Commentary for Wed, Sept 3, 2014 (www.golddealer.com) – Gold closed up $5.20 at $1268.90 in what looks like a short-covering bounce – but there were a few significant buys at these lower levels across the counter – so new recent lows have attracted attention. Not yesterday when the significant technical damage was done but today as the paper traders covered their action.
So what about that $22.10 loss yesterday? It was surprising but consider that we are still in the “summer markets” meaning volume numbers while not necessarily thin can be pushed by aggressive traders. And because physical buyers watch prices carefully – some everyday – they can become hyper-sensitive about moves one way or the other. Take a breath and look at the bigger picture – gold really has been stable this year which is something when you consider the poor publicity we have seen as the US economy improves.
You might even want to make the case that gold is base-building if you look at the big picture like the Aden Sisters have recently pointed out. And the dubious cease fire in Ukraine – well Putin can have what he wants and there will be little opposition so look for continued trouble.
I will concede that geopolitical events like Russian/Ukraine and Gaza/Israel have not created what used to be good reasons for gold to either firm or move higher – but things change fast in these areas and gold bullion is always a last resort “store of money” if the politicians blow-up.
Silver closed up $0.04 at $19.11 – still very quiet in the physical world of silver bullion although there has been some pop in the number of smaller sized 10 oz bars being sold.
Platinum closed up $2.00 at $1412.00 and palladium was down $7.00 at $875.00. Today we saw some rather large buys in platinum bullion – the public jumped in with both feet. This is not a general trend but a few big players looking for entry points in a market they already own.
SINGAPORE, Sept 3 (Reuters) – Gold struggled on Wednesday to recover from sharp overnight losses and traded near its lowest level in two-and-a-half months on a stronger dollar and robust U.S. economic data that curbed the metal’s safe-haven appeal.
The dollar hovered around 14-month highs against a basket of major currencies, underpinned by upbeat U.S. manufacturing data and a selloff in the yen and sterling. A stronger greenbackhurts dollar-denominated gold as it makes the metal more expensive for holders of other currencies.
Spot gold ticked up 0.1 percent to $1,267.14 an ounce by 0251 GMT, not far from $1,262.42 hit in the previous session – its lowest since mid-June. Gold fell 1.7 percent on Tuesday, its biggest one-day drop since July 14.
“The technical picture for gold is pretty weak right now. That and the stronger dollar provide more downside potential for gold,” said one precious metals trader based in Singapore.
“Key technical supports are at $1,265 and $1,230. The uncertainty could increase as we head towards the European Central Bank meeting and U.S. jobs data later this week,” the trader added.
Markets are awaiting the ECB meeting on Thursday as they seek clarity on the bank’s response to a stalled recovery, disappearing inflation and the sluggish pace of reform in the euro zone.
Some investors expect the ECB to unveil fresh stimulus, after French President Francois Hollande and ECB President Mario Draghi agreed on Monday that deflation and weak growth were threatening the European Union’s economy.
U.S. data on non-farm payrolls and unemployment rate, due on Friday, were also eyed to gauge the strength of the world’s biggest economy and its impact on the Federal Reserve’s monetary policy.
Geopolitical tensions in Ukraine and the Middle East failed to support gold as the stronger dollar offset any safe-haven bids.
SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund and a measure of investor sentiment, said its holdings fell 1.8 tonnes to 793.20 tonnes on Tuesday.
In news from the physical markets, Indian gold imports and premiums are likely to surge during the rest of the year as buying picks up for the wedding and festival season, the head of the country’s biggest gold refiner said.
Nouriel Roubini is chairman of Roubini Global Economics and a professor at NYU’s Stern School of Business – Draghinomics – Abenomics, European-style
ECB president Mario Draghi can follow a similar economic route to Shinzo Abe’s experiment in Japan. It’s a risky path worth taking
Mario Draghi may follow Japan’s ‘Abenomics’ principles – a three-pronged plan to ward off deflation and stagnation in the eurozone. Photograph: Michael Probst/AP
Two years ago, Shinzo Abe’s election as Japan’s prime minister led to the advent of “Abenomics”, a three-part plan to rescue the economy from a treadmill of stagnation and deflation. Abenomics’ three components – or “arrows” – comprise massive monetary stimulus in the form of quantitative and qualitative easing (QQE), including more credit for the private sector; a short-term fiscal stimulus, followed by consolidation to reduce deficits and make public debt sustainable; and structural reforms to strengthen the supply side and potential growth.
It now appears – based on European Central Bank president Mario Draghi’s recent Jackson Hole speech – that the ECB has a similar plan in store for the eurozone. The first element of “Draghinomics” is an acceleration of the structural reforms needed to boost the eurozone’s potential output growth. Progress on such vital reforms has been disappointing, with more effort made in some countries (Spain and Ireland, for example) and less in others (Italy and France, to cite just two).
But Draghi now recognises that the eurozone’s slow, uneven, and anaemic recovery reflects not only structural problems, but also cyclical factors that depend more on aggregate demand than on aggregate supply constraints. Thus, measures to increase demand are also necessary.
Here, then, is Draghinomics’ second arrow: to reduce the drag on growth from fiscal consolidation while maintaining lower deficits and greater debt sustainability. There is some flexibility in how fast the fiscal target can be achieved, especially now that a lot of front-loaded austerity has occurred and markets are less nervous about the sustainability of public debt. Moreover, while the eurozone periphery may need more consolidation, parts of the core – say, Germany – could pursue a temporary fiscal expansion (lower taxes and more public investment) to stimulate domestic demand and growth. And a eurozone-wide infrastructure-investment programme could boost demand while reducing supply-side bottlenecks.
The third element of Draghinomics – similar to the QQE of Abenomics – will be quantitative and credit easing in the form of purchases of public bonds and measures to boost private-sector credit growth. Credit easing will start soon with targeted long-term refinancing operations (which provide subsidized liquidity to eurozone banks in exchange for faster growth in lending to the private sector). When regulatory constraints are overcome, the ECB will also begin purchasing private assets (essentially securitised bundles of banks’ new loans).
Now Draghi has signalled that, with the eurozone one or two shocks away from deflation, the inflation outlook may soon justify quantitative easing (QE) like that conducted by the US Federal Reserve, the Bank of Japan, and the Bank of England: outright large-scale purchases of eurozone members’ sovereign bonds. Indeed, it is likely that QE will begin by early 2015.
Quantitative and credit easing could affect the outlook for eurozone inflation and growth through several transmission channels. Shorter- and longer-term bond yields in core and periphery countries – and spreads in the periphery – may decline further, lowering the cost of capital for the public and private sectors. The value of the euro may fall, boosting competitiveness and net exports. Eurozone stock markets could rise, leading to positive wealth effects. Indeed, as the likelihood of QE has increased over this year, asset prices have already moved upward, as predicted.
These changes in asset prices – together with measures that increase private-sector credit growth – can boost aggregate demand and increase inflation expectations. One should also not discount the effect on “animal spirits” – consumer, business, and investor confidence – that a credible commitment by the ECB to deal with slow growth and low inflation may trigger.
Some more hawkish ECB officials worry that QE will lead to moral hazard by weakening governments’ commitment to austerity and structural reforms. But in a situation of near-deflation and near-recession, the ECB should do whatever is necessary, regardless of these risks.
Moreover, QE may actually reduce moral hazard. If QE and looser short-term fiscal policies boost demand, growth, and employment, governments may be more likely to implement politically painful structural reforms and long-term fiscal consolidation. Indeed, the social and political backlash against austerity and reform is stronger when there is no income or job growth.
Draghi correctly points out that QE would be ineffective unless governments implement faster supply side structural reforms and the right balance of short-term fiscal flexibility and medium-term austerity. In Japan, though QQE and short-term fiscal stimulus boosted growth and inflation in the short run, slow progress on the third arrow of structural reforms, along with the effects of the current fiscal consolidation, are now taking a toll on growth.
As in Japan, all three arrows of Draghinomics must be launched to ensure that the eurozone gradually returns to competitiveness, growth, job creation, and medium-term debt sustainability in the private and public sectors. By the end of this year, it is to be hoped, the ECB will start to do its part by implementing quantitative and credit easing. © Project Syndicate, 2014
Expect the European quantitative easing plan to first copy the US game book and then take its place relative to the pricing of gold. Just how this will take place is difficult to say and will take time but one thing is sure – their QE dialogue will push and pull the price of gold even on the short-term. This week the EU will meet and talk about fiscal policy – even if they ignore specific QE plans short term but indicate they will do everything possible to help their stalled economic model the gold market will move higher.
The walk-in cash business today was hot with several very large gold bullion deals. The phones were “on and off” with little in the way of selling.
The GoldDealer.com Unscientific Activity Scale is a “3” for Wed. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 4) (last Friday – 2) (Monday – Closed) (Tuesday – 2). 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).
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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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