Commentary for Tuesday, Sept 16, 2014 (www.golddealer.com) – Gold closed up a tepid $1.60 today at $1235.20 watching carefully for any interest rate hints which might come from the two day Federal Open Market Committee (FOMC) being held Tuesday and Wednesday.
The backdrop for this important powwow today saw Industrial Production down 0.01% and the Producer Price Index (PPI) unchanged so most believe the Fed will stay the course. All this inside scoop will be released tomorrow so sit tight and let’s see what happens – but remember even with all this hoopla about negative news – gold has only fluctuated about 13% this year.
Silver closed up $0.10 at $18.65 and we are seeing little in the way of big physical action across the counter but silver ETF holdings moved to the highest point of the year – just under 20 million ounces so someone is taking advantage of cheaper silver prices.
Platinum closed up $3.00 at $1368.00 and palladium closed up $7.00 at $844.00.
So what’s up for gold on the short term? Most believe the Federal Reserve will begin rising interest rates around mid-2015 – a pretty good bet in my mind. If this is not the case and the possibility of higher rates is hinted at by the Federal Open Market Committee this week gold will continue to trend lower. News from the meeting will probably be released after the market close Wednesday.
For some reason there is a great deal of talk about higher interest rates but I would not be surprised to see Fed Chair Yellen stand pat – she has in the past with no trouble. This is especially true with inflation subdued and job creation still underwater. It would figure that the Fed will continue to cut quantitative easing as most believe they have gotten all that is possible out of this fiscal manipulation.
But raising interest rates is a horse of a different color – even this morning’s CNBC commentary pointed to a just released survey which claims the majority of CEO’s are disappointed in the ability of the economy to gain traction.
You should expect continued lowering of the quantitative easing program – this will punish gold – until the program is finished. And good riddance – perhaps after this boogie man is off the table the gold market can regain perspective.
In either case the technical picture for gold remains negative and the general mood remains neutral to negative. We are looking at 8 month lows and there may be another test of the $1200.00 support level.
Our across the counter talk has also been lackluster – especially because gold does not seem to be interested in geopolitical events for the present. This too will change and there is something particularly unsettling about ISIS and the new Islamic State.
The absence of physical buying from both India and China was discouraging but news this morning about increased Chinese gold premiums may indicate this tide is turning. I am surprised this change did not happen sooner considering the discounts from highs and the natural affinity both countries have for gold bullion. Chinese investors expect more stimulus for the Bank of China and the buying season is fast approaching in India.
For now the dollar at 14 month highs is a tough act to follow and while some believe the stock market is vastly overvalued I would not want to stand in front of this double threat.
On the shorter term we may settle for a defensive gold market, still trying to find traction and supported by returning physical demand. Gold is cheap – but investors tend to “wait” when there is price confusion. In the physical market we have seen a few large gold bullion buyers add to their position. These players are however long-term buyers from us and may be averaging their positions – taking advantage of lower prices. This is traditionally a smart play but does take a bit of sand and the belief that gold will win the race against fiat currency.
We have seen virtually no big “new money” moving into gold bullion which figures – but we see the smaller to mid-size buyers coming back into the market – and like I have mentioned in the past we have seen virtually no large sellers which is encouraging.
I would say we have not entered into an exhaustion or give up phase in gold bullion. And as the summer draws to a close we could see traditional buying return. But without some rise in prices this market still looks tired.
Yesterday’s small jump in prices was just short-covering going into the FOMC meeting and so the bears remain in charge.
If you are looking for a wild card consider the talked about overbought position in stocks. If this turns out to be true and the DOW weakens it could be a positive catalyst.
If you are a new player to the gold bullion market the $1200.00 range is as good a place as any to get started. Especially as the market mood is negative – but I would consider making a number of smaller buys through Thanksgiving.
One of the great things about this market is that all the commentary about the end of the world and the collapse of the dollar has evaporated. I have always said this argument for owning gold is misplaced – there are better reasons to own gold bullion for the longer term.
And in the shorter term – I would once again plug David Stockman’s book – (Amazon) The Great Deformation is a searing look at Washington’s craven response to the recent myriad of financial crises and fiscal cliffs. It counters conventional wisdom with an eighty-year revisionist history of how the American state especially the Federal Reserve has fallen prey to the politics of crony capitalism and the ideologies of fiscal stimulus, monetary central planning, and financial bailouts. These forces have left the public sector teetering on the edge of political dysfunction and fiscal collapse and have caused America’s private enterprise foundation to morph into a speculative casino that swindles the masses and enriches the few.
Defying right- and left-wing boxes, David Stockman provides a catalogue of corrupters and defenders of sound money, fiscal rectitude, and free markets. The former includes Franklin Roosevelt, who fathered crony capitalism; Richard Nixon, who destroyed national financial discipline and the Bretton Woods gold-backed dollar; Fed chairmen Greenspan and Bernanke, who fostered our present scourge of bubble finance and addiction to debt and speculation; George W. Bush, who repudiated fiscal rectitude and ballooned the warfare state via senseless wars; and Barack Obama, who revived failed Keynesian “borrow and spend” policies that have driven the national debt to perilous heights. By contrast, the book also traces a parade of statesmen who championed balanced budgets and financial market discipline including Carter Glass, Harry Truman, Dwight Eisenhower, Bill Simon, Paul Volcker, Bill Clinton, and Sheila Bair.
Stockman’s analysis skewers Keynesian spenders and GOP tax-cutters alike, showing how they converged to bloat the welfare state, perpetuate the military-industrial complex, and deplete the revenue base even as the Fed’s massive money printing allowed politicians to enjoy deficits without tears.” But these policies have also fueled new financial bubbles and favored Wall Street with cheap money and rigged stock and bond markets, while crushing Main Street savers and punishing family budgets with soaring food and energy costs. The Great Deformation explains how we got here and why these warped, crony capitalist policies are an epochal threat to free market prosperity and American political democracy.
Normally comments in this newsletter are confined to the precious metals market but this article by Steve Roach (Coin World) may prove interesting to the general public because the rare cent in question might still be in circulation and possibly in your change. As a rule there is really nothing left in circulation which might prove valuable to collectors but there are modern exceptions. When the price of copper was moving higher the cost of a real copper cent might have exceeded its face value. This rather minor point bothered the US Mint in the 1970’s so they considered making the Lincoln cent in aluminum. In 1974 the US Mint produced almost 9 million copper Lincoln cents – and a handful of 1974-D aluminum experimental trials.
The Treasury handed out the experimental examples to members of Congress for a peek at the possible new penny. Then things went a little wacky – the Mint asked for the coins back and our representatives said – well – they looked and then passed the aluminum coins on to the next interested person. At any rate – not all the examples were retrieved – and today we have the mystery of the famous 1974-D aluminum cent – a coin you could run into at the grocery counter. But do me a favor – since this is rather inside information to the general public – should you find one of these rarities contact me (RSchwary@aol.com) and let me outline the possible legal scenarios along with my good friend and numismatic attorney Armen Vartien.
Legal Case Continues for 1974D Aluminum Cent as Mint, Private Citizens contend for Ownership Rights – Cent is subject of ongoing litigation
Two California men continue their fight to prove that a 1974-D Lincoln aluminum cent in their possession is legal to own. The cent was set to highlight Heritage Auctions’ April 2014 Central States Numismatic Society auction but was withdrawn at the request of the U.S. Mint.
Randall Lawrence and Michael McConnell initially filed a lawsuit in a San Diego federal court on March 14 asking the court to affirm that an example of the experimental cent that the two men owned is not government property and can be legally owned.
The Mint filed a response on June 3 seeking that the court dismiss the complaint, which was granted on July 23 when a judge ruled that the two men failed to prove that they legally owned the cent. The court allowed Lawrence and McConnell to file a motion for leave to amend the complaint, which they filed on Aug. 21 with a proposed amended complaint attached.
The Mint’s position has been consistent: because Congress never issued an aluminum cent as legal tender, any example remains property of the federal government regardless of how long it has been in private hands. The court initially granted the Mint’s motion to dismiss, specifically noting that the initial filings did not allege “facts surrounding the circumstances under which Plaintiff Lawrence’s father obtained the Aluminum Cent.”
The proposed amended complaint goes into further detail as to how the men came into possession of the cent, and how Lawrence’s father, Harry Edmond Lawrence, acquired the coin through his service as a Mint employee for approximately 20 years.
The filing states that before Harry Lawrence’s retirement as assistant superintendent at the Denver Mint in 1980, the Denver Mint commemorated his service in 1979 by “(a) giving him a clock engraved with his name and dates of service and with the ‘hours’ represented by specimens of each of the last 90%-silver coins minted in Denver in 1964, and (b) allowing him to keep certain error coins struck in Denver which he had accumulated, and one specimen of the 1974-D aluminum cent.” The amended complaint further adds that upon Harry Lawrence’s death he gave his son the clock, the error coins and the 1974-D aluminum cent, along with his other personal property. In 2013 Randall Lawrence conveyed an interest in the cent to McConnell, a coin dealer.
Denver aluminum cents? – More than 1 million 1974 aluminum cents were struck at the Philadelphia Mint, although nearly all were destroyed. In response to the Mint’s position that the Denver Mint aluminum cents were unauthorized, the two men contend, “Regardless of the Mint’s lack of records, the Denver Mint could not have made aluminum cents without a specific order to do so, evidenced by the special delivery of aluminum planchets from Philadelphia.”
The walk-in cash business today was just average and so were the phones. Nothing special as most consider the possible outcomes from the Federal Open Market Committee meeting today and tomorrow.
The GoldDealer.com Unscientific Activity Scale is a “4” for Tuesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 5) (last Thursday – 5) (last Friday – 7) (Monday – 6). 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, cokes and Snapple. We have also added fresh fruit in a transparent attempt to disguise our regular junk food habits – which seem to grow when things get this quiet. And it does not help that the world famous Randy’s Donuts is just down the street.
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