Commentary for Wednesday Oct 23, 2013 (www.golddealer.com) – Gold closed off $8.60 today at $1333.90 on mild profit taking and mixed signals between the dollar and oil. The dollar continues weak but oil surplus places pressure on gold.
Mario Draghi President of the European Central Bank explains on CNBC this morning that European recovery is still fragile and warns that EU penalties for bank bondholders will hurt confidence in economic recovery. That is how a banker encourages continued bailout money to cover past sins and follows the US lead on quantitative easing which supports gold.
Still the metals remain short-term bullish in the past four sessions leading up to Wednesday: gold advanced $60.00, silver $1.40, platinum $55.00 and palladium $40.00 so profit taking today was in the cards. Gold also closed in on its 50 day moving average today ($1342.00) before selling off and closing lower on the day.
Silver was off $0.17 at $22.58 and is now trading above its 50 day moving average ($22.51) and its 100 day moving average ($21.40). A key level for silver is $24.25 which is the high close in August and we will have to contend with profit taking along the way but anything over that and we might be off to the races.
And India is back on the silver radar screen with increased imports. Reported imports for India in 2012 were 60 million ounces (I will take the over on that one) and thru August of this year imports are 128 million ounces. So we could be looking at 200 million ounces of silver imported this year in light of restrictions placed on gold imports. About 787 million ounces of silver (not a big number) was mined last year and over half of that was used in industrial applications.
Platinum was down $11.00 at $1438.00 and palladium was down $6.00 at $746.00.
So where is gold going price wise over the next few months? I talked about my long term technical plan some time ago describing a trading range for gold between $1200.00 and $1400.00. Further I said the range would show little buzz as gold continued to unwind into the New Year supported primarily by physical demand from Asia but dealing with less economic stimulus. Actually I was also looking for a bullish double bottom pattern in November/December as gold once again touched solid support at $1200.00: but then up jumped the debt debacle, weaker economic numbers, possible hiccups in Europe and the notion that the Fed bond buying program would last through the first quarter of 2014.
This of course pushed gold above the $1300.00 and washed out my nicely forming double bottom which could have suggested the end of the bear market in gold and set the stage for higher prices in 2014. So for now we are back to range trading which was my original idea. There is nothing wrong with this plan and it does provide advantages to those accumulating physical gold and encourages those who when gold was making new highs thought they had missed an opportunity.
At this point however you must ask yourself how much do you think gold has transformed itself from a pure monetary play into a legitimate store of value? The “store of value” question is what will support and even push gold into higher ground especially if European, Asian or Middle East demand gains momentum. And forget the talk that gold is no longer a store of value: this is silly and is one of the goofy arguments always raised in a weak market.
Also keep in mind that ETF (Exchange Traded Fund) selling has slowed and with quantitative easing still up close and personal I would not want to short these markets even if I the pure technical picture is either neutral or slightly in favor of the bears. You could make a small case that November has traditionally been negative for gold but I would counter that Christmas this year might unveil new promise in the jewelry trade. This area of usage might surprise not because gold is cheap technically but because it seems cheap relative to old highs and you can’t sell out of an empty cart.
There is big money being made in stocks today and you might soon see profit taking which could easily be used to establish new gold hedge positions at these lower levels in anticipation of increased world demand in 2014.
Finally when gold was hot big buyers were common but as it trended lower and the press subsided these big players go missing for more than a year. But lately (30 days) a few big players have reappeared and some are making commitments. The frequency is not big but it has reappeared which could mean this market is once again being considered by big money. It may however be too soon to circle a number and this most recent break to the upside has delayed my developing bullish bottom so we are back to a traditional back and forth model with the bulls and bears trading places.
As you can see from our Activity Scale for Wednesday – 5 – the walk in cash traffic is increasing but the order size is on the small side. The phones were also steady but nothing to write home about: there was a flurry of new customer questions. This might be promising if anything develops.
Another consumer heads up: if you want to invest in US Silver Eagles stay away from those which have been certified by PCGS or NGC and cost more than a few bucks over spot. Telemarketers are jamming this market to the uninformed and it will only end badly – stick with weight (personal holdings or IRA) for there is nothing rare about a certified modern date silver eagle.
Our new CNI Activity Scale will take into consideration volume, open and closed orders (buying and selling), the cash trade, and the hedge book: (Thursday – 4) (Friday – 5) (Monday – 3) (Tuesday – 3) (Wednesday – 5). The scale is 1 through 10 (5 being relatively busy and this approach considers today’s business so it will be more intuitive). We believe this is a reliable way to give you an idea of what a real bullion business is doing without the sales pitch.
Phase One of our new golddealer.com website will soon be complete (Oct 28th best guess) and includes a new look along with live pricing. It will also include Live Chat, you will be able to set up your own customer account, and you will receive automatic email confirmation on buying or selling. Look for further improvements before year end which makes accounting, shipping and tracking easier (check to see if we have your email address in the new system). We now offer the choice of USPS or FedEx Ground.
Our new flat screens within the CNI Building are up and operational and the cash trade loves this idea. The feed and graphs are live and bullion products are programmed with premium spreads so your choices are easier. There is nothing like this on the West Coast and visitors enjoy complete transparency when buying or selling.
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Written by California Numismatic Investments (www.golddealer.com).