Commentary for Monday Nov 4, 2013 (www.golddealer.com) – Gold closed up $1.50 today at $1314.60 so we continue in a sideways pattern but defensive and today’s support came in over what looks like some bargain hunting and short covering.
So we remain guessing but the Federal Reserve seems fairly content with monetary easing and tapering might remain elusive. If you are looking for background noise regarding gold bullion concern over Europe has helped the dollar and pressured gold but a strong Chinese economy encourages their gold appetite.
Silver closed down $0.13 at $21.67 but this market remains quiet except for the premiums on US Silver Eagles which began rising today with all the major bullion dealers for some reason which eludes us.
Platinum closed up $3.00 at $ $1454.00 and palladium was higher by $11.00 at $749.00.
You don’t often hear much about palladium so this partial post by Tim Smith (Everbank) is worth the read: Palladium: Time for Platinum’s Little-Known Brother to Shine – “In past issues of the Daily Pfennig® edition, I have written many times about gold, silver, and even platinum, but there is one precious metal that tends to get overlooked by many investors, and that metal is palladium. Palladium is one of six metals that comprise the platinum group metals. These metallic elements have similar physical characteristics, such as being well suited for catalytic purposes, but you will find that for investment purposes, the most common are platinum and palladium. Palladium’s primary application is in the automotive industry for the production of catalytic converters. Over half of the annual production of palladium goes toward making this piece of equipment, which helps to convert harmful exhaust gases into nitrogen, carbon dioxide and water vapor, which are much better for the environment. Of course, platinum is also used for catalytic converters, but palladium is a much lower cost alternative, at roughly half the price of platinum currently. With automotive demand set to increase due to more potential drivers in emerging market countries, as well as increases in emissions standards, the demand for palladium does not look like it will be slowing down anytime soon. Palladium is also used to a lesser extent in the chemical sector, laboratory equipment, dentistry, electronics, glass manufacturing and, of course, jewelry (Source: U.S. Geological Survey, Mineral Commodity Summary). Palladium is the least dense of the platinum group metals, and thus is commonly alloyed with gold to produce white gold. The last use of palladium is for investment, though this is a very small percentage in relation to the industrial applications listed above. According to Johnson Matthey, industrial applications account for 91% of palladium consumption, which makes for a very tight supply with increasing demand.”
Palladium’s all time high was about $1100.00 so today it is trading at a hefty discount. We carry both the bullion palladium bar and coin and prices are similar but remember for some inexplicable reason (your taxpayer dollars at work folks) the bar is taxable within California but the Canadian Palladium Maple Leaf is not. Neither bar nor coin is taxable if shipped outside California.
This is a quote from the Doug Noland (The Prudent Bear) through Ed Steer’s Gold & Silver Daily: “Federal Reserve Bank of Philadelphia President Charles Plosser made notably cautious comments Friday on CNBC. “I think many people – myself included – I’m not alone in this – are beginning to worry about the consequences of how we unwind ourselves from all this stuff…It’s not because that we know what’s going to happen. It’s because unintended consequences or the build-up of risks can be very important. I think we have to balance, not just the risks in the economy, but our own risks that we’re creating down the road.” And is music to my ears, Mr. Plosser spoke of the need to take some discretion away from the Fed and of making policymaking more “systematic.” He admitted to being dumbfounded by the FOMC’s move to $85bn monthly QE, and said the hurdle to increase QE would be “very high.” There is growing acceptance that the Fed has gone too far with its experimental policymaking – and the costs associated with overheated markets are mounting. In the “old” days, there was appreciation for the risks associated with a diffident central bank finding itself “behind the curve.” The essence of the analysis was that if the Fed were slow to tighten, our central bank would eventually face cumulative excesses and the need for more aggressive tightening measures. And while the Fed has removed “tightening” from its vocabulary, the analytical premise remains valid: With monetary policy having remained ultra-loose for way too long, the risks associated with cumulative excesses have begun to expand rapidly. The Fed doesn’t have until March or June to start winding down increasingly destabilizing QE.”
The quantitative easing talk has been talked to death and the problem being at this junction is simply that nothing much has happened (inflation or bubble explosion or something else falling from the sky) so the discussion does not warrant fear. That does not mean all this fiat printing won’t come back to haunt us but it does mean that the “pain” part of the equation for this government economic “fix” is postponed. Another interesting part of the QE discussion though not often mentioned creates a tension between the QE “blow up” scenario and the “we have created an easing monster which helped liquidity but now we are married to the beast”.
Up to this point the government position on $85 billion a month in bond buying was that the massive money infusion was necessary to fight deflation and “what is the problem?” because up to this point we avoided financial collapse and inflation is still virtually zero. But there is no analog to this particular brand of QE and so the danger of catastrophe is raised by Noland and others.
I am not a big apocalypse fan but there is something in the wind when a Federal Reserve Bank President begins to question a new form of easing policy which is now embraced worldwide.
This is a fairly common question from a reader: “Wouldn’t be better to buy gold bars which are less expensive then say American Eagles, after all they both have an ounce of gold? Your thoughts, Thanks DR.”
There are several schools of thought: (1) Some investors like the idea that Eagles are minted by the US Mint, a sovereign entity because oversight is the best in the world. (2) There are some investors who prefer bars because as you rightly point out an ounce of gold is an ounce of gold. I have been in this business 30 years and own two types of gold bullion: the US Gold Eagle and the South African gold Krugerrand.
The reason behind my choices however is not related to relative price: the reason I like these most is because they share universal recognition and move directly with the price of gold. In the end however the buy/sell spreads on real bullion products are so close that the decision as to which one is “best” amounts to a personal choice like the color of your car. Thanks for reading and the question.
The walk-in cash trade and phone business was steady but not hurried going into the weekend and there was some pop to phone orders in the afternoon. Our Activity Scale was another “3” today. The CNI Activity Scale takes into consideration volume, open and closed orders (buying and selling), the cash trade, and the hedge book: (last Tuesday – 3) (last Wed – 3) (last Thursday – 3) (last Friday – 3) (Monday – 3). The scale is 1 through 10 and we believe this is a reliable way to “sense” what a real bullion business is doing without the sales pitch.
Phase One of our new golddealer.com website will be delayed another week (November 11th) and now I am beginning to feel like the President. It will also include Live Chat, you will be able to set up your own customer account, receive automatic email confirmation, and ask for daily Gold Newsletter email if you have the nerve.
Phase Two will make accounting, shipping and tracking even easier (check to see if we have your email address in the new system).
We now offer the choice of USPS or FedEx Ground. Our new flat screens within the CNI Building are operational and the cash trade loves this idea. The feed and graphs are live and bullion products are programmed with premium spreads: there is nothing like this on the West Coast and visitors enjoy complete transparency.
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Written by California Numismatic Investments (www.golddealer.com).