Commentary for Wednesday, April 30, 2014 – Gold closed virtually unchanged today off $0.40 at $1295.60. A look at 1st quarter Gross Domestic Product was a surprise today. Expectations were for a 1.1% advance but the number came in at only up 0.1% (attributed to bad weather).
This may have created the shaky trading pattern but last year the economy did grow at 2.6%. It remains to be seen what the Fed will do but it seems unlikely it will alter its taper program. Release of inflation numbers today (up 1.4%) created zero response.
The gold trading between last night and the close of the COMEX today was edgy. The Hong Kong and London markets were generally lower but not by enough to create worry (less than $10.00) but the opening New York market jumped higher again looking at $1300.00 and just as quickly reversed testing $1285.00 finally closing at $1295.60. This should have been a typical choppy trading day with no buzz but again it looked nervous to me or if not nervous perhaps cautious.
I can’t put my finger on it but gold again looks like it is feeling around for support in a generally unfriendly new environment. Usually when this happens observers will look for support from real bullion players. The recent article out claiming that gold has lost its core investors is silly. Gold is an alternative currency and store of value which moves in and out of favor depending on people’s relative trust of government. It will always find support from core believers and while you may find a problem with any relative price that support will come as the market figures parity.
Today there continues to be confusion over what I call “fair-value” because the functioning government edict of printing money has not had to pay the piper (yet). Time is always on the side of gold and publicity (good or bad) changes with the wind. Buy and hold gold bullion and you guarantee an insurance policy again government at its worst.
Deutsche Bank Exit from London Fixing To Have Little Impact on Gold Prices (Kitco News) – News reports that Deutsche Bank is pulling out of the London gold fixing without finding a buyer for its seat adds to a trend in which the event is losing some of its prestige but probably won’t have a major impact on the broader market, analysts said. “I don’t know that it’s going to have a meaningful effect on price discovery,” said Sterling Smith, futures specialist with Citi Institutional Client Group. According to a Reuters report, Deutsche Bank will cease to be part of the process as of May 13. Deutsche Bank said early in the year that it was looking to scale back its commodities business. Each day, representatives of five banks hold two conference calls to match buy and sell orders and decide on a London fixing, which is a reference price for miners, jewelers and others in the gold industry. The process has been under scrutiny lately by market participants and regulators. The Deutsche Bank news likely will not have a long-term impact on the price of gold itself, said Bill O’Neill, one of the principals with LOGIC Advisors. “But it has moved the fix into a less prestigious state than it used to be,” O’Neill said. “The London gold fix used to be the pre-eminent daily price determinant, if you will. I don’t think that’s the case anymore.” The fixing was already losing some of its prominence even before the Deutsche Bank news, he added. “The Deutsche Bank situation shows nobody is really running in to get that involved in the fix,” he said. “It’s symbolic of the standing of the fix relative to what it used to be….I remember times when people would have their eyes on the wire to see what the fix was.” But, with the advent of more gold trading around the world, the precious metal is now more of an “international, around-the-clock market” rather than a several-hours-a-day market, O’Neill said. Smith echoed a similar sentiment. “Most of the trade is done through the international market. It’s done with a bid/offer in a live market,” he said. “The second the market reopens, the fixing number is only of historical value.”
These are the changes in the largest gold Exchange Traded Fund (GLD – SPDR Trust) since our last reported numbers: we moved from 25,468,060, gold ounces on deposit (April 23, 2014) to the current holdings of 25,468,060 gold ounces on deposit (April 30, 2014). This means the fund hasn’t changed over the last 8 days. In future newsletters we will track this number on a weekly basis which will provide a better short-term feel of which way speculators are moving in this exchange traded gold fund.
Silver closed down $0.36 at $19.12. This lower move in silver approaches yearly lows (Jan 31st @ $19.10) so bargain hunters may be interested. A slowing GDP however might be a problem as silver is important in the production of many consumer goods like cell phones, flat screens and solar panels. Fabrication demand was up 6.3% last year while supply fell 2.4%. The $1000 face 90% silver bag is drawing attention along with the popular 1 oz silver round.
These are the changes in the largest silver Exchange Traded Fund (SLV – BlackRock iShares) since our last reported numbers: we moved from 330,599,095 silver ounces on deposit (April 24, 2014) to the current holdings of 327,253,616. (April 30, 2014). This means that the fund has moved lower by 3,345,479 over the last 8 days. In future newsletters we will track this number on a weekly basis which will provide a better short-term feel of which way speculators are moving in this exchange traded silver fund.
Platinum closed down $3.00 at $1427.00 and palladium closed up $5.00 at $812.00
Even though the Activity Scale moved lower today the walk-in cash trade was more than active all day with the primary focus being silver bullion. The phones were only average.
The GoldDealer.com Activity Scale is a “3” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 6) (last Friday – 5) (Monday – 5) (Tuesday – 5). The scale (1 through 10) is a reliable way to understand our volume numbers.
Live pricing on the site moves all bullion products up or down during the day. The Bullion Products link on the home page now includes our Bid (blue) and Ask (green) prices. Premium quotes vary with product and look like this – “spot plus $15.00” or “spot plus $50.00” and bullion products list them under the live prices on their respective landing pages.
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