Gold Mildly Higher and Continued Quiet into the Weekend

Gold Mildly Higher and Continued Quiet into the Weekend

Commentary for Friday, May 29, 2015 ( www.golddealer.com) – Gold closed on the COMEX today up $1.30 at $1189.40 in a week of trading which had many scratching their heads. Gold did lose $15.00 on the week but most traders were perplexed that losses were not greater considering how mighty the dollar has become with trouble in Europe.

So another quiet day for gold and another quiet day on the Dollar Index – for now this relationship holds all the trump cards. The recent climb by the Dollar Index has hurt gold – this week alone we have climbed from 96.00 to almost 98.00 but on the way to the theater Wednesday a funny thing happened. The Dollar Index sold off (always good for gold) and moved lower – as of this writing we are at 96.85. Yes, flat and for now flat is good – and remember that a strong dollar is exactly what the Federal Government does not want.

So I believe they will work at making sure the dollar, at least remains capped. A higher dollar will derail our improving economy and could seriously threaten the stock market. And a serious drop in the price of stocks could be a plus for gold.

Do I think gold is heading substantially higher on the short term? No and most real gold folks do not claim this either – only the telemarketers selling junk gold coins to the unsuspecting for too much money. So my usual admonition – be careful about anyone claiming you can make a fortune in gold virtually overnight.

Still I am in the business of buying and selling physical metal and so belong to the optimistic camp which looks for recent lows ($1150.00) to hold – and for now I am happy with that outcome. Why? Because I also believe all this fiat currency will create much more mischief.

Silver closed up $0.04 at $16.69 and this number does not create the buzz we see when silver moves below $16.00 so the across the counter business was steady but not hurried.

Platinum closed down $4.00 at $1111.00 and palladium was weaker by $9.00 at $776.00. Platinum is now trading at $78.00 less than gold. There is a reasonable amount of bullion products to choose from and yet the public has not jumped on this discount. Platinum was down $37.00 on the week and is within $20.00 of yearly lows.

This from FXEmpireGold Traders Seem Bored – “Intriguingly, gold has failed to find much if any demand from safe haven buying … today despite the sharp drop in European and US equity markets,” said a technical analyst.

The US dollar rallied this week by 1.3 per cent against a basket of leading currencies, after data showed US business investment spending plans increased solidly for a second straight month in April.

The above quote was exactly my feeling on our posted commentary yesterday. There seems to be plenty of both positive and negative factors which should influence the price of gold – but curiously these are creating absolutely no buzz – either in the paper or physical markets.

Which created yesterday’s comment that the gold market is becoming a news junkie. It’s possible that this is the calm before the storm but it is also possible that gold has become an equity trade or fair-valued in the present range. The latter possibility for the gold optimist is certainly in the minority but it could nonetheless be true. If we are at or approaching a bottom – especially if the proposed interest hike fails to produce the predicted break to lower ground – or if that break occurs and is strongly opposed by physical demand.

So let’s consider the often miss-quoted and supposedly Chinese curse “May you live in interesting times”. According to expert Torrey Whitman “But what is most noteworthy about the expression is that it is not Chinese. There is no such expression, "May you live in interesting times," in Chinese. It is a non-Chinese creation, most probably American that has been around for at least 30 or 40 years. It appears in book prefaces, newspapers (frequently in the New York Times) and speeches, as an eye- or ear-catcher, although I have not found it in Bartlett's Quotations or other quotation sourcebooks. I speculate that whoever it was who first coined it attempted to give the expression mystique, and so decided to attribute it to the Chinese.”

With all the talk from the Federal Reserve lately about raising interest rates you would assume that the financial world is somewhat optimistic about the future of the financial world. After all we have been trying to slug our way out of this financial collapse since 2008. The answer to the problem since the beginning has been virtually free money to most – and when near zero rates were not enough there were ways of inducing negative interest rates. In other words governments of the world would force people to spend their money because keeping it not only did not pay any interest – there would now be a penalty.

This financial goofball recently became noticeable in Germany and raised the ire of people smarter than me because it not only did not make sense – it looks like a magic trick. Now that Janet Yellen has declared that an interest rate hike is almost a certainty before year end and further that interest rate normalization should not take more than a year or two the idea of further interest rate sleight of hand has moved to the bake burner. But I would remind many that moving away from free money may not be as easy as our government leader’s claim.

And not all the data is in Yellen’s favor – this is another reason the price of gold remains firm at the lower end of its trading range. Consider the just released Chicago PMI May 2015 – The Chicago Business Barometer fell 6.1 points to 46.2 in May from 52.3 in April The Chicago Business Barometer fell sharply back into contraction in May, reversing all of April’s gain and casting doubt on the strength of the widely expected bounce back in the US economy in the second quarter. New Orders, Production and Employment Down by More Than 10%.

Santelli this morning notes that this watched barometer of economic activity is on the wrong side of the line now for February, March and April – meaning it points to contraction in the economy – especially because according to the survey inventories are moving higher.

This from Tyler Durden (ZeroHedge) – Financial Insanity Grips the World – Rare is the person who is a realist. We collectively live in a world of pretend and extend. Every one of us wants our present civilization to continue, though for countless millions the world has already turned upside down as unemployment has soared and war and terrorism proliferate. The very structure of life in our world is threatened because madmen have undermined the financial system through the creation of debt instead of wealth. We have collectively borrowed against our children’s future until their very future is in doubt.

Dr. Paul Craig Roberts, former Assistant Secretary of the Treasury for Economic Policy and associate editor of the Wall Street Journal thinks that insanity grips the western world. I have to agree and no one who reads the news would disagree. In the “The Sane Society” prominent psychotherapist Erich Fromm suggested that Western society as a whole was lacking in sanity; that the inequities and disharmonies of the entire society were pathological, not just the mental illnesses of people therein.

The newest mirror of financial insanity are the negative interest rates. Today if you are a manager of other people’s money, like a pension fund manager, you are forced to lend out hard-earned money at a loss, to buy worthless paper, issued by governments who only pretend they will be in any position to pay back. Bloomberg writes, “Negative interest rates are an odd fish in the world of finance given that they basically wreak havoc on a central tenet of investing; that investors will be compensated in some way for, you know, investing in things.”

The Secular Investor writes about this saying, “Who is going to save money then? Not a single soul, of course. People will start to create debt en masse, because it is the better and cheaper option. The resulting investments will rise in value, moreover, when an increasing amount of people take on debt in search for returns. Things cannot get a lot crazier than this. If this is how the system ends up working, we fear that the effects will be irreversible. It is like a black hole that sucks in more and more matter – read: capital – and never lets go. This financial black hole story will also end with a sudden implosion, a flash of light and a big bang, just like in space, and those who do not own hard assets at that point in time could lose every bit of wealth they’ve ever accumulated.”

“The negative interest rates are oppressing the elderly, robbing them of their dreams. They were told to save for retirement, but now they face negative interest rates after paying a lifetime of taxes……There is so much cash around and nothing to invest in, that we see companies buying back their own stock,” writes Martin Armstrong. “In the hunt for apparently “safe assets”, investors have thrown caution to the wind, and collectively determined to pay governments for the privilege of lending to them,” writes Jeremy Warner.

Pater Tenebrarum, writing about the new war against cash, says, “As the modern day fiat money system inevitably cruises toward its final denouement, individual rights will come increasingly under attack as the world’s ruling elites and centrally directed banking cartels begin to batten down the hatches.” “There is only one conclusion that can be drawn from such an anti-cash sentiment. Your property is no longer your own. This fundamental attack on the value of money should erupt in national outrage,” writes James Hall.

Many people are worried for good reason. If US inventories, already at record high levels, and with the inventory to sales rising to great financial crisis levels, had not grown by $121.9 billion and merely remained flat, US Q1 GDP would not be 0.2%, but would be negative 2.6%.Things are not looking good for America and the rest of the world economy. Human activity in the real world is deflating (contracting) at an accelerating rate.

The scenario (worst case) that I am betting my money on is presented by Gary Christenson, who writes, “Financial or economic collapse occurs. If credit collapses and businesses aren’t paid for products and services, the distribution system could temporarily shut down. Contemplate empty grocery shelves, empty gasoline stations, electricity and water outages, empty ATM’s, and EBT cards that don’t work.” This is exactly what to expect when our present financial system burns down to the ground.

Ambrose Evans-Pritchard writes, “The slump in the annual growth rate to 0.2pc in the first quarter does not convey the full horror of it. Once you strip out a surge in inventories – often a pre-recession warning – the economy contracted sharply. Investment in business buildings and factories fell 23pc. "A whiff of panic is in the air," said the Economic Cycle Research Institute.”

Charles Hugh Smith writes, “All the "saves" have done is guarantee the financial system will burn down in a conflagration ignited by a seemingly trivial spark somewhere in the vast global system of phantom collateral.”

From an essay about how debt-addicted world could go the way of the Mayans we read, “The current state of affairs echoes Archaeologist Arthur Demarest’s observation about the Mayan civilization: “Society had evolved too many elites, all demanding exotic baubles…all needed quetzal feathers, jade, obsidian, fine chert, and animal furs. Nobility is expensive, non-productive and parasitic, siphoning away too much of society’s energy to satisfy its frivolous cravings.”

Conclusion – Brandon Smith concludes, “Self-reliance requires preparedness. There is no way around it. There is no such thing as crisis for those who are prepared. This means placing oneself in a position to provide the necessities of life so that one does not become a slave to need. Desperation often leads to moral relativism, and tyrants thrive on the moral weakness of a population. The more prepared an individual is, the more likely he is to fight back against despotism. The more prepared a community is, the less that community will feel inclined to request aid from those who might leverage such aid to oppress that community.”

Martin Armstrong concludes, “It certainly appears that we are complacent as a society and as such, we never act until it is too late. Then everything falls apart. Indeed, government interest rates have moved into negative interest rates on about 30% of Eurozone total debt. This has become an effective tax on money itself, with respect to whatever you have left in your account after paying taxes. We are heading for economic Armageddon and the day of reckoning is rapidly approaching. You better wake up before the coffin is nailed shut.”

"Corrupt and seriously deranged politicians are destroying western civilization."

“The end result of Fed policy appears to be to keep us in perpetual economic malaise, to keep us all confused. There is no solution to the crisis, merely a choice of which roads to choose, a deflationary debt collapse, or a hyperinflationary dollar collapse or World War III. Pick your poison…,” concludes Zero Hedge.

Our Patented Employee Survey – Gold's Direction Next Week?

Of course it's not really patented but we do have some fun along the way. This is what the GoldDealer.com employees think – 6 believe gold will be higher next week – 5 think gold will be lower and 2 believe it will be unchanged.

Our Patented Customer Survey – Gold's Direction Next Week?

Like the employees our customers were given three choices – up – down – unchanged. We limited the survey to a random sampling of 100 transactions – unscientific but worth considering because these people took action: 34 people thought the price of gold would increase next week – 44 believe the price of gold will decrease next week and 22 think prices will remain the same.

Precious Metal Closes & Dollar Strength – May 25 – May 29

The walk-in cash trade today was hit or miss and the phones were the same way. One interesting note is that while these markets have turned flat there has been physical action in the small to mid-range size. But over the past week two bona-fide whales showed up – and we have not seen this special kind of trade for some time – both were buyers.

The GoldDealer.com Unscientific Activity Scale is a “ 7” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – Closed) (Tuesday – 2) (Wednesday – 3) (Thursday – 3). 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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