Commentary for Friday, Oct 17, 2014 – Gold closed down $2.30 today at $1238.10 so this makes for the second day of smaller losses in a market which was a combination of fear driven and oversold coming together.
And the dollar gained strength today creating some drag on the price of gold. The greenback was stronger because data from the US Commerce Department showed a 6.3% increase in new-home construction starts.
But gold does look like it is working hard around the $1240.00 mark. Still it did finish up $17.00 on the week and it did well last week moving higher by $29.00.
So is gold running out of gas on its recent bounce higher? It is still too soon to tell but a stall around $1240.00 is not good. Gold must show some strength above $1240.00 and continue to push higher into the $1280.00 range before the bulls feel more comfortable. Without this confirmation the recent strength we have seen is just a bounce at the lower end of a technically impossible market sell-off which began in early July when gold was moving on both sides of $1320.00.
Whether the gold market will reinvent itself really centers on the next move from our Federal Reserve and they are meeting next week. They are however in a bit of a bind at this point because they have committed themselves to ending quantitative easing this month.
Just yesterday the stock market opened up to the downside with lots of red and within hours of the opening James Bullard was on Bloomberg.
This from CNBC/Rueters – Bullard: Fed may want to keep up bond buying for now –
“The head of the St. Louis Federal Reserve Bank said on Thursday the U.S. central bank may want to keep up its bond buying stimulus for now given a drop in inflation expectations.
“Inflation expectations are dropping in the U.S., and that is something that a central bank cannot abide,” James Bullard told Bloomberg television. “We have to make sure that inflation and inflation expectations remain near our target.”
“For that reason, I think a reasonable response by the Fed in this situation would be to … pause on the taper (of bond purchases) at this juncture and wait until we see how the data shakes out into December,” he said.”
There is no way this Governor just happened to take a position contrary to his boss right in the middle of a very large stock market rout. He was sent in to quell the markets and the result was exactly what the Federal Reserve wanted – stocks rebounded.
So what does this have to do with gold? If the Federal Reserve ends quantitative easing and the result helps makes Europe unstable world financial markets will follow our Thursday morning lead. There will be red ink all over the place – and everyone will run to the dollar and eventually gold for safe havens.
And if they don’t end quantitative easing on time the metals markets will have just what it needs to push into higher territory – the theory that all governments of the world are stuck producing more fiat money to support a system which is now addicted to near zero interest rates.
No one knows how this mess will play out but it’s easy to see that gold will remain volatile until the Federal Reserve can figure out a way to back away from this tiger.
Silver closed down $0.10 at $17.28 and remains quiet into the weekend – like gold the big order guys are waiting into this weekend. Silver closed up $0.03 this week after moving higher by $0.47 last week. Still I expected more physical buying at these depressed levels – the World Mints are striking new coins to beat the band and consumers are still buying big but the regular across the counter bullion business seems to have cooled off. The two big buyers of circulated silver dollars are full so premiums on real silver dollars (1878-1935) are moving lower.
Platinum closed up $10.00 at $1262.00 and palladium also closed up $10.00 at $756.00. Palladium might prove to be the dark horse bet. It peeked recently at $900.00 and is now moving lower over a fear of a slowdown in car sales. The car industry is driven by low interest rates and people always need cars so I might be looking for a counter trend with palladium.
Precious Metal Closes & Dollar Strength – Oct. 13 through Oct. 17 – 2014
Gold Silver Platinum Palladium Rhodium Dollar Index
Mon $1229.30 $17.29 $1260.00 $785.00 $1230.00 85.53
Tues $1233.60 $17.35 $1272.00 $794.00 $1230.00 85.83
Wed $1244.10 $17.41 $1261.00 $764.00 $1230.00 81.84
Thurs $1240.00 $17.38 $1252.00 $746.00 $1230.00 84.87
Fri $1238.10 $17.28 $1262.00 $756.00 $1230.00 85.11
Our Patented Employee Survey – Gold’s Direction Next Week?
Of course it’s not really patented but we do have some fun along the way. This is what the GoldDealer.com employees think – 4 believe gold will be higher next week – 6 think gold will be lower and 2 believe it will be unchanged.
Our Patented Customer Survey – Gold’s Direction Next Week?
Like the employees our actual customers were given three choices – up – down – unchanged. We limited the survey to a random sampling of 100 transactions – unscientific yes but worth considering because these people actually took action: 52 people thought the price of gold would increase next week – 28 believe the price of gold will decrease next week and 20 think prices will remain the same.
This commentary from one of my favorite traders – Peter Hug (Kitco): Nowhere to Hide? Not True! “I guess I should qualify the following, because if you are an American this may not be as valid, but it may become more urgent as time moves forward. Today the U.S. equity markets are getting slaughtered, as U.S. economic growth is beginning to wane. The 10-year bond travelled under 2%, as investors were terrified and looking for a safe haven. Europe is on the verge of another economic Armageddon and geo-political risks continue to accelerate in the Middle East. Where to hide? Well gold popped some $20, but as an American investor so what, what’s the big deal. I agree: from the beginning of the year gold is up a paltry 3% in US$ terms. But what if you’re a Canadian or a European? Canada has seen its stock market evaporate to the tune of 12%, in the last few weeks, as commodity complexes disintegrate, against the back drop of global deflation. Gold in Canadian terms started 2014 at +/- $1,280 and is now at +/- $ $1,405. For a German, gold in Euro terms has increased 10.3% since the beginning of the year. The fundamental drop in value for the C$/US$ is 6% since the beginning of the year and for the Euro the drop has been 6.5%. So for the Canucks and the Europeans, gold has provided what it is intended to provide, protection. Our American friends may be next.”
The above quote from Hug is important and the theme is a favorite of mine lately – gold bullion may not look too bad if your measure of value is not the US dollar.
Owning gold bullion provides that little insurance edge needed when considering unbacked paper money which is created because of government edict. I know – you have heard that plenty of times and I’m not saying that gold bullion is the answer to all problems in this world.
But it does provide solace – who knows what will happen in a world which seems crazier than it has ever been – given the progress we have made since the end of the cold war.
I had been in the gold bullion business 17 years when Reagan challenged the Russians to “tear down that wall” and it looked like peace was breaking out all over the world. President Reagan made that speech at the Brandenburg Gate, West Berlin, Germany in 1987.
You might believe that collective world thinking has made giant strides since that time but in fact the world is more dangerous.
This threat however is not from an arms race but from a currency race.
Just holding gold bullion in your hand – under your own control and outside the normal financial channels means something to real hard asset people.
The fact that holding real gold in your own hand also adds a certain sensibility to your life and that part is thrown in for free.
The walk-in cash trade picked up nicely today but the phones were just average for a Friday. Interestingly the talk about rhodium bullion seems to be picking up but we have seen no big pop in sales volume.
The GoldDealer.com Unscientific Activity Scale is a “5” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 4) (Tuesday – 4) (Wednesday – 3) (Thursday – 4). The scale (1 through 10) is a reliable way to understand our volume numbers. The Activity Scale is weighted and is not necessarily real time – meaning we could be very busy and see a low number – or be very slow and see a high number. This is true because of the way our computer runs what we call the “book”. Our “activity” is better understood from a wider point of view – perhaps a week or two. If the numbers are generally increasing – it would indicate things are busier – decreasing numbers over a longer period would indicate volume is moving lower.
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, cokes and Snapple. We have also added fresh fruit in a transparent attempt to disguise our regular junk food habits.
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Thanks for reading – your friends at GoldDealer.com. Enjoy your weekend and we appreciate your business.
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