrangement which could easily bring that entire region to its knees and send the price of gold through the roof. But perhaps the world is tired of the never ending battle.

    Silver closed up $0.13 at $20.96.

    Platinum was higher by $4.00 at $1493.00 and palladium was off $4.00 at $876.00. China imported 426,000 ounces of palladium in the first half of this year compared to 256,000 ounces for the same period last year. Cars sales are expected to reach 20.5 million this year which would put the overall need for palladium at 1.73 million ounces. Palladium remains about $8.00 below its recent 13 year high. Our rhodium sales remain solid.

    The Labor Day weekend is the official “end” of summer so we have a little over a month remaining. Why is this important? Because the summer months are traditionally slow for coin dealers and I hate “slow” – still, slow is better than stop. Physical volume numbers move in the wrong direction even for core players because many enjoy a vacation with the family. At any rate I expect business to pick up considerably in September especially if we continue to wander around gold’s lower trading range.

    I would also remind readers that the telemarketing trade continues to “gin” out so called rare bullion coins. For a coin to be included in the “bullion” club it must have a low premium – otherwise you are buying collectables. The difference between the buy and sell on many of these so-called new silver rare coins are atrocious.

    And any dealer can contract with World Mints to produce their own limited edition “rare silver coin”. This is just another variation of the old Franklin Mint scam perpetrated on the unknowing in the 1970’s. The limited editions are a vertical market only meaning there is no established secondary market so when the critical mass is reached they all are worth their weight only. So why pay a big premium up front if your intention is to invest in bullion? Be especially careful of a coin with an odd weight – this is done so that “melt” value is not easily figured – let’s be careful out there as predatory phone sales tactics are all over the place.  

    I am surprised the recent CNBC rant by Rick Santelli about the Federal Reserve preparing for hyperinflation did not get more press. I am not a big proponent of hyperinflation and don’t believe it will happen in the US. But there are plenty of coin dealers who made a fortune touting this type of stuff to retirees who should only consider the most conservative of investments.

    Still inflation is a foregone conclusion – but hyperinflation I am not too sure about. This introductory Forbes article by Mike Patton on the subject might be worth a peek.

    Introduction

    According to renowned economist Marc Faber, hyperinflation in the U.S. is a certainty within the next 10 years. Mr. Faber has correctly predicted some of the most important financial events in the modern era including, the stock market crash of 1987; the rise of oil, precious metals and other assets in the 2000′s; and on Fox News in February 2007, he said a U.S. stock market correction was imminent. The market peaked six months later. Is Mr. Faber correct this time? Is U.S. hyperinflation imminent in the next 10 years?

    In this article, we will discuss the effects of inflation and hyperinflation, consider an example of hyperinflation and discuss the possibility of this occurring in the U.S. One thing is certain, if hyperinflation does materialize, it would be devastating to our economy. Let’s begin with inflation.

    Inflation

    The Fed is the primary catalyst for inflation. Moreover, it actually attempts to create a low to moderate level of inflation. Why does the Fed want inflation? Because inflation is a signal of a growing economy. Additionally, if inflation is too high, the economy will suffer. If it’s too low, deflation becomes a threat. Therefore, low to moderate inflation is the goal.

    Inflation may be defined as “A general rise in prices” and occurs when demand outpaces supply. Actually, there are a couple of ways inflation can manifest and the Federal Reserve’s monetary policy lies at the heart of both. For example, when the Fed lowers interest rates, money is cheaper to borrow.

    Next, when the Fed expands the money supply, money is more plentiful, which again, makes it easier to borrow. Finally, when the Fed reduces bank reserve requirements (i.e.: The percentage of each deposit which must be held in reserve at the Fed), banks have more money to lend. All three create an environment which makes money more plentiful and cheaper for consumers and businesses to borrow. Of course, this assumes consumers and businesses are willing to take on debt. Another consequence of a significant expansion in the money supply is the devaluation of the currency. In essence, when there is a substantial increase in the supply of an item, including currencies, its value declines. Hence, it takes more dollars to buy the same goods and services. In a literal sense, inflation is the result of a decline in the value of a currency. Therefore, if Fed policy is successful, the expectation is that demand will rise, companies will expand their workforce and/or spend more money on technology to meet the increased demand and the economy will grow. However, if demand increases too rapidly, inflation will result.

    Although inflation is defined as a general increase in prices, during such periods, prices on some items may rise while others may fall. Therefore, we shouldn’t presume that if home prices rise; food prices, auto prices, etc., will also rise. Actually, prices on specific items rise and fall based on the Fed’s monetary policy plus supply and demand for the particular product or service. For example, let’s assume XYZ Company produces widgets and has a monopoly on them (i.e.: no other company is legally allowed to produce them). Further assume this company makes 8,000 widgets each month, but has the capacity to produce up to 10,000 if necessary. In this case, the company’s “Capacity Utilization” rate (i.e.: the company’s current percentage of maximum capacity) would be 80% (8,000 / 10,000). However, if demand were to suddenly increase to 15,000 widgets per month, XYZ would have to expand its facility, hire more staff and/or purchase technology to meet the increased demand. This would cause the price per unit to rise (at the production level), which would necessitate a price increase to the consumer in order to maintain the same margin of profit. If inflation became too elevated, it would be called hyperinflation. Let’s look at this now.

    Hyperinflation

    Hyperinflation is much less common than inflation. Unfortunately, there is no specific numerical definition for hyperinflation. However, there is some consensus. For example, a few economists suggest that an inflation rate of 50% per month would constitute hyperinflation. Using this rate, a junior cheeseburger deluxe at Wendy’s, which costs about one dollar today, would cost $130 a year from now and nearly $17,000 in 2 years. Needless to say, hyperinflation is a destructive force which is best avoided. Could we actually see hyperinflation in America? Has hyperinflation occurred frequently?

    The Nineteenth century was the century of deflation, whereas the Twentieth century was the period of inflation. Hyperinflation occurred as many as 55 times over the past century. Notable countries include: China, Russia, Brazil, Germany, Argentina, Poland, Chile and others. Could it happen in America? Many experts say no.

    Because the U.S. has a very proactive Fed, and there’s such a large amount of historical data from countries that have experienced hyperinflation, we should be able to learn from the past mistakes of others and avoid it. However, since inflation and hyperinflation are triggered by an excess of currency, which is not backed by gold or any other substance of value (i.e.; called “fiat” currency), there is no limit to the amount of dollars the U.S. can print (though we don’t print that much actual paper these days). Therefore, we need to briefly discuss the gold standard.

    Gold Standard

    There are a few different types of gold standards. However, in the interest of brevity, we’ll only skim the surface on this subject. Generally speaking, when a country adopts a gold standard, the amount of currency it may issue is limited by the amount of gold it holds in reserve. During times of war, a country’s need for capital increases, so abandoning the gold standard allows a country to expand its money supply to finance the war. This has been the typical path for countries during wartime. Today, there are no countries on the gold standard. In the absence of this, again there is no limit to amount of currency a country may print. This can be problematic, especially in smaller, developing nations. The absence of a gold standard was a key factor in one of the worst cases of hyperinflation in history. I’m referring to Germany following WWI.

    Germany’s Hyperinflation After WWI

    When WWI began, Germany abandoned its gold standard in order to print more currency to finance the war. When the war ended, Germany admitted they had started the war and agreed to pay reparations to various countries, with France being the major beneficiary. The details were included in the Treaty of Versailles, the document which formally ended the war. The amount Germany was required to pay was enormous. In fact, the total was close to 226 billion gold marks (approx $846 billion in current U.S. Dollars). After it became evident that Germany was unable to meet this demand, in 1921 the burden was reduced to 132 billion marks, the equivalent of $442 billion in today’s dollars.

    Due to the war, Germany’s economy was in shambles. Moreover, with many of its factories in ruin, its production capacity was severely reduced. Hence, even the reduction to 132 billion marks was well beyond its ability to repay. However, to help assure compliance, France and Belgium deployed troops to Germany from 1923 to 1925. During this period, Germany’s central bank, the Reichsbank, issued a massive amounts of marks to repay its debt. However, because Germany had abandoned the gold standard, its currency was backed only by the full faith and credit of its government. Between this monetary explosion and the loss of confidence in its currency, the German mark experienced a massive decrease in value, which resulted in severe hyperinflation. To better grasp the situation at that time, prices doubled during the five years from 1914 to 1919. They doubled again in only five months in 1922. In 1914, the ratio between the mark and the U.S. Dollar was 4.2 German Marks to one dollar. By 1923, it took 4.2 trillion marks to equal one dollar. The German currency had totally collapsed. This also contributed to a brief, but sharp recession in the U.S. (August 1918 to March 1919).

    Who Benefits And Who Suffers From Inflation And Hyperinflation?

    The beneficiaries of high inflation include any individual or entity who has borrowed money at a fixed rate. High inflation also benefits investors who own commodities, and businesses that derive a significant portion of revenue from exports. Who loses with inflation? First, the overall economy suffers. Specifically, consumers lose purchasing power and their standard of living erodes. Lenders are also hurt as are those who need to borrow. The latter group suffers because lenders raise their interest rates to hedge against inflation. In short, money becomes much more expensive. Finally, import-oriented businesses struggle when inflation is high.

    Hyperinflation, on the other hand, hurts almost everyone. It decimates the middle class. It can cause massive bank failures, especially banks with large amounts of outstanding fixed-rate loans. And, although borrowers who have a fixed rate loan do benefit, because prices on everything else are increasing so rapidly, any benefit from the loans is erased by the extreme cost of goods and services. There really are no winners with hyperinflation.

    The Potential for Hyperinflation in the U.S. Today

    Could the U.S. experience hyperinflation? If you look at the amount of the Feds monetary expansion since 2008, then you would likely conclude yes. For example, when the financial crisis began, the Fed’s balance sheet was around $800 billion. Today, it is over $4 trillion. That’s a tremendous increase. However, it’s important to note that the majority of this new money is sitting at the Federal Reserve and has not actually entered the economy. If this were not the case, if all this capital were allowed to enter the economy, inflation would be very high. Perhaps not hyperinflation, but I believe it would be much higher than it was during the late 1970s.

    Why would the Fed flood the market with so much money if it wasn’t intended to enter the economy? Because during the 2008 crisis, not counting the banks that did go out of business, a large number of other banks nearly collapsed. The actions of the Fed were nothing short of brilliant. They created a glut of new money through T.A.R.P., QEII, Operation Twist and QEIII. Then they offered to pay interest to banks on their reserves, which from a financial standpoint made it profitable to banks to leave large amounts on reserve. Hence, with the majority of this new money in reserve, bank balance sheets have been greatly strengthened. It’s important to note that the financial sector must be strong if the economy is to thrive. The Feds challenge will come when it’s time to unwind it all.

    With over $4.2 trillion on the Fed’s balance sheet ($3.8 trillion more than at the beginning of the crisis), when demand finally increases and lenders need more capital to lend, or when the Fed decides not to pay interest on bank reserves, the Fed will have to reverse course and, instead of buying bonds (which removes cash from its balance sheet and increases the money supply), it will be selling bonds (removing cash from the economy, reducing the money supply). This is where things could get dicey. This is also why the Fed would like to end QEIII as soon as possible. Because the longer it continues, the more money there will be to remove and this could cause a severe dislocation in the financial markets. In other words, when the Fed ceases QEIII, the stock market could decline along with bond prices.

    Conclusion

    Is Marc Faber correct in his prediction? Will the U.S. experience hyperinflation within the next 10 years? It all depends on consumer demand and the leadership of the new Fed Chair, Janet Yellen. It will also depend on economic growth in the rest of the world. The road out of the 2008 crisis has been masterfully maneuvered thus far. Will the next leg of the monetary journey be as smooth? I believe the Fed has done an outstanding job, all things considered. However, with a new chairperson, will the Fed continue to guide the economy with the same precision? My guess is that it will. After all, there are a lot of very bright individuals making decisions, and that gives me confidence. We’ll see if Mr. Faber is right. For the sake of all of us, I hope he’s wrong.”

    The walk-in cash trade today was again “summer-like” and so were the phones. Our Activity Scale remains somewhat elevated because of several large orders but I think generally physical demand remains subdued. It is not that there is nothing going on – but considering recent world events I would say the price action in gold has been underwhelming.

    The GoldDealer.com Activity Scale is a “4” for Monday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Tuesday – 3) (last Wednesday – 2) (last Thursday – 4) (last Friday – 4). The scale (1 through 10) is a reliable way to understand our volume numbers.

    Email confirmation using a PDF File when buying or selling is functional. It also includes the various forms of payment and includes bank wire instructions. And you can now see your actual invoice or purchase order on your computer screen.

    When you buy or sell please check to see if we have your current email on file and that your computer will accept our email (no spam).

    About shipping information – when buying or selling your rep will walk you through your current mailing information. Thanks for keeping us up to date if you have moved.

    Our four flat screens downstairs with live independent pricing (BullionDesk.com) are a big hit with the cash trade. Live pricing moves all the buy/sell product prices on a real time basis. Yes - you can visit the store with cash and walk away with your product. Or you can bring product to the store and walk away with cash. When buying from us remember if you exceed $10,000 in cash (the real green kind) a Federal Form is necessary.

    In addition to our freshly ground organic coffee offered visitors throughout the day we have added cold bottled water and cokes. No popcorn machine as yet but I am working on this idea and the In and Out burger plan.

    Like us on Facebook and follow us on Twitter @CNI_golddealer.

    Thanks for reading from your friends at GoldDealer.com and enjoy your evening.

    Disclaimer – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisers. The precious metals and rare coin market is random and highly volatile so it may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.

    What is the French 20 Franc Rooster?

    Last updated 18 hours ago

    Minted from 1899 to 1914, the French 20 franc Gold Rooster is one of the most popular gold coins in Europe. These traditional French gold coins display the Gallic Rooster, or Coq Gaulois, which has been one of the national symbols of France since the Middle Ages. Although the French 20 franc Gold Rooster is arguably the most common of the European gold coins, they remain relatively scare and have quite a bit of historical significant.

    • French20Franc-300x300
    • French20Franc2-300x300

    If you are looking for gold coins to add to your collection, or if you are just getting into precious metal investments, contact California Numismatic Investments. We carry a large selection of gold coins, including the beautiful French 20 franc Gold Rooster. Visit our website to see all of the gold coins we offer, or call us toll-free at (888) 612-2679 to speak with one of our precious metal experts today. 

    Gold Moves Lower as World Tension Moves Lower

    Last updated 3 days ago

    Commentary for Friday, July 18, 2014 (www.golddealer.com) – Gold closed down $7.50 at $1309.20 which makes for a $28.00 loss on the week - pretty uneventful pricing - in light of all the international turmoil.

    Silver closed down $0.25 at $20.83 and we are selling the Bison and Antelope (Canadian Wildlife Series) at $2.50 over spot. These are beautiful, limited and popular real silver bullion choices.

    Platinum closed down $14.00 at $1489.00 and palladium was off $4.00 at $880.00. 

    A small technical look at gold into the weekend might prove interesting: Gold is trying to pare its gains today, breaking back below the May high at $1315.00 before finding support above the important 50% Fibonacci ratio at $1308.00. Fibonacci ratios have a long standing in the technical community and can be used to suggest support in a negative market.

    We are seeing resistance at the 7 Day Moving Average ($1315.00) and 21 Day Moving Average ($1318.00) with support at the 50 Day Moving Average ($1293.00) and 100 Day Moving Average ($1303).

    Bollinger Bands (BB) was developed by technical trader John Bollinger. This “band” is plotted on a graph two standard deviations away from a simple moving average. Today the BBs are diverging, which suggests consolidation on reduced volatility following the strong upside break.

    A few days ago I talked about the Relative Strength Index (RSI). The RSI relative to gold is a momentum tool used by technicians in an attempt to determine overbought or oversold conditions in a particular asset class. The RSI is really a ratio of averages – it divides the average number of “up” closes times the days involved with the average number of down closes using the same number of days.

    Without getting more into this type of commentary I am curious as to what the reader thinks of such wizardry? Some readers like the idea of technical indicators; some believe these are nothing more than chicken bones and some fall asleep. I am not trying to develop a trading mentality here because all of this is presented as “informational only” - we are simply long term holders. Your input however would be appreciated and thanks.       

    Let’s consider gold safe haven buying – or lack of said product. Hamas has launched 8000 rockets into Israel and one must ask where did they get this new capability? This is a horrible game of shadows and it appears that this new weapon capability comes from Iran.

    So like many times before the Middle East situation is complex – is this move by Hamas one of desperation because they are not part of the peace negotiations. All of this will end badly as even Egypt condemns them and is talking about war crimes.

    The death toll is completely one sided as Israel has one of the finest fighting forces in the world. So let’s hope someone can create a cease fire and once again attempt a political solution. 

    The other unsettling aspect contributing to this escalating problem is the rocket attack which brought down the commercial Malaysian airliner killing almost 300 civilians. And this number includes as many as 23 Americans – but this has not been confirmed as of Friday. This atrocious act is now being investigated and it will take weeks before definitive information is available. But there is only a handfull of governments with this capability and our State Department claims the Russians are involved either directly or indirectly. 

    However these tragedies play out the tension level will remain high and this will unfortunately support the price of gold. But not to the extent that some might assume. Remember the last Russian incursion into Ukraine was worth about $50.00 in the price of gold as safe haven buying immerged. So I think that higher gold prices are capped unless this mess continues to escalate.

    Because of these factors the short players have moved to the sidelines - especially into an uncertain weekend. The overnight Globex and Sydney markets reached a high of about $1325.00 before seeing mild profit taking. The Hong Kong, London and domestic markets settled looking at $1310.00.

    But all of this will not create the longer term support needed for higher gold prices.

    Could I pick one significant problem which will push prices higher? Europe’s still accumulating debt - which can only be paid back through inflation.

    This from Ambrose Evens-Pritchard (The Telegraph) – “The world economy is just as vulnerable to a financial crisis as it was in 2007, with the added danger that debt ratios are now far higher and emerging markets have been drawn into the fire as well, the Bank for International Settlements has warned.

    Jaime Caruana, head of the Swiss-based financial watchdog, said investors were ignoring the risk of monetary tightening in their voracious hunt for yield.

    “Markets seem to be considering only a very narrow spectrum of potential outcomes. They have become convinced that monetary conditions will remain easy for a very long time, and may be taking more assurance than central banks wish to give,” he told The Telegraph.

    Mr Caruana said the international system is in many ways more fragile than it was in the build-up to the Lehman crisis. Debt ratios in the developed economies have risen by 20 percentage points to 275pc of GDP since then.

    Credit spreads have fallen to wafer-thin levels. Companies are borrowing heavily to buy back their own shares. The BIS said 40pc of syndicated loans are to sub-investment grade borrowers, a higher ratio than in 2007, with ever fewer protection covenants for creditors.”

     Participants in the weekly Kitco News Gold Survey are split over gold’s price direction for next week as no one group has an outright majority, although a nominal number lean bullish.

    Out of 37 participants, 25 responded this week. Of those, 11 see higher prices, nine see lower prices and five see prices trading sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.

    Last week, survey participants were bullish for this week. As of 11:30 a.m. EDT, Comex August gold was down about $19 for the week.

    Those who see higher prices say geopolitical concerns will keep gold bid.

    “The tragic geopolitical situation, however it transpires in both Gaza and Ukraine, gives gold support. At the same time, the market had overcompensated for the reduction in stimulus by the Fed and with sentiment on gold very negative. So up next week,” said Adrian Day, chairman and chief executive officer, Adrian Day Asset Management.

    Those who see weaker prices took an opposite view of gold’s reaction to geopolitical worries.

    “If a day of rising tensions in Russia and Ukraine and ground-fighting in Gaza can only muster a 1% rally in gold, what will it take to really get a rally going? Funds' trading performance in gold has been horrific the past two-three months... getting short at the low, getting long at higher levels, now caught in the middle of a $1,275-$1,350 trading range. I believe the recent poor performance is having the effect of funds going to the sidelines which is one reason gold can't rally well. I look for gold to drift a little lower probably re-testing $1,275'ish over the next one to two weeks,” said Ken Morrison, editor of online newsletter Morrison on the Markets.

    A few participants said gold prices have little short-term trend right now, so they expected choppy, range-bound trade. Frank Lesh, broker and futures analyst with FuturePath Trading, said he’s had a hard time trying to be bullish gold and is opting for being neutral right now.

    The “gold trade has been a real disappointment for the longs the past week. Gold opened on the high of the week on Monday and immediately sold off on profit taking, hitting sell stops and cleaning out any recent buyers. Then the geopolitical problems (surfaced) and the market can’t hold the gains from the safety bid. The downing of the aircraft is a tragic, but not an act of war and the Israeli invasion of Gaza is something that has happened before without serious market disruptions. Either situation could easily turn much worse, but the markets will take a wait-and-see attitude for now. Many traders remember getting burned when the initial tension of the Russia/Ukraine started and gold spiked to $1,390’s, only to quickly give back any gains. I have been trying to be bullish this market, but the action the past several weeks has me back to a neutral stance,” Lesh said.

    The walk-in cash trade picked up some this Friday but is still subdued and the phones were back to average with lots of questions. Buyers or sellers however remain elusive so volume numbers continue to disappoint even though prices are cheap relative to old highs.

    The GoldDealer.com Activity Scale is a “4” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 4) (Tuesday – 3) (Wednesday – 2) (Thursday – 4). The scale (1 through 10) is a reliable way to understand our volume numbers.

    Email confirmation using a PDF File when buying or selling is functional. It also includes the various forms of payment and includes bank wire instructions. And you can now see your actual invoice or purchase order on your computer screen.

    When you buy or sell please check to see if we have your current email on file and that your computer will accept our email (no spam).

    About shipping information – when buying or selling your rep will walk you through your current mailing information. Thanks for keeping us up to date if you have moved.

    Our four flat screens downstairs with live independent pricing (BullionDesk.com) are a big hit with the cash trade. Live pricing moves all the buy/sell product prices on a real time basis. Yes - you can visit the store with cash and walk away with your product. Or you can bring product to the store and walk away with cash. When buying from us remember if you exceed $10,000 in cash (the real green kind) a Federal Form is necessary.

    In addition to our freshly ground organic coffee offered visitors throughout the day we have added cold bottled water and cokes. No popcorn machine as yet but I am working on this idea and the In and Out burger plan.

    Like us on Facebook and follow us on Twitter @CNI_golddealer.

    Thanks for reading from your friends at GoldDealer.com and enjoy your weekend.

    Disclaimer – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisers. The precious metals and rare coin market is random and highly volatile so it may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.

    The Prices At GoldDealer Are Always Fair

    Last updated 3 days ago

    • on GoldDealer.com
    • Doing business with GoldDealer (CNI) has been very satisfactory. The personnel are knowledgeable, helpful, courteous and consistently straightforward. The products are accurately described. The prices are fair. The newsletters are welcome and well done. Transactions are efficient and smoothly
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    Gold Moves Higher Reacting to the Malaysian Tragedy

    Last updated 4 days ago

    Commentary for Thursday, July 17, 2014 (www.golddealer.com) – Gold closed up $17.10 at $1316.70 on this tragic day.

    The big upward move in gold was obviously due to the Malaysian tragedy.

    A commercial jetliner flying from Amsterdam to Kuala Lumpur was shot down by what appears to be a surface to air missile over Ukraine. The plane with almost 300 people on board went down near Donetsk. The Ukrainian government claims pro-Russian rebels were responsible. This information came across the wires in early morning trading.

    Gold had already developed a slight positive bias just below its 100 day moving average ($1305.00) before the sad news was broadcast worldwide.

    The increased international tension took a summer, rather sleepy trading environment which was technically negative and turned it into a scramble to cover shorts - which then turned into safe haven buying.

    Later in the morning it was learned that a Russian fighter mistook the commercial aircraft for a Ukrainian cargo plane. Perhaps – but this too is difficult to believe considering the intelligence, training and electronic surveillance available to both fighter and commercial pilots.

    Still this event will re-focus the world on this Russian-Ukrainian situation.

    And further sanctions were placed yesterday by President Obama.

    I think the question here is whether the commercial jet was deliberately shot down or this was a terrible mistake or accident? If true - it will not overshadow a market with a technically negative bias. And I would expect the fight between the bulls and bears to continue short term.

    On the other hand if this turns out to be a deliberate act it could signal a huge escalation in the Ukraine and gold will continue higher.

    In the meantime expect reports to be inaccurate – both sides blaming the other as the slaughter of the innocent continues. I would also question why any commercial aircraft would be allowed to fly over a war zone even at 30,000 feet.

    At the time of this writing the physical gold market both locally and nationally has not be affected. Bullion sales remain quiet even with the Israeli incursion into Gaza.   

    Silver closed up $0.36 at $21.08. The Silver Institute released positive news. Like a 7 million ounce increase in Silver ETF holdings this year and industrial demand for silver up 23%. Also noteworthy are expectations that solar panel usage of silver will be up 10% this year.

    Platinum was up $18.00 at $1503.00 and palladium made a 13 year high - up $8.00 at $884.00.

    Building Permits, Unemployment Claims, Housing Starts - Tom Moore (FastMarkets) - Building permits fell to 0.96 million, the third straight month of declines and a five month low. This does not bode well for the housing market as it indicates reduced supply going forward.

    Housing starts have also fallen to a 9-month low, dropping to 0.89 million in June down from the revised 0.99 million in May. Housing starts have also fallen for 3 straight months, a trend that is likely to continue with building permits declining.

    Unemployment claims dropped to a 9 week low of 302,000, the third straight week of decreases, indicating strength in the employment market. This follows the rise in employment shown by both the NFP and ADP payroll numbers.

    I am a big fan of Kira Brecht (TraderPlanet/Kitco) and her commentary is especially relevant considering the Malaysian tragedy. America’s Role as Global Policeman. “The first half of 2014 has been littered with global political tensions and military uprisings including Russia's annexation of Crimea and the rise of ISIS, a jihadist group, in Iraq. On the other side of the globe, China continues to spat with Japan over ownership of a chain of islands —known as the Senkaku in Japan and the Diaoyu in China — in the East China Sea. Commodities such as gold and crude oil have both seen gains in recent months.

    Gold has gained in part amid its role as a hedge against global instability and a safe-haven investment, while crude oil has rallied amid concerns about a potential supply disruption, particularly in Iraq.

    Meanwhile, average U.S. citizens are now questioning in larger and larger numbers the role that America should play as a global policeman. A recent Wall Street Journal/NBC news poll revealed that 47% of respondents favored a less active role by the U.S. in world affairs. Anti-intervention themes run across party lines here in the U.S. and with massive debt and deficit levels, some question the appropriateness of large defense budgets at a time of fiscal indebtedness.

    What does this all mean for the commodity markets?

    "The U.S. has acted as a global stabilizer in geopolitics since 1945. And, as we relinquish that role we are seeing more tensions," said Bill O'Grady, chief market strategist at Confluence Investment Management. Pointing to recent global events, he added "the conclusion the rest of the world is drawing is that American promises of protection really aren't that enforceable. The U.S. is giving up its previous role in the world."

    Looking ahead, O'Grady points to upcoming midterm elections and then the 2016 U.S. Presidential election as critical. "This election may determine if we try to retain our role in the world. Enormous portions of the American public are sick of the role and want to be done with it," he said.

    Pointing to the political spectrum, O'Grady noted there has been a shift in American politics as a fight between the populists versus the establishment. "The tea party and the radical left have more in common. Hilary Clinton is not a whole lot different than Jeb Bush. But, Rand Paul and Elizabeth Warren and a lot different than Clinton and Bush."

    The next presidential election could determine the direction the U.S. takes with its role as a global policeman. If the U.S. continues to step back from its role as global policemen, O'Grady suggests "it's bullish for all commodities."

    With the potential for additional political and military unrest in various hot spots around the globe, the supply-side threats to commodity production could increase.

    Many companies in recent years, especially during and just after the recession relied upon an inventory strategy known as "just-in-time inventory." Why sit on supplies and pay holding costs when you can order supplies on an as-needed basis? An increase in geopolitical tensions in the years ahead could cause companies to change that strategy.

    "The whole basis of just-in-time inventory is the security of supply," O'Grady explained. "If U.S. defense spending contracts and there is less stability around the world, it makes just-in-time inventory look foolish," he warned.

    What commodities could be impacted? Crude oil, grains, industrial metals, and precious metals as a safe-haven and hedge.

    "Oil, energy is by far the most important. Modern capitalist societies can't operate without it. Food. If you are a leader of a country and your people can't eat, you probably won't be a leader for very long," O'Grady warned. Bottom line? "What we are going through is pretty momentous," he concluded.

    Change is afoot in the global political and economic structures. Gold has been rallying in recent days and weeks. A strong bid continues to prop up the yellow metal. There are a myriad of reasons to own gold and the farther one looks out into the future even more bullish reasons seem to arise.”

    The walk-in cash trade and national phone sales were slow today – so the physical reaction to increased tension worldwide is a rather disarming silence. We will have to wait for a better technical assessment tomorrow and perhaps the overnight Hong Kong and London action will provide more information.   

    The GoldDealer.com Activity Scale is a “4” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Friday – 3) (Monday – 4) (Tuesday – 3) (Wednesday – 2). The scale (1 through 10) is a reliable way to understand our volume numbers.

    Email confirmation using a PDF File when buying or selling is functional. It also includes the various forms of payment and includes bank wire instructions. And you can now see your actual invoice or purchase order on your computer screen.

    When you buy or sell please check to see if we have your current email on file and that your computer will accept our email (no spam).

    About shipping information – when buying or selling your rep will walk you through your current mailing information. Thanks for keeping us up to date if you have moved.

    Our four flat screens downstairs with live independent pricing (BullionDesk.com) are a big hit with the cash trade. Live pricing moves all the buy/sell product prices on a real time basis. Yes - you can visit the store with cash and walk away with your product. Or you can bring product to the store and walk away with cash. When buying from us remember if you exceed $10,000 in cash (the real green kind) a Federal Form is necessary.

    Like us on Facebook and follow us on Twitter @CNI_golddealer.

    Thanks for reading from your friends at GoldDealer.com and enjoy your evening.

    Disclaimer – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisers. The precious metals and rare coin market is random and highly volatile so it may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.

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