Gold Rebounds on Yellen’s FOMC Comments

Gold Rebounds on Yellen’s FOMC Comments

Commentary for Wednesday, June 17, 2015 ( www.golddealer.com) – Gold closed down $4.10 on the Comex today at $1176.40 in anticipation of Fed Chair Yellen’s comments. The gold market moved higher by as much as $12.00 ($1188.00) in the after-market so her comments were seen by the trade as dovish.

Yellen did say that "downward pressure on inflation is abating". However the 2% target has yet to be achieved. This one comment was enough to push gold higher on the short term but everyone is still worried about that pesky interest rate hike.

Still she is as crafty as they make them – don’t fall for the nice grandma look this Federal Reserve Chair knows the score and won’t be baited by Europe’s push for “no increase”. Expect the long talked about push to higher ground sometime this year. And expect its ultimate effect on the price of gold to be much less than most expect.

The dollar also got back into the pricing game today. The Dollar Index closed yesterday at 94.96 and the range today was from 94.11 through 95.18 – as of this writing we are looking at 94.29 so it’s very defensive moving towards lows on the day and approaching almost a full point lower on Yellen’s commentary.

Silver closed down $0.02 at $15.94 in quiet trading but did get a lift off the close of $0.30 after Yellen assured the world that the Federal Reserve had no intention of upsetting the apple cart.

Platinum closed down $8.00 at $1072.00 and palladium was down $12.00 at $720.00. Platinum is now trading for $104.00 less than gold.

This from Reuters – Fed chief Yellen's news conference after FOMC meeting – The following are highlights of Federal Reserve Chair Janet Yellen's remarks at a press conference following the conclusion of the U.S. central bank's two-day policy meeting on Wednesday.

Yellen On How Fed Will Slim Down Balance Sheet – "This is a matter that the committee has not yet decided and I can't provide any further detail. It is obviously something we will be thinking about."

Yellen On No Plan To Follow Any Mechanical Approach – "As I have emphasized previously, we absolutely do not expect to follow any mechanical 25 basis points a meeting, 25 basis points every other meeting – no plan to follow any type of mechanical approach to raising the federal funds rate. We will evaluate incoming conditions and move in the manner that we regard as appropriate. So that's one lesson.

"Conceivably, I think with the benefit of hindsight it might have been better to raise rates more rapidly or more during the 2004 to 2006 cycle. You know, I'm not certain of that judgment, but I think there is a case to be made."

Yellen On Need For More Decisive Evidence On Economy – "While the committee views the disappointing economic performance in the first quarter as largely transitory, my colleagues and I would like to see more decisive evidence that a moderate pace of economic growth will be sustained."

Yellen On Growth Outlook – "Looking head the committee still expects a moderate pace of GDP growth with continuing job gains and lower energy prices supporting household spending. The labor market data so far this year have shown further progress towards our objective of maximum employment, although it is slower-paced than late last year."

Yellen On The Labor Market – "It seems likely that some cyclical weakness in the labor market remains. The participation rate remains below most estimates of its underlying trend. Involuntary part-time employment remains elevated and wage growth remains relatively subdued. So although progress clearly has been achieved, room for further improvement remains."

Yellen Says Economy Not Yet Ready For Rate Hike – "The committee continues to judge that the first increase in the federal funds rate will be appropriate when it has seen further improvement in the labor market and is reasonably confident that inflation will move back to its 2 percent objective over the medium-term. At our meeting that ended today, the committee concluded that these conditions have not yet been achieved."

Yellen On Policy Stance Remaining Accommodative – "Let me emphasize that the importance of the initial increase should not be overstated. The stance of monetary policy will likely remain highly accommodative for quite some time after the initial increase in the federal funds rate in order to support continued progress towards our objectives of maximum employment and 2 percent inflation."

Cramer’s comments on the price of crude oil this morning are worth exploring. Basically his position is that oil stocks are too cheap because the price of crude oil is not falling below the $60.00 a barrel range as expected.

The Saudis will do anything necessary to maintain crude oil market share, including selling the stuff cheap because their cost structure is cheap. Cramer reasons that because crude has stabilized around $60.00 demand must be there (economic numbers from China and Europe support this notion) and so oil is heading higher in price.

The implication of a “bottom” in crude oil is important relative to inflation and gold. The cost of oil has to be one of the most important component parts of inflation. Under normal conditions higher oil will eventually lead to higher inflation and higher gold prices.

The technical picture for gold remains neutral to negative even though we have closed above the now important overheard resistance level of $1200.00 at least 5 different occasions since last November.

But it’s not like the bears are having their way – trading just feels heavy, meaning there is action but the trade sees little chance gold will once again threaten the $1200.00 with any conviction because of the soon predicted Fed rate hike. So the short paper trade is content to push lower, looking for a break in that stubborn trading range between $1170.00 and $1185.00.

As I have mentioned before a good indication of this lack of buzz is the Greek crisis. It really is a crisis, both for Europe and Greece, a financial calamity spurred on by poor government policy. If this piece of financial bad luck had happened closer to 2008 it would have created panic. But now that a larger economic collapse is not likely the gold market and possible safe-haven buying is lost in transition. This situation reminds me of the famous quote by J. Paul Getty – “If you owe the bank $100 that's your problem. If you owe the bank $100 million, that's the bank's problem.”

This from ReutersThe continuing Greek debt crisis is not spurring much safe-haven demand. Prime Minister Alexis Tsipras accused Greece's creditors on Tuesday of trying to "humiliate" Greeks with more cuts as he defied a growing drumbeat of warnings that Europe was preparing for his country to leave the euro.

The unrepentant address to lawmakers after the collapse of talks with European and IMF lenders at the weekend was the clearest sign yet that the leftist leader has no intention of making a last-minute U-turn and accepting austerity cuts needed to unlock frozen aid and avoid a debt default within two weeks.

Gold is typically seen as a good bet at times of financial and economic uncertainty, but bids have failed to emerge in a robust way as expectations of a U.S. interest rate rise this year are weighing on the market.”

This from MarketWatch (Myra Saefong) – There is a shake-up in the gold market – and emerging markets like China and India are to blame – Emerging-market demand is ‘changing the nature of the bullion market,” HSBC analysts, led by James Steel, said in a note on Tuesday.

Investment demand was the primary driver of gold until recently, but “price-sensitive EM demand is an increasingly important driver of gold prices, they said.

EM buyers and sellers “largely define” the range for gold—with prices near $1,100 an ounce attracting buyers, but prices near $1,300 causing buyers to “shy away from purchases,” the HSBC analysts said. Gold futures GCQ5, -0.19% settled at $1,180.90 on Tuesday.

They also point out that emerging-market central banks have contributed to purchases and they expect official-sector buying this year to climb by 25%.

In China, gold demand has been hurt by a moderating economy, a pullback in demand for luxury goods, a reduction in official gift giving and strong domestic mine output – which all contributed to the nation’s slowing appetite for imported gold, analysts at HSBC said.

But China’s imports are “still robust by any historical measure,” with 2014’s imports marking the second best year for bullion demand in the country’s history, they said. And so far this year, imports are running well ahead of the five-year average. Consumers in important gold-consuming nations such as China, India, Indonesia, Vietnam and other emerging markets, “may have fewer tools at their disposal with which to protect savings and household wealth against rising prices or low or negative real interest rates,” the analysts said.

So gold in these markets remains broadly popular since it’s viewed as an “efficient and reliable store of value,” they said.

HSBC points out that annual per-capital consumption of gold in India and China is relatively low at one gram, but that also leaves “significant room for growth.” Looking ahead, HSBC forecast a broad price range of $1,120 to $1,305 an ounce for the rest of this year, with an average price of $1,234, which is unchanged from its previous estimate. It also left its average price forecasts at $1,275 for 2016 and $1,300 for 2017, with its five-year view at $1,325 an ounce.”

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 6-10-15 was 51,161,325. That number this week (6-17-15) was 51,029,786 ounces so over the last week we dropped 131,539 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 51,024,739.

All Silver Exchange Traded Funds: Total as of 6-10-15 was 618,258,504. That number this week (6-17-15) was 621,562,258 ounces so over the last week we gained 3,303,754 ounces of silver.

All Platinum Exchange Traded Funds: Total as of 6-10-15 was 2,569,319 ounces. That number this week (6-17-15) was 2,581,212 ounces so over the last week we gained 11,893 ounces of platinum.

All Palladium Exchange Traded Funds: Total as of 6-10-15 was 2,971,923 ounces. That number this week (6-17-15) was 2,967,262 ounces so over the last week we dropped 4,661 ounces of palladium.

I said yesterday that the process of putting gold and silver into your IRA continues to be abused by the hustlers in this trade. And the hustlers are all wearing suites so be careful how you choose a dealer for your precious metal IRA.

The weak spot in this system is product choice – some choices are designed by telemarketers to make them a fortune and the money unfortunately comes out of your retirement money. High-end graded bullion should be avoided like the plague and even if you choose a good product like Proof Gold Eagles compare prices carefully – telemarketing firms love to sell combination proof sets (1 oz, ½ oz, ¼ oz and 1/10 oz) because it is more difficult for the consumer to figure exactly what they are paying over melt.

The latest in this attempt to steal your IRA money is a new twist on the Self-Directed IRA account. All the representatives at GoldDealer.com are competent at walking you through the process of placing precious metals in your IRA – but Ed Hodson is the Zen master at some of the more intricate procedures.

And because all our people are salaried there is no profit axe to grind – they will dispense the best informational choices which provide the most for your buck. I asked Ed to look into what he was hearing from customers who were solicited and in turn asked us to check out the details.

This was Ed Hodson’s email to me – Regarding Self-Directed IRA Accounts – Over at the CNI IRA Desk we're fielding more calls about holding Gold and Silver Eagles yourself, outside of a depository, as part of the holdings in a Self-directed IRA account. It appears the telemarketers are pushing this as an option. Is it legal? Can it be done? And does it benefit the customer?

At this time, you can hold Gold and Silver Eagles yourself as part of your IRA holdings if you set up a Limited Liability Company to do so. So yes, it is legal, and can be done. But should you? That seems questionable.

I checked in with one of the IRA custodians we work with and was told that while they are occasionally asked to set up some of what I like to call "Hold-your-own IRAs," it's pretty much a nightmare for everyone concerned, and here's why. Uncle Sam takes a very dim view of these accounts, because the potential for abuse and fraud is obviously so much higher if the metals aren't stored in a depository.

Metals could be sold and not replaced, or invoiced but never actually purchased, or given out for collateral on a loan, or loaned to a friend, or "distributed" well before the age of 59 1/2…profits could be achieved, but not reported…the only way for the government to know for sure if your IRA holds what it's supposed to is to frequently audit those holdings.

They're not just going to take your word for it. It's like waving a big red flag in front of a raging bull, and on that flag someone has written "PLEASE HAVE THE IRS AUDIT ME EVERY YEAR." Not most people's idea of fun.

Ironically, it seems the telemarketers are telling their clients that having a hold-your-own IRA is more discreet, more private, less likely to result in government intervention, blah blah blah.

Actually, opening such an IRA will potentially mark you as a "person of interest," because from Uncle Sam's perspective, simply opening such an account makes you look like somebody who has something to hide. I'd recommend keeping things simple and transparent by storing metals in a depository and by working with reputable custodians and brokers.

The walk in trade was active all day but was on the smallish side and the phones were also busy in the small to mid-range – no large selling today.

The GoldDealer.com Unscientific Activity Scale is a “ 3” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 7) (last Friday – 4) (Monday – 6) (Tuesday – 4). 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.

When buying or selling you will receive an email confirmation. This includes a PDF File to confirm your invoice or purchase order and includes forms of payment and bank wire instructions. When doing business please check to see if your current email has been entered into the new system and check to see if your computer will accept our email (no spam).

Thanks for letting us know when you move or change your email.

We believe our four flat screens downstairs with live independent pricing (BullionDesk.com) are unique in the United States. The walk-in cash trade can see in an instant the current prices of all bullion products and a daily graph illustrates the range of the markets on any given day.

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. We will even wire funds into your account that same day for a small service fee ($25.00) if you are in a hurry.

In addition to our freshly ground coffee we offer complimentary cold bottled water, Cokes and Snapple. We also provide fresh fruit in a transparent attempt to disguise our regular junk food habits as we sneak down the block for the best donuts in the world (Randy’s).

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Thanks for reading – we appreciate your business and enjoy your evening.

Disclaimer – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisers. The precious metals and rare coin market is random and highly volatile so it may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.

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