Gold Defensive with Dollar Strength – Fed Comments Neutral

Gold Defensive with Dollar Strength – Fed Comments Neutral

Commentary for Tuesday, Feb 24, 2015 ( www.golddealer.com) – Gold closed down $3.40 on the Comex today at $1196.90 so Fed Chair Yellen’s comments had no effect on the price of gold – but the stronger dollar did and negative sentiment prevails.

Gold overnight traded in a relatively tight $8.00 range in Hong Kong and London on both sides of the important $1200.00 range and seems comfortable holding slightly below $1200.00 in early domestic trading.

The Greek debt semi-deal has taken some tension off the European table for a month or two as European stocks rebound and safe haven buying from this sector subsides. We are talking about $270 billion in debt – that is what Greece owes the European Union. The new plan as of Tuesday, which would swap old debt for new bonds.

Still this is complicated but Greece and the EU did see a relief rally. This from Fortune – “Greece’s stock and bond markets reacted joyously to the news, with the benchmark stock index rising 7.2% and the risk premiums on Greek government and bank debt tumbling. The yield on the government’s five-year bond fell by over two percentage points from over 14% to 12.12% by lunchtime in Athens.”

There are a few other factors which cap gold strength on the short term – the Chinese New Year has closed exchanges and the Dollar Index has been strong these past 5 days moving from under 94.00 to over 95.00.

Solid performance in US stocks also takes speculative money away from gold.

But all of this is secondary to what Fed Chair Janet Yellen said about interest rates and the economy in general. The possibility of an interest rate hike is the next big hurdle for the price of gold so this testimony is closely followed for any hint at a new Fed direction.

I listened to her comments and the Fed’s direction seems clear – no rate hike for now – her term “patience” means for the next couple of meetings and finally the Fed’s forward guidance will be changed before a rate hike. So transparency is obvious and I think her concern over Europe is apparent. For some reason she kept waving around the Federal Reserves audited statement so the government wants the public to know their books are straight.

Her opinions about US interest rates play big here for everyone especially gold traders. She said that policy will most likely stay the same for at least a few more meetings (the Fed meets eight times a year). That would seem to delay any rate hike for another 6 months. She further said why put pressure on industries that would suffer with higher rates when inflation remains below the 2% target. These are dovish comments but they created little change in the gold market.

In the longer 30 day term the price of gold is technically weak moving from around $1300.00 to around $1200.00 so the bears are in charge. But the $1200.00 mark shows solid support going back to 2010 with a number of recent bounces off that support line going back to early 2013.

We believe this market will remain indecisive on the shorter term and gold will need something new on its plate to move the price needle.

Silver closed down $0.07 at $16.18. We are once again entering a sweet spot for physical silver buyers so I would expect sales of silver bullion products like bars, US Silver Eagle Monster Boxes and $1000 face 90% silver bags to increase.

Platinum closed unchanged today at $1166.00 and palladium closed up $4.00 at $790.00. The price of platinum remains about $30.00 under the price of gold so expect some action within the platinum group metals. Supply of platinum bullion products among larger dealers remains thin but hopefully world mint production will help the shortage.

This from Samuel William (GoldCorp) – Falling supply will support gold price, Goldcorp CEO says – “Supply constraints will hold gold steady in the short term and support longer-term price rises, Goldcorp CEO Chuck Jeannes said.

Yellow metal discoveries have been declining since a peak in 1995, despite higher exploration spending over the past decade, Jeannes told the BMO Capital Markets 24th Global Metals & Mining Conference in Hollywood, Florida.

Mine development is also taking much longer due to issues such as government restrictions, disputes with indigenous communities, political instability and project economics, with those that do get built taking an average of 20 years to begin production, the CEO said.

"When you combine that information and look at what's going on in mine supply, we expect a peak in gold production in 2015," Jeannes said.

"In fact, if you look at the guidance releases from mining companies around the world so far in 2015 you might actually get to the end of the year and say 2014 was the peak gold supply. The message is simple. Gold supply will be tightening going forward."

Demand – While global demand for gold has dropped worldwide, central bank buying has remained stable and this is likely to continue as the banks diversify away from the US dollar as their primary reserve currency, the CEO added.

Lower investment demand has been largely offset by increases in physical gold buying, particularly in China, which Jeannes said previously would support steady price rises. "There are lots of bullish and bearish factors which I think will combine for a fairly stable price in the near term and we do see steadily improving prices over the medium to long term," Jeannes told the event.”

So some questions regarding the price of crude oil and the price of gold. The relationship between the two is a confused one but one none the less that everyone watches carefully. Like all “cause and effect” scenarios – take this one with a grain of salt.

Let’s say the price of oil moves lower – does this push the price of gold one way or the other. There are plenty of writers who claim that lower oil means inflation price pressure is less. Less inflation might prompt more gold sellers. But at the same time lower oil might also push stock prices lower – creating some demand in the gold market.

What happens if the price of oil moves higher? This might prompt some to believe inflation numbers are going to increase and so the price of gold may move higher.

Confusing isn’t it? And history is not much of a guide – consider the oil embargo in the 1970’s. Many claimed the higher oil created inflation rates which saw 16% and for a short time gold was king. But as the Federal Reserve pushed interest rates to an unheard of 18% it crushed the gold market.

So what to do as the price of oil fluctuates? Be concerned if the price of crude oil is not stable but leave your options open. Unstable oil is a menace to the world and especially to the Middle East. Today the price of oil has stabilized between $45.00 and $55.00 a barrel. Stable oil is good for gold. But this relatively low price is bad for us because at this price domestic oil development losses steam.

I usually avoid posts like this one – but this is interesting not because of personal gain but because it would be nice if a new technology and gold could help the human condition . Gold-Plated Nano-particles Seek and Destroy Cancer Cells – In a recently published study, researchers from Cornell University detail how they developed gold-plated nano-particles that are able to find and destroy cancer cells.

Comparable to nano-scale Navy Seals, Cornell scientists have merged tiny gold and iron oxide particles to work as a team, then added antibody guides to steer the team through the bloodstream toward colorectal cancer cells. And in a nanosecond, the alloyed allies then kill the bad guys – cancer cells – with absorbed infrared heat.

This scenario is not science fiction – welcome to a medical reality. “It’s a simple concept. It’s colloidal chemistry. By themselves, gold and iron-oxide alloys are benign and inert, and the infrared light is low-power heating,” said Carl Batt, Cornell’s Liberty Hyde Bailey Professor of Food Science and the senior author on the paper. “But put these inert alloys together, attach an antibody to guide it to the right target, zap it with infrared light and the cancer cells die. The cells only need to be heated up a few degrees to die.”

Batt and his colleagues – Dickson K. Kirui, Ph.D. ’11, a postdoctoral fellow at Houston Methodist Research Institute and the paper’s first author; Ildar Khalidov, radiology, Weill Cornell Medical College; and Yi Wang, biomedical engineering, Cornell.

For cancer therapy, current hyperthermic techniques – applying heat to the whole body – heat up cancer cells and healthy tissue, alike. Thus, healthy tissue tends to get damaged. This study shows that by using gold nano-particles, which amplify the low energy heat source efficiently, cancer cells can be targeted better and heat damage to healthy tissues can be mitigated. By adding the magnetic iron oxide particles to the gold, doctors watching MRI and CT scanners can follow along the trail of this nano-sized crew to its target.

When a near-infrared laser is used, the light penetrates deep into the tissue, heating the nano-particle to about 120 degrees Fahrenheit – an ample temperature to kill many targeted cancer cells. This results in a threefold increase in killing cancer cells and a substantial tumor reduction within 30 days, according to Kirui. “It’s not a complete reduction in the tumor, but doctors can employ other aggressive strategies with success. It also reduces the dosage of highly toxic chemicals and radiation – leading to a better quality of life,” he explained. The study was funded in part by the Ludwig Institute for Cancer Research, and Kirui was supported by a Sloan Foundation Graduate Fellowship.

The walk-in cash trade was about average but the national phones picked up greatly. Not many sellers out there today so the public is still interested as long as the Federal Reserve does not raise interest rates. There is also an important return of the Asian and Indian physical buying across our counter. This is obvious because of the jump in the sales of our PAMP gold bars – they have been absent since November.

The GoldDealer.com Unscientific Activity Scale is a “ 5” for Tuesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 3) (last Thursday – 4) (last Friday – 3) (Monday – 5). 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 busy and see a low number – or be 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. If the numbers are generally increasing – it would indicate things are busier – decreasing numbers over a longer period would indicate volume is moving lower.

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