Commentary for Wednesday, June 3, 2015 – Gold closed down $9.40 on the COMEX today at $1184.70. Interestingly the dollar was weaker – the Dollar Index closed yesterday at 95.94 and it is now trading at 95.48. Under normal trading conditions this half point move to the downside would push gold higher but no joy today.
The reason is probably trader fear – look at the numbers. Last Wednesday was a down day for gold but since then we have crept higher – not much but the numbers are steady (+ $2.50, + $1.30, + $1.10, + $5.80) – we have slowly moved higher until today. Traders closed long positions because they don’t believe even when faced with a stronger dollar – the Greece debt situation and a miss in ADP numbers. So I think the general feeling with professionals remains negative because of the improving US economy.
This from Jim Wyckoff (Kitco) – “It could be that many precious metals traders are focusing on Friday’s U.S. jobs report and its potential to show a stronger U.S. economy, which would have mitigated today’s weaker U.S. dollar index. The U.S. ADP national employment report was released this morning and came in at up 201,000 in May, which was a slight miss to the downside. The market place showed little reaction to that report. Friday morning’s U.S. jobs report from the Labor Department is expected to show the non-farm payrolls number come in at up 225,000 in May. The sharp sell-offs in the U.S. Treasury markets this week might also be spooking the gold and silver bulls. The rising Treasury yields (lower prices) are hinting that the U.S. Federal Reserve will raise interest rates sooner rather than later. The European Central Bank meeting in Frankfurt, Germany today saw no changes to Eurozone monetary policy, as expected. However, German and U.S. bond markets were pressured by ECB President Mario Draghi’s comments in his press conference after the meeting. Draghi’s remarks about the potential for rising inflation and bond market volatility rattled U.S. and European bond traders.”
And I think this lack of confidence is also with the physical buying public. They still want to stay in the game but sideways price action is always a wet towel on demand. I have complete weekly ETF information later on in the newsletter but here is the latest look at gold – The record high for Gold ETF’s in 2015 is 53,901,867 ounces and the record low for 2015 is 51,057,082 ounces. As of 5-27-15 the total was 51,451,424 ounces so it’s easy to see we are at the lower end of the range some 6 months into 2015.
Silver closed down $0.32 at $16.46. The new 1 kilo silver bar from RMC is getting some attention – it’s live and on the site at $0.80 over spot delivered – nice bars and serialized.
Platinum closed down $9.00 at $1104.00 and palladium closed down $11.00 at $757.00. Platinum is now trading at an $80.00 discount to gold.
The key to gold’s price direction has obviously been the dollar of late – and the best Dollar Index chart to watch in the shorter term is the 3 month picture. From a technical standpoint this suggests an interesting change in the general trend. Since March when the Dollar Index topped the 100.00 mark it has made 2 progressively lower tops indicating technical weakness. To me, this interruption in a generally stronger trend in the dollar since the summer of last year explains gold’s recent firmness, even as the Federal Reserve promises an interest rate hike sometime this year. As I have been saying a weaker dollar is just what the Federal Reserve needs to keep Wall Street on track and insure our still recovering economy does not disappoint.
The key then to a stable and perhaps even rising price in gold is the euro. A recovering European Union makes the euro stronger and the dollar weaker in a relative sense. This firms the price of gold and creates more short term interest in our shinny friend. Again back to the 3 month Dollar Index – this latest bounce to lower territory could easily settle back into recent lows around 92.00, once again confirming this bearish technical trend. As of this writing the Dollar Index is trading around 95.00 so this potential 3.00 point weakening could even offset the coming Federal Reserve interest rate hike.
Cramer on CNBC this morning was also talking about possible dollar weakness and he believes the Dollar Index might revisit 80.00.
So is all this a lock? Of course not but a weaker dollar – the result of a quicker than expected economic recovery in Europe – the result of the Draghi printing press and the resultant higher price of gold is a more likely outcome than the usual talk of Greece blowing up and taking the EU over the cliff. Besides if the latter calamity happens you are still better off with a little gold or silver bullion in your kick.
This from MarketWatch – The euro records largest daily rally since March 18 – “The euro finished Tuesday’s North American session up 2.2% against the dollar, its best one-day performance since March 18. The pop for the shared currency occurred as data showed eurozone inflation rising for the first time in six months, and fresh reports that Greece’s creditors are hammering out terms of a proposal aimed at ending a long-running debt standoff. Mark McCormick, global FX strategist at Crédit Agricole, said the dollar’s gains over the past two weeks, and the market’s optimism about Greece, made the buck ripe for profit-taking.”
New from the World Gold Council – The Social and Economic Impacts of Gold Mining
Total contribution of over US$171bn to the global economy.
Globally, the gold mining industry directly contributed around US$ 83.1bn to the global economy in 2013 – equivalent to the combined gross domestic product of Ghana and Tanzania. Taking indirect economic impact into account this contribution increases to US$171.6bn. Total number of jobs that result from commercial gold mining rises to around 4.2 million globally.
Globally, gold mining companies directly employed over one million people in 2013, with over three million more people employed as a result of the industry’s suppliers and support services.
In most gold producing countries, over 90% of the industry’s employees are local workers.
The report shows that gold mining has made good progress in seeking to develop local human capital and skills.
Over 60% of the countries covered in the report are low or lower-middle income with substantial socio-economic development needs.
However, the report indicates that growth in the economic contribution of gold mining often coincides with a marked improvement in income status of host nations.
70% of the value that gold mining companies distribute within an economy relates to payments to local suppliers and employees.
The majority of government revenues from gold mining are derived from sources, such as corporate and income tax rather than from money relating to permits and royalties.
Gold mining’s direct economic contribution to the global economy has increased seven-fold from 2000 to 2013.
This is greater than the rise in value of gold over the same period.
This is our usual ETF Wednesday information – these metrics are important to individual physical investors because they provide clues as to whether the physical market is enthusiastic and adding metals or is disappointed and selling metals.
All Gold Exchange Traded Funds: Total as of 5-27-15 was 51,451,424. That number this week (6-3-15) was 51,294,300 ounces so over the last week we dropped 157,124 ounces of gold.
The all-time record high for all gold ETF’s was 85,112,855 ounces in 2013. The record high for Gold ETF’s in 2015 is 53,901,867 and the record low for 2015 is 51,057,082.
All Silver Exchange Traded Funds: Total as of 5-27-15 was 612,845,023. That number this week (6-3-15) was 612,956,262 ounces so over the last week we gained 111,239 ounces of silver.
All Platinum Exchange Traded Funds: Total as of 5-27-15 was 2,575,066 ounces. That number this week (6-3-15) was 2,573,517 ounces so over the last week we dropped 1,549 ounces of platinum.
All Palladium Exchange Traded Funds: Total as of 5-27-15 was 2,982,330 ounces. That number this week (6-3-15) was 2,974,471 ounces so over the last week we dropped 7,859 ounces of palladium.
The walk-in cash trade today seemed on the quiet side but behind the scene there was some significant action. The public is selling reasonable numbers in both silver and gold bullion – this is the first significant selling we have seen in months.
The GoldDealer.com Unscientific Activity Scale is a “ 7” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 3) (last Friday – 7) (Monday – 4) (Tuesday – 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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