Commentary for Monday, June 8, 2015 – Gold closed up $5.40 on the Comex today at $1173.20.
And the dollar got more attention today after the supposed comments by President Obama.
This from MarketWatch – “After strengthening early in the global day, the dollar turned sharply lower Monday as conflicting reports emerged that U.S. President Barack Obama told a group of G-7 delegates that the strong dollar “posed a problem.”
Bloomberg initially reported the comment, citing a French official, eliciting a hasty denial from a White House spokesperson.
Looking beyond reports about Obama’s comments, some dollar weakness was expected Monday, said Naeem Aslam, chief market analyst at Avatrade, after its massive gains following Friday’s nonfarm payrolls report for May, as short-term investors booked profits from the move.”
Regardless of who said what the Dollar Index today was moving lower. The last close I have was 96.40 and the range as of this writing has been 95.56 through 96.55 and as of now we are looking at 95.62 so it’s getting weaker. This and the overnight bargain hunting by the Asian contingent is why gold has been firm today.
Still let’s not get too excited – today $5.40 move to the upside was subdued considering that in the past three weeks gold has lost $58.00 – the uptick however is not the point. We are seeing the usual physical buying at the lower end of a long established range and that is worth noting.
There are also a few interesting events which should have created some excitement in gold but did not. Friday Greece delayed the payment of 300 million euro!
This from Reuters – “The Greek government cannot consent to absurd proposals,” Tsipras told parliament. “I want to believe that this proposal was a bad moment for Europe or at the very least a bad negotiating trick and will soon be withdrawn by the masterminds themselves,” he said.
He was speaking after Athens delayed a 300 million euro payment due to the IMF on Friday, a highly unusual step that rattled financial markets and sent Greek stocks .ATF down 5 percent but that does not yet signal a formal default.
Opinion polls published on Friday show around three out of four Greeks want to remain in the euro zone, while more want their government to accept the offer from European and IMF creditors than want it to be rejected.”
And what’s really going on in Germany and the derivative business both here and in Europe? A financial blow-up in derivatives will make the 2008 real estate crash looks like kid’s stuff.
This according to Reuters – “Germany’s largest lender Deutsche Bank purged its leadership on Sunday, appointing Briton John Cryan as chief executive to replace Anshu Jain just two weeks after Jain was given more power to reorganize the bank.
Deutsche Bank has struggled to restore an image tarnished by a raft of regulatory and legal problems which include probes into alleged manipulation of benchmark interest rates, mis-selling of derivatives, tax evasion and money laundering. The German lender presented a radical management shake-up on May 21 in a last ditch attempt to restore confidence in its management, but some investors demanded more changes.”
Silver closed down $0.02 at $15.95.
Platinum closed up $9.00 at $1101.00 and palladium closed down $8.00 at $742.00. Rhodium made new yearly lows today at $1000.00. This is a market which has great potential but has not gotten much press and the combination of rarity and industrial application should be noted. It looks like there is very little downside to me in the $1000.00 trading range. A look at rhodium’s five year chart will show it has traded for as high as $3000.00 – has traded as low as $500.00 in 2003 but spiked in price a few years later moving to $10,000.00. The Baird 1 oz Rhodium Bar is the only way to go and supplies are more limited than the current price might indicate.
This from A. Ananthalakshmi ( Reuters) – Gold ticks up, but holds near 11-week low on U.S. rate outlook – SINGAPORE, June 8 “Gold ticked up on Monday after a three-day losing streak, but was still hovering near an 11-week low as a strong U.S. jobs report boosted expectations for a U.S. interest rate hike in September.
The metal had fallen to $1,162.35 on Friday, its lowest since March 19, after data showed U.S. job growth accelerated sharply in May and wages picked up. Nonfarm payrolls increased 280,000 last month, the largest gain since December.
The report, indicating signs of strong momentum in the U.S. economy, bolstered expectations the Federal Reserve will begin to raise rates in September and sent the dollar rallying to a 13-year peak against the yen.
“The technicals of the markets have deteriorated to such an extent that they will now likely drive precious prices lower, as the theme of a stronger dollar and the imminent rise in U.S. rates again dominates sentiment,” said INTL FCStone analyst Edward Meir.
Higher U.S. rates could diminish demand for non-interest-paying bullion, while a stronger dollar makes gold more expensive for holders of other currencies and reduces the metal’s safe-haven appeal.
Investor positioning in bullion continued to reflect bearish sentiment.
Further outflows were seen in SPDR Gold Trust, the world’s top gold-backed exchange-traded fund, with holdings dropping 0.17 percent to 708.70 tonnes on Friday, the lowest since mid-January.
Hedge funds and money managers cut net long positions in gold and silver during the week ended June 2, U.S. Commodity Futures Trading Commission data showed on Friday.
“Gold ETF holdings are near their 2015 lows and seem to be contributing to gold’s gradual decline since mid-May,” said MKS Group trader James Gardiner. “Higher bond yields and a stronger dollar are also continuing to put pressure on the metal.”
Benchmark 10-year U.S. Treasury yields posted their steepest weekly jump in nearly two years on Friday after the jobs report.
The next major support level for gold is around the March low of $1,142, although there are also signs of strong support in the mid-to-low 60s, he said.
In mining news, South Africa’s Association of Mineworkers and Construction Union said on Sunday it will launch a wildcat strike if its rival union and gold mining companies impose a wage deal on its members. Strikes could potentially lower production levels and lend support to prices.”
I highlighted the above “support level for gold” because we have been talking about this range for some time now ($1142.00 – $1180.00). Today’s gold pessimist claims recent headwinds (interest rate hike, lack of physical demand) will finally break down this support line and push gold lower.
Our position is a bit more optimistic based on what we see as across the counter physical demand. Any push toward to lower end of this range brings in very large cash buying from the ethic trade. And the Asian market overnight reinforced this notion. One of the big advantages to the way we have our live prices set up is that you can see what happens when the store is closed.
Sunday night around 11:00 PM is a good example – compare our Friday Comex close ($1167.80) with the Live Product Pricing in the top corner right of our home page. You will see gold up $5.40 – meaning the Asian market is trading around $1173.00. This is the Asian market demand cited by Reuters in the above article. This general support area goes back to the summer of 2013 so it is not without merit – and in my book we will never see this gold bullion again – it’s going into very strong hands.
If this area holds because of physical demand overseas you could make a decent case that the big losses in gold were over by the summer of 2013 as the market traded on both sides of $1200.00. At this point this is not a big deal but in the coming months it could be – it might entice more safe haven buying from the American public if they begin to believe a generally declining market is now stable and it’s safe to enter the water.
This according to Neils Christensen (Kitco) – Russia To Boost Gold, Foreign Reserves To $500 Billion Over Next Few Years – “The Russian central bank has been a major purchaser of gold bullion, and that trend does not appear to end any time soon.
According to media reports, Elvira Nabiullina, chairwoman of the central bank, said the plan is to increase its foreign reserves to around $500 billion in the next few years, from the current level of $357 billion.
“In optimal conditions, reserves should be enough to cover considerable capital outflows for two to three years,” she said. “The increase in reserves should be gradual and solely in a way that doesn’t contradict monetary policy goals, particularly reducing inflation to 4 percent in the medium term.”
In 2014, the central bank sold off almost a quarter of its foreign reserves in an effort to prop up the ruble, which hit record lows late in the year. The ruble was hit hard last year as a result of considerable lower oil prices and harsh global economic sanctions as result of Russia annexing the Crimean region from Ukraine.
Even as the central bank was selling parts of its reserves last year, it continued to accumulate gold bullion. However, it is unclear how much gold will be bought in order to increase the country’s total foreign reserves by about $145 billion in the coming years.
According to Bloomberg, in a press briefing after the conference, Nabiullina said that the central bank purchases will be done smoothly and over an extended period, limiting market impact.
“We’ll carry out operations depending on the situation on the currency market, and the parameters of the operations can vary,” she is quoted as saying in the Bloomberg article.
In 2014, according to the World Gold Council (WGC), the Russian central bank led the world in gold purchases, buying 173 tonnes. That trend has continued with the central bank buying 300,000 ounces of gold in April, according to a Reuters’ article, May 26.
The article noted that as of May 1, Russia’s gold reserves rose to 40.1 million troy ounces, compared to 39.8 million reported the previous month. According to the WGC, Russia’s gold reserves represent more than 13% of the nation’s total foreign reserves.”
Can’t say the walk in trade was really busy but the downstairs was active all day – mostly buyers who were surprised that Friday’s weakness in gold did not carry over into Monday. The phones were average but not impressive. Still there is steady business and people seem to be taking advantage of silver storage programs at CNT. The idea of storing larger silver bullion positions in CBOT secure storage is getting some attention although the programs have been around for a long time. They are however an ideal way for someone who wants to take a real silver bullion position and have the product stored under their name at a government OK’d facility. At any rate they are getting much more popular so for details call Ken Edwards (1-800-225-7531).
The GoldDealer.com Unscientific Activity Scale is a “ 4” for Monday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Tuesday – 5) (last Wednesday – 7) (last Thursday – 4) (last Friday – 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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