Commentary for Thursday, Oct 2, 2014 – Gold closed down $0.40 at $1214.20 in quiet trading which is curious considering what is going on in Europe. The dollar was somewhat weaker and the euro somewhat stronger after Mario Draghi announced a kind of quantitative easing which was supposed to help the slow deflationary drag now apparent within the European Union.
The problem being that traders expected some move toward a US Federal Reserve solution but did not get enough bang for their buck or (bang for their euro as the case may be).
And the continued slide in oil prices is a further drag on the price of gold. Crude oil fell below $90.00 today – the first time in 17 months. As they say – when it rains it pours.
At any rate no one seems happy – the usual outcome when government largess is somehow modified – and in the European context more was not enough.
Gold seems to be in a short term holding pattern but this will not last long. It must either show strength at current levels or be doomed for further testing of the $1200.00 support. I feel like I’m at the Las Vegas dice tables.
To be fair professional traders feel a negative bias but I am a coin dealer and as such am allowed to opine at will – it could go either way – because the gold market could legitimately be oversold – if you are a pessimist there is no such thing.
One thing is sure – the public have not lost their heads. We have seen a number of larger gold bullion sellers these past few days but relative to what we sell to the general public this number remains small. Still more recently the general public has not jumped on these lower gold prices.
Why? Of course, everyone wants lower and then lower – if you get my drift. Any upward movement from these oversold regions will bring in fresh buyers – in the meantime expect either flat or continued weak prices for gold.
Chicago Mercantile Exchange reports for the last 5 trading days – so we are looking at the trading volume numbers for the December Gold contract: Thursday 9/25/14 (186,354) – Friday 9/26 (149,452) – Monday 9/29 (105,757) – Tuesday 9/30 (182,523) and Wednesday 10/01 (146,536).
Lots of activity here but nothing that would lead to a panic so the paper markets remain orderly.
Silver closed down $0.20 at $17.01 and I was surprised we did not see more action downstairs. Committed silver bullion buyers are still buying in the small to mid-size range but the hurried large buyer is still missing.
Remember that the physical silver market and the paper market can be very different. As paper silver slides lower – physical products sometimes get more difficult to purchase. The Canadian Mint announced allocations today on their popular Silver Maple Leaf 1 oz Monster Boxes.
Platinum slipped another $20.00 to the downside today finishing at $1270.00 and palladium was also down $15.00 at $769.00. No joy here either – PGM prices remain weak even though new car sales are solid. Rhodium’s fall was excessive down $75.00 at $1215.00. All of this should begin another cycle of trades – gold bullion for platinum, palladium or rhodium bullion.
Chuck Butler at the Daily Pfennig mentioned this morning that the 40th annual New Orleans Investment Conference 2014 will take place October 22-25. This is the first and best of the gold conferences and began in the early 1970’s when I first got into the gold business. It remains a bastion for gold believers to this day.
Mary Anne and Pam Aden will speak along with other leaders in the world of gold investment and if you happen to be available a visit will reinvigorate even those who once believed in gold and have gone over to the dark fiat currency side. Even if you can’t visit in person the conference is usually taped and the tapes are cheap and very much worth your listening time.
These speakers will not dish out the old platitudes about value of gold rising in a fiat world. They represent the core of committed gold thinkers who happen to believe gold bullion belongs in every portfolio regardless of relative price. But this type of conference goes further and is especially needed today when the American bullion buyer is discouraged with lower prices and lower positive sentiment.
But make no mistake the conference is not just a dog and pony show designed around why you should buy gold and make a fortune. It presents speakers who back up their well thought out commentary with solid reasoning. And the speakers are not a bunch of telemarketing hustlers but informed leaders in our industry so mark your calendar and let’s see what they have to say.
This from the GATA (Gold Anti-Trust Action Committee) site – Golden Rule: Why Beijing Is Buying – Alan Greenspan – “If China were to convert a relatively modest part of its $4 trillion foreign exchange reserves into gold, the country’s currency could take on unexpected strength in today’s international financial system.
It would be a gamble, of course, for China to use part of its reserves to buy enough gold bullion to displace the United States from its position as the world’s largest holder of monetary gold. (As of spring 2014, U.S. holdings amounted to $328 billion.) But the penalty for being wrong, in terms of lost interest and the cost of storage, would be modest. For the rest of the world, gold prices would certainly rise, but only during the period of accumulation. They would likely fall back once China reached its goal.
The broader issue — a return to the gold standard in any form — is nowhere on anybody’s horizon. It has few supporters in today’s virtually universal embrace of fiat currencies and floating exchange rates.
Yet gold has special properties that no other currency, with the possible exception of silver, can claim. For more than two millennia, gold has had virtually unquestioned acceptance as payment. It has never required the credit guarantee of a third party. No questions are raised when gold or direct claims to gold are offered in payment of an obligation; it was the only form of payment, for example, that exporters to Germany would accept as World War II was drawing to a close.
Today the acceptance of fiat money — currency not backed by an asset of intrinsic value — rests on the credit guarantee of sovereign nations endowed with effective taxing power, a guarantee that in crisis conditions has not always matched the universal acceptability of gold.
If the dollar or any other fiat currency were universally acceptable at all times, central banks would see no need to hold any gold. The fact that they do indicates that such currencies are not a universal substitute. Of the 30 advanced countries that report to the International Monetary Fund, only four hold no gold as part of their reserve balances. Indeed, at market prices, the gold held by the central banks of developed economies was worth $762 billion as of December 31, 2013, comprising 10.3 percent of their overall reserve balances. (The IMF held an additional $117 billion.) If, in the words of the British economist John Maynard Keynes, gold were a “barbarous relic,” central banks around the world would not have so much of an asset whose rate of return, including storage costs, is negative.
There have been several cases where policymakers have contemplated selling off gold bullion.
In 1976, for example, I participated, as chair of the Council of Economic Advisers, in a conversation in which then U.S. Treasury Secretary William Simon and then Federal Reserve Board Chair Arthur Burns met with President Gerald Ford to discuss Simon’s recommendation that the United States sell its 275 million ounces of gold and invest the proceeds in interest-earning assets.
Whereas Simon, following the economist Milton Friedman’s view at that time, argued that gold no longer served any useful monetary purpose, Burns argued that gold was the ultimate crisis backstop to the dollar. The two advocates were unable to find common ground. In the end, Ford chose to do nothing. And to this day, the U.S. gold hoard has changed little, amounting to 261 million ounces.
I confronted the issue again as Fed chair in the 1990s, following a decline in the price of gold to under $300 an ounce. One of the periodic meetings of the G-10 governors was dedicated to the issue of the European members’ desire to pare their gold holdings. But they were aware that in competing with each other to sell, they could drive the price of gold down still further. They all agreed to an allocation arrangement of who would sell how much and when. Washington abstained. The arrangement was renewed in 2014. In a statement accompanying the announcement, the European Central Bank simply stated, “Gold remains an important element of global monetary reserves.”
Beijing, meanwhile, clearly has no ideological aversion to keeping gold. From 1980 to the end of 2002, Chinese authorities held on to nearly 13 million ounces. They boosted their holdings to 19 million ounces in December 2002, and to 34 million ounces in April 2009. At the end of 2013, China was the world’s fifth-largest sovereign holder of gold, behind only the United States (261 million ounces), Germany (109 million ounces), Italy (79 million ounces), and France (78 million ounces). The IMF had 90 million ounces.
However much gold China accumulates, though, a larger issue remains unresolved: whether free, unregulated capital markets can coexist with an authoritarian state. China has progressed a long way from the early initiatives of Chinese leader Deng Xiaoping. It is approaching the unthinkable goal of matching the United States in total GDP, even if only in terms of purchasing-power parity. But going forward, the large gains of recent years are going to become ever more difficult to sustain.
It thus seems unlikely that, in the years immediately ahead, China is going to be successful in vaulting over the United States technologically, more for political than economic reasons. A culture that is politically highly conformist leaves little room for unorthodox thinking. By definition, innovation requires stepping outside the bounds of conventional wisdom, which is always difficult in a society that inhibits freedom of speech and action.
To date, Beijing has been able to maintain a viable and largely politically stable society mainly because the political restraints of a one-party state have been offset by the degree to which the state is seen to provide economic growth and material wellbeing. But in the years ahead, that is less likely to be the case, as China’s growth rates slow and its competitive advantage narrows.”
The walk-in cash business and national phones were again just average today. It may be that the public is just expecting the second shoe to fall relative to gold. But there seems to be some tension beneath the surface – at least with the customers which visit the store.
The GoldDealer.com Unscientific Activity Scale is a “6” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 5) (last Thursday – 5) (last Friday – 5) (Monday – 5) (Tuesday – 6) (Wednesday – 6). 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 very busy and see a low number – or be very 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 – perhaps a week or two. If the numbers are generally increasing – it would indicate things are busier – decreasing numbers over a longer period would indicate volume is moving lower.
Email confirmation using a PDF File when buying or selling is functional. It also includes the various forms of payment and includes bank wire instructions. And you can now see your actual invoice or purchase order on your computer screen.
When you buy or sell please check to see if we have your current email on file and that your computer will accept our email (no spam).
About shipping information – when buying or selling your rep will walk you through your current mailing information. Thanks for keeping us up to date if you have moved.
Our four flat screens downstairs with live independent pricing (BullionDesk.com) are a big hit with the cash trade. Live pricing moves all the buy/sell product prices on a real time basis. 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. When buying from us remember if you exceed $10,000 in cash (the real green kind) a Federal Form is necessary.
In addition to our freshly ground organic coffee offered visitors throughout the day we have added cold bottled water, cokes and Snapple. We have also added fresh fruit in a transparent attempt to disguise our regular junk food habits.
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Thanks for reading from your friends at GoldDealer.com and enjoy your evening.
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