Commentary for Thurs, Sept 4, 2014 (www.golddealer.com) – Gold closed down $3.80 today at $1265.10 which is not bad considering the strength of the dollar which rallied more than 1% as the European Central Bank made money lending a little easier by lowering their interest rate.
They also committed to an asset based security purchase program as the euro sank below 1.30.
So we have another example of a central bank stimulating their economy with cheap money. This in turn hurts savers but allows economic tinkering which may help in the short-term but history has shown that in the long term it creates fiat money and ultimately – inflation.
So the goal especially in Europe is to pay back the money borrowed with cheaper euros. All central banks employ this tactic and it seems they have escaped the reaper for now at least.
Technically gold remains weak trading below its 50 Day Moving Average ($1302.00) its 100 Day Moving Average ($1293.00) and its important 200 Day Moving Average ($1285.00).
Brinks delivered the 2015 1 oz Lunar Goat today. This is the usual excellent work done by the Perth Mint – live pricing is now on the site and these will move fast with only 30,000 pieces available worldwide. Perth has developed an interesting niche in the bullion gold market – a collectable – pure gold coin – with changing designs and only modest premiums.
Silver closed down $0.04 at $19.06.
I have always said that the physical market – especially in silver bullion has a secret life. Real silver bullion buyers march to a different drummer and so even when silver commentary is depressed I would step back and take a deep breath. Many real buyers believe the actual price of silver in your hand should be worth a multiple of what we see today.
This from William Gibbs (Coin World) – United States Mint sells more than 2 million silver American Eagles in August 2014 – sales to date total 28,111,000 coins. “The United States Mint sold 2,007,500 ounces of American Eagle 1-ounce bullion coins in August, a slight increase from July’s sales.
The Mint sold 1,975,000 coins to authorized purchases in July. Sales in July were the lowest for a single month for the year, with August sales being the second lowest of the year.
Through the end of August, the Mint has sold 28,111,000 of the 1-ounce silver bullion coins. That number is well below the pace for the same period in 2013; by the end of August 2013, the Mint had sold 33,075,000 of the 1-ounce bullion coins during the calendar year.
Sales in 2013 of American Eagle silver bullion coins set a record of 42,675,000 ounces.
The 2013 and 2014 sales figures should not be confused with mintage figures. It is possible that some 2012 coins were delivered to fill early 2013 orders, and some 2013 coins used to fill early 2014 sales.”
My point being that even with subdued physical action across our counter these beautiful silver bullion coins are going somewhere – and our buy-back of Monster Boxes is small relative to sales.
Platinum closed down $4.00 at $1408.00 and palladium was up $15.00 at $890.00.
I was surprised the European Union decision to squeeze interest rates once again did little for the price of gold on the short-term. Trading overnight in Hong Kong and London was uninspired holding the line at a few dollars one way or the other. When the EU interest news was released in early domestic gold trading the market moved higher by about $5.00 but the news was quickly dissipated and gold once again moved back to the $1270.00 level.
According to CBS News – ADP survey: Private employers added 204K jobs in August – WASHINGTON – “U.S. businesses added jobs at a healthy pace in August, according to a private survey, the fifth straight month of solid gains.
Payroll processer ADP says private employers added 204,000 jobs last month, down from 212,000 in July, which was revised slightly lower. Job gains above 200,000 are usually enough to lower the unemployment rate.
“August marks the fifth straight month of employment gains above 200,000, continuing an encouraging trend for the U.S. labor market,” said ADP CEO and president Carlos Rodriguez in a statement.
The figures suggest that the government’s jobs report, to be released Friday, will also show a solid increase. But the ADP numbers cover only private businesses and sometimes diverge from the government’s more comprehensive report.
Economists surveyed by FactSet forecast that the government’s report will show that 220,000 jobs were added in August, while the unemployment rate slipped to 6.1 percent.”
The continued steady US jobs creation points to an improving bottom line for the economy. This is another factor which caps higher gold prices on the short-term.
Now consider the numbers for new unemployment benefits – This from Reuters – The number of Americans filing new claims for unemployment benefits rose a bit more than expected last week, but remained at levels consistent with tightening labor market conditions.
Initial claims for state unemployment benefits increased 4,000 to a seasonally adjusted 302,000 for the week ended Aug. 30, the Labor Department said on Thursday. Claims for the prior week were unrevised.
Economists polled by Reuters had forecast claims climbing to 300,000 last week. A Labor Department analyst said there were no special factors influencing the state level data.
The four-week average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, climbed 3,000 to 302,750.
Still, both claims and the four-week moving average continued to point to a strengthening jobs market. The claims report has no bearing on August’s employment report as it falls outside the survey period. The government is expected to report on Friday that nonfarm payrolls increased by 225,000 last month after rising by 209,000 in July, according to a Reuters survey.
That would be the seventh straight month that job gains have exceeded 200,000, a stretch last seen in 1997. The unemployment rate is expected to have declined one-tenth of a percentage point to 6.1 percent. The jobless claims report showed the number of people still receiving benefits after an initial week of aid fell 640,000 to 2.46 million in the week ended Aug. 23. That was the lowest level since June 2007.
Productivity dips, and so do labor costs – A career counselor reviews a document with information about finding jobs at the Western Addition Neighborhood Access Point in San Francisco. A career counselor reviews a document with information about finding jobs at the Western Addition Neighborhood Access Point in San Francisco.
A separate report showed U.S. labor costs were far more weaker than previously thought in the second quarter, a government report showed on Thursday, which could give the Federal Reserve ammunition to maintain its accommodative monetary policy stance for a while.
The Labor Department said unit labor costs, the price of labor for any given unit of production, fell at a 0.1 percent annual rate instead of the 0.6 percent increase reported last month. Unit labor costs had increased at a rate of 11.6 percent in the first quarter.
Compared to the second quarter of 2013, they rose 1.7 percent.
The Fed is keeping a close eye on wage growth as it ponders when to raise benchmark interest rates, which it has kept near zero since December 2008. Investors do not expect a rate increase until around the middle of next year. The Labor Department also revised its initial estimate for productivity, to show it increasing at a 2.3 percent annual rate in the second quarter rather than the 2.5 percent pace reported last month.”
So things continue to improve but marginally – the above may provide a clue as to why we have not seen much inflation movement. Normally a tightening labor market might portend higher wages and higher inflation which would support gold prices. But at the same time the government’s massive QE program has distorted the normal model so as the above points out labor costs might be moving in the wrong direction.
At any rate gold on the shorter term is in technical trouble which can be seen on the 30 day gold chart. We have moved steadily downward from the plus $1300.00 level to something between $1260.00 and $1270.00 – not really that bad but then again not really that good so gold looks weaker and shaky in the bargain. My bet is that professional paper traders are looking to further test the downside but are not fully convinced that the “short” will work for long even with negative publicity.
This from CNBC’s Matthew J. Belvedere – Why Goldman’s gold man recommends shorting gold – “The Ukraine-Russia crisis and economic weakness in Europe and Japan have been supporting gold somewhat, but prices are being pressured by Federal Reserve policy, said Jeffrey Currie, head of commodities research at Goldman Sachs. That’s why he sees the precious metal falling 17 percent from current levels by year end.
“Our target at the end of this year is $1,050, really driven by the view that we think that the Fed will ultimately be the dominate force here and put more downward pressure [on prices],” Currie told CNBC’s “Squawk Box” on Thursday. “Gold is a hedge against a debasement in the U.S. dollar.” He said he’d recommend shorting gold.
Gold traded around $1,270 an ounce Thursday morning. It’s up nearly 4 percent this year, with a 2014 high of $1,384 in mid-March. Gold was down nearly 25 percent over the past 12 months and is off 33 percent from its all-time high of $1,923 in September 2011.
Not everyone is so down on bullion. “I think we hold around $1,250, and I think we’re going to see some bargain-hunting,” RBC precious metals analyst George Gero told CNBC.”
I think Goldman’s view is still in the minority and shorting gold at the lower end of its current trading range does not make much sense. The physical demand alone will support prices and there are many other variables which could work in gold’s favor. We have had several years of bad news for gold and many now believe gold represents a value play given the amount of currency floating around and the promise of even more fiat paper in the coming years.
Because Monday was a holiday we are a day behind in these physical numbers – so here is our usual Wednesday look at Exchange Traded Funds today:
Gold Exchange Traded Funds: Total as of 8-27-14 was 55,288,445. That number this week (09-03-14) was 55,013,852 ounces so over the last week we dropped 274,593 ounces of gold.
It might also be interesting to note that in 2013 the record high for all gold ETF’s was 85,112,855 ounces. In 2014 the record low was 54,773,273 ounces.
All Silver Exchange Traded Funds: Total as of 8-27-14 was 631,459,523. That number this week (09-03-14) was 634,556,008 ounces so over the last week we gained 3,096,485 ounces of silver.
All Platinum Exchange Traded Funds: Total as of 8-27-14 was 2,841,672 ounces. That number this week (09-03-14) was 2,762,730 ounces so over the last week we dropped 78,942 ounces of platinum.
All Palladium Exchange Traded Funds: Total as of 8-27-14 was 2,957,712 ounces. That number this week (09-03-14) was 2,951,888 ounces so over the last week we dropped 5,824 ounces of palladium.
The walk-in cash business today was again busy – with plenty of new cash action. This is the “physical effect” meaning that as the paper market moves lower – those on the sidelines waiting for better prices begin to get interested. The phones also picked up today and the order size is moving higher – not whale size but we are seeing a number of 5 figure orders.
The GoldDealer.com Unscientific Activity Scale is a “5” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Friday – 2) (Monday – Closed) (Tuesday – 2) (Wednesday – 3). 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.
Like us on Facebook and follow us on Twitter @CNI_golddealer.
Thanks for reading from your friends at GoldDealer.com and enjoy your evening.
Disclaimer – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisers. The precious metals and rare coin market is random and highly volatile so it may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.