Commentary for Thursday Aug 22, 2013 (www.golddealer.com) – Gold closed up $0.60 today at $1371.20 after failing another attempt at higher levels reaching $1381.00 encouraged by positive purchasing manager numbers from China and Europe. So no fizz in this drink even though the Fed wants to stay the course and avoid rocking the financial boat.
Silver was also tepid up $0.08 at $23.03 and most physical bullion dealers will admit that sales are not exactly setting records.
Platinum however surged today up $21.00 at $1539.00 and palladium was higher by $8.00 at $755.00. Last year Anglo-American indicated they may lay off as many as 12000 platinum workers which caused unrest and mine protests. Yesterday they announced the layoffs of 6900 workers and demonstrations followed pushing platinum prices higher. Platinum producers claim current prices are too low relative to the cost of production and so manufacturing slows. Still with this bullish price talk I would have expected more platinum bullion sales and trading of gold bullion for platinum bullion.
A few things to keep in mind: Economic recovery equals less monetary easing which equals less demand for gold which equals weaker prices for gold. Remember however gold’s great ability to be a forward indicator meaning I believe this current shakeout will be finished before quantitative easing is over. Also note that generally higher interest rates usually mean a stronger dollar which is bad for gold short term but look at the latest data and you will find a disconnect meaning for now interest rates are flattening out and the dollar is moving lower which in the longer term is good for gold prices.
The technical picture for copper is solid and prices are moving higher meaning China is manufacturing power lines and building out which also means her rank and file remain employed making money and buying gold.
The latest numbers show a disconnect between the working family and the much talked about US recovery. People are making less in spite of massive government spending and huge liquidity which leads to this general feeling by many that Congress (both Republican and Democrat) is not doing a good job.
Finally overnight borrowing by banks is significantly less important today than it was in the past because the banks are now flush with cash and will be even flusher when new rules come down from on high raising banking cash requirements. So what you might say but consider that if the banks won’t give up their cash because of new government ruling it would be much more difficult for the Fed to drain this hyper-money environment or reverse the quantitative easing process when inflation begins to creep into the numbers. This might be the catalyst needed to push gold into higher territory and make today’s prices seem very reasonable.
This from a reader is a common question so it might make interesting reading. “My precious metal portfolio is all physical and in my possession. I have 92% in silver, and 8% in gold. I will probably never need this money, and I will leave it to my kids when I pass on. I have taught them about gold and silver and they are buying for themselves already. I know that I am heavy on silver and light on gold but having a hard time making myself buy gold when silver seems so cheap. Your thoughts on asset allocation of my precious metals would be appreciated. What %age in gold, silver, palladium, and platinum. Thank you very much.” This particular investor is indeed heavy in silver bullion but my typical response is always “why not” if you like the metal?
My personal allocation has been more like 60% gold bullion and 40% silver bullion but in the old days I had very little silver and much more gold. The reason I am dancing around the question is that I think it makes better sense for today’s investor to keep an open mind and be flexible. I made a recommendation a few years ago to trade some gold bullion for platinum bullion. The platinum market has not faired well in this severe recession and prices plummeted but in my book this just makes the trade stronger because I am a long term player. The important point to remember is that changing the percentages between bullion products is fine (a rebalancing if you will) but never give up your core holdings. And now that rhodium bars are available consider adding a new bullion product.
I received several emails this week from customers which claim they are pressured to buy other products when shopping gold bullion. This is common in the industry because of “fake” bullion dealers. These are the guys that advertise bullion prices to generate sales leads. First, if you can’t easily find the price (both buy and sell) of a bullion product on a dealer’s website avoid calling because if they were interested in selling you bullion they would provide the prices upfront.
And second if you ask for bullion pricing and are told you really don’t want to own bullion products (for any number of goofy reasons designed around selling you a more expensive coin with a wider buy/sell spread) simply move on. And if you think this practice is limited I used Google to search for several commonly used bullion terms. On each page almost half of the listed dealers were telemarketing hustlers which always use this “pushing” technique to steer you into wrong choices so let’s be careful out there.
Walk in business and the phones were again on the quiet side in early trading at the CNI Building but picked up in the afternoon. Still no really large action so the spec money remains light even though we remain at the higher end of gold’s recent price climb. Granted this represents thin summer trading but gold must show strength at these levels and higher or risk once again getting stuck in the mud.
The CNI computers place my almost famous LA Physical Trade Business Number at a slowing “2” meaning business volume is moving in the wrong direction and we are seeing a few big sales in gold bullion. Like us on Facebook and follow us on Twitter @CNI_golddealer. Thanks for reading and enjoy your evening. These markets are volatile and involve risk: Please Read Before Investing
Written by California Numismatic Investments (www.golddealer.com).