Commentary for Wed, Feb 25, 2015 ( www.golddealer.com) – Gold moved up $4.10 on the Comex today at $1201.00 after rallying as high as $1207.00 late yesterday afternoon.
It was easy to see a bounce in the price of gold after Yellen’s testimony on the hill. For lack of a better reason I think this bounce was a relief rally happening in reaction to the Fed Chair’s dovish comments on interest rates. The gain was modest and was given back today as gold traders are back to contemplating when gold will face its next big test.
Still we are holding the important $1200.00 range – so the world markets provide support. And eventually the damage caused by the long term zero-rate cost of money will become apparent.
But will this damage be significant? Look at it this way – the fallout might not be all that bad. When you average in the large increase in fiat money into an already bloated world currency pool the debtor might be in better shape than you think. Someone just told me France just finished paying off some debt left from the Napoleonic war! I don’t know if that is true but the idea of big debt being paid off over an even bigger span of time is not new.
The US basically bankrolled Europe after World War II using the Marshall plan. Was all the money paid back? Hardly but the humanitarian effort paid big dividends. As long as the system does not crack and fall apart the inflation idea when dealt with in small pieces seems to work fairly well.
Of course it robs the thrifty saver but that old work ethic is a cliché – fallen in the battle of today’s credit card world. I’m a victim of the fake credit world just as much as anyone else – I use all the systems we have learned to trust over the decades. The difference between me and the next fellow however is that I don’t want everything I own in this seemingly perfect system which supplies everything to everyone and delays the payback indefinitely. That is the primary reason gold and silver bullion are appealing – there is no person or bank holding the other end of the trade. Bullion proves complete privacy in a see through world and it provides indisputable shelter just in case this utopia blows up.
The Chinese are back from their new year and buying gold once again – this should settle the nervous nellies of the market and India could reduce or eliminate their 10% tariff on gold imports as early as Saturday.
Silver closed up $0.24 at $16.42 in quiet trading. I think the range between $16.00 and $17.00 has become the new normal for the real silver bullion trade. The closer we get to the lower end of the range the more excited the trade – the higher end, well the phones stop ringing.
Platinum closed up $4.00 at $1170.00 and palladium closed up $18.00 at $808.00. Platinum is near 5 1/2 year lows with some supply improvement in the physical market. Above ground stockpiles have declined by 48% over the past few years so we are using more platinum than we are producing. Still platinum bullion remains a secondary US market even though it is much rarer than gold.
This is our usual ETF Wednesday information – Gold Exchange Traded Funds: Total as of 2-18-15 was 53,915,389. That number this week (2-25-15) was 53,923,185 ounces so over the last 2 weeks we gained 7,796 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 53,923,185 and the record low for 2015 is 51,057,082.
All Silver Exchange Traded Funds: Total as of 2-18-15 was 617,954,299. That number this week (2-25-15) was 623,239,065 ounces so over the last 2 weeks we gained 5,284,766 ounces of silver.
All Platinum Exchange Traded Funds: Total as of 2-18-15 was 2,565,794 ounces. That number this week (2-25-15) was 2,560,817 ounces so over the last 2 weeks we dropped 4,977 ounces of platinum.
All Palladium Exchange Traded Funds: Total as of 2-18-15 was 2,989,402 ounces. That number this week (2-25-15) was 2,983,626 ounces so over the last 2 weeks we dropped 5,776 ounces of palladium.
Everyone wonders about how much gold is smuggled into India these days and how this hat trick is accomplished on a large scale. This from Reuters – India seizes record haul of smuggled gold outside airport – “India is the world’s top buyer of gold, and the high duty has made illegal shipments profitable. The World Gold Council estimates that 175 tonnes of gold were smuggled into the country last year.
“Smuggling is happening because of high customs duty on gold,” said Prithviraj Kothari, executive director of the India Bullion & Jewellers’ Association, adding that smuggling may rise in 2015 if import duties remain high.
“If we want smuggling to become unattractive, the government should bring down duty to 2-4 percent.”
Five men and one woman were arrested outside the airport in the western city of Ahmedabad, police said. Of the six, three had arrived on an Emirates flight from Dubai while the others waited outside the airport, in Gujarat state. Acting on a tip-off, police caught them as they were loading bags containing gold into a car, senior police officer A.K. Sharma told Reuters.
The gold in the bags was worth more than $2.57 million, Sharma said.
The suspects told police that traders pay them up to $1,600 for one trip on top of free air tickets, food and hotel costs.”
I have always wondered about the penalty for getting caught. The smugglers are basically released with no jail time but the government keeps their gold. I wonder if India is slow to reduce the 10% tariff because, in effect it helps increase their reserves?
Every commentator I read is fixated on a deflationary European spiral. This would be damaging to the price of gold so this insight from FX Empire pointing to perhaps just the opposite is worth reading and its implications if correct would not only support gold but create an inflationary environment which will encourage new speculative money.
This from FX Empire – Inflation Holds the Key to a Lower Euro – “Greece reached a deal with the Euro group on Friday which removed a major market uncertainty, with regard to the European assets. European equities surged to fresh highs after Greece was given a 4 month retrieve. While the Greek debt issue was only postponed, it’s off the radar for now and the markets can give their full attention to Yellen who along with the rest of the Federal Reserve is scheduled to announce its monetary policy decision on Wednesday. Speculation the FOMC will keep rates low for longer also helped underpinned investor sentiment last week.
There are plenty of data releases which on balance should confirm the relatively positive outlook for Eurozone growth, with Germany and the former crisis countries outperforming. Sentiment is improving, labor markets are stabilizing and the drop in energy prices is boosting real disposable income. All these are aiding domestic demand and are supporting a broadening of the recovery that leaves upside risks to growth outlooks, especially with the ECB preparing to add further stimulus. Headline inflation rates may be negative, but the risk of a real deflationary spiral clearly is limited.
A key inflation indicator will be released on Thursday in the form of Eurozone M3 money supply growth. This already started to pick up ahead of the ECB’s QE announcement and economists are looking for an acceleration in the annual rate to 3.8% year over year from 3.6% year over year, which would lift the three months moving average to 3.4% year over year from 3.1% year over year. The stabilization is backing the view that deflation risks are limited, even if final Eurozone HCIP is expected to be confirmed at just -0.6% year over year. Preliminary German HICP scheduled for Friday is likely to lift slightly to -0.4% year over year from -0.5% year over year in January.
The Euro has been consolidating in a tight range which is encapsulated by the Bollinger bands. These technical indicators cover 2-standard deviations around the 20-day moving average. The bands have been contracting closer to one another which shows that historical volatility is contracting. As this continues to perpetuate, a break out is more likely to generate momentum when the break finally comes. With interest rates in the US climbing relative to European rates, the most likely direction is lower.”
This from Reuters – “The euro zone raised its gold holdings by 7.437 tonnes in January, data from the International Monetary Fund showed on Tuesday. Traders attributed the increase to Lithuania joining the currency bloc, while Turkish holdings declined by 14.227 tonnes.”
The walk-in cash trade was on the slow side today and so were the phones. But the Indian walk in trade (gold bars) continues to improve. This is a telling insight – these folks have an uncanny ability to buy cheaper – they never sell.
The GoldDealer.com Unscientific Activity Scale is a “ 5” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 4) (last Friday – 3) (Monday – 5) (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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