Commentary for Tuesday, Oct 28, 2014 – Gold closed up $0.10 at $1229.20 awaiting the results of the in-process meeting of the Deep Thinkers in Washington. The Federal Open Market Committee will release information concerning its quantitative easing program after the stock market closes tomorrow.
Quantitative Easing as it stands right now amounts to a $15 billion dollar a month bond buying program so the glory days of $85 billion a month are gone – so it’s not that removing the last $15 billion is any big deal fiscally – but it might be big psychologically.
Is the government really going to eliminate a program which might have saved our economic bacon since the financial collapse of 2008? I appreciate there are many who believe this rapid increase in the money supply was wrong headed but the fact remains the entire house of cards did not collapse.
There is no doubt that the elimination of this Federal largess will pressure gold but it appears we are at or close to a bottom around $1200.00 – a bottom which might be supported by real physical demand from China, India, and central banks of the world.
Like all government decisions the economic fallout is difficult to figure. Will Yellan end the program – most say yes but consider that real estate looks like it is softening (Shiller Index today) and there are plenty who believe the stock market is in for further correction. Durable goods orders today were down 1.3% and Europe looks rough – perhaps indicating a larger global slowdown.
Still Consumer Confidence announce today is at it highest level since October of 2007. So from an American perspective things are getting better.
If I had to guess a reasonable range for gold within the next few months I would say something between $1180.00 and $1250.00 makes sense.
If you want to study gold ETF holding for more clues consider this from FXEmpire – Gold ETF’s Tumble to the Lowest in 5 Years – “Gold remains flat as traders prepare for the two day Federal Reserve meeting beginning later today. Most analysts do not believe any surprises are in store but there is always the possibility. Investors are hoping that the decision and statement released just after the conclusion of the meeting on Wednesday will have some language changes taking a more hawkish stance giving clues on the timing of an interest rate increase in early 2015. Gold is trading at 1227.80 easing down a few dollars after ending the week at $1230.00.
The dollar dropped before the Federal Open Market Committee led by Chair Janet Yellan will debate when to start raising interest rates. Futures traders have pushed back their bets on the timing of rate increases, with the odds of it going up by December 2015 at 66 percent, from 85 percent by October next year as recently as last month. The Fed indicated in the September meeting that it planned to end its quantitative-easing programs this month. It has held its key interest rate at zero to 0.25 percent since 2008.
Gold prices dropped as holdings in exchange-traded products backed by the metal dropped to the lowest in more than five years. On Monday gold futures drifted lower for the fifth straight session in anticipation of an end to the US Federal Reserve’s economic stimulus program, slipping back from a six-week high reached a week ago. Most large investors and retail buyers have been selling into the rally and the latest weekly data show holdings of exchange traded funds backed by physical gold falling to the lowest in over five years.”
Silver closed up $0.07 at $17.18. I was a bit disappointed in silver sales across the counter yesterday so I checked computer numbers for US Silver Eagles and 1 oz Silver Rounds. Actually our sales in these two areas are about twice their normal rate so while the phone may not be ringing as much – the amount of dollars spent per order is moving higher.
Platinum was higher by $11.00 at $1265.00 and palladium was up $7.00 at $793.00.
This from Tom Jennemann (FastMarkets) – Finalists make final pitch for gold fix; system to go live in early 2015 – The London Bullion Market Association (LBMA) aims to select a third-party technology provider that will be tasked with developing and administering a new gold price mechanism by November, it said on Monday.
“The solution provider will then develop the daily gold price mechanism with the assistance of the LBMA. This is with a view to undertaking testing in December ahead of the solution going live early in the first quarter of 2015,” LBMA said in a release.
The twice-daily gold fix, which has been in operation since September 12, 1919, has recently come under close regulatory and media scrutiny. While there have not been any findings of wrongdoing, it’s believed that having an outside operator is a critical step in modernizing the image of the benchmark process, while also providing enhanced transparency and compliance with legislation.
In September, the London Gold Market Fixing Ltd (LGMFL) and LBMA opened up a Request for Proposal (RFP) process to companies that were interested assuming responsibility for the administration of the London Gold Fixing.
During an LBMA seminar held on Friday, broker Autilla Ltd (Sapient); the CME Group with Thomson Reuters; the Intercontinental Exchange (ICE); the London Metal Exchange (LME) and Electronic Broking Services (EBS), a wholesale electronic trading platform owned by ICAP, each presented their vision for the new pricing system.
The event was attended by LMBA members and bullion market participants such as banks, investment funds, traders, refiners, mining companies, hedge funds, trade associations and end users. Both the Bank of England and the Financial Conduct Authority attended the seminar as observers.
Each presentation was followed by a question and answer style session, which provided the opportunity for those in attendance or participating to quiz the finalists, LBMA said.
This from Neils Christensen (Kitco) – Switzerland Gold Referendum A Healthy Conversation – Ron Paul – Although it is unlikely Switzerland’s gold referendum will pass, one U.S. politician said the country is embarking on a “healthy conversation” regarding the role of its national bank.
Ron Paul, former congressman thinks Switzerland’s gold referendum is a “healthy conversation”.
Former U.S. Rep. Ron Paul, who is a strong proponent of gold-backed currencies, said in an exclusive interview with Kitco News the fact a referendum on gold reserves was triggered in Switzerland demonstrates that people around the globe are starting to question the reliability of fiat currencies.
On Nov. 30 Swiss voters will vote on three initiatives as part of the gold referendum: whether or not the Swiss National Bank should increase its gold reserves to 20%, that the central bank should stop selling its precious metals and that all its gold should be held within the country.
“People are starting to talk about gold more and they should,” he said. “(The referendum) is one more step in the direction of proving that paper money, fiat money, money created by politicians out of thin air to subsidize big government and monetize debt is going to end.”
Although recent polls showed some popularity for the “Save our Gold” initiative, which was first launched in 2013 by the Swiss People’s Party, Paul said there is a concerted effort by the Swiss government to oppose the initiative. He added that he is expecting as the Nov. 30 deadline looms closer to see stronger fear tactics from the Swiss government and the Swiss National Bank to convince people to vote against the initiative.
“When our crisis hit there was panic and people were scared to death. Even conservatives who didn’t believe in bailing out the banks were frightened into it,” he said. “But if you had a clean vote and just simply ask the question: ‘should Switzerland hold its own gold … should the central bank hold a certain amount of gold in reserves.’ I think you would get an overwhelming ‘yes.’”
However, he added that no matter what happens with the vote “it is the discussion that is the most important.”
A lot of the attention of the Swiss gold referendum has been focused on the need for the national bank to buy about 1,500 metric tons of gold to boost its gold reserves to 20% of its total foreign reserves, if it passes. Paul said just as important, the central bank will have to hold all its gold within the country. Currently, the Swiss National Bank holds 70% of its gold and 20% is held with the Bank of England and 10% is held with the Bank of Canada.
“That is a natural and normal healthy instinct and I think other countries ought to do it,” he said. “It’s sort of like holding gold for personal reasons… If I am holding gold for emergency reasons, I want to know where it is and I want access to it.”
Kitco posted this updated information – “A slim majority of Swiss citizens said they would vote yes to force the Swiss National Bank to increase and hold on to their gold reserves, according to the country’s first opinion poll.
On Tuesday, 20 Minuten, Switzerland’s biggest daily newspaper, released the results of its online survey. According to the poll, which was conducted on Oct. 15 and had more than 13,000 respondents, 45% to 39% said they would support the “Save Our Gold” initiative. However, according to media reports, the survey also showed a high number of undecided voters.”
When this news story first came up on the radar screen – some weeks ago – it was generally conceded that the initiative had little chance of passing. It was criticized as being too restrictive for the Swiss central bank and some suggested it would make the Swiss less competitive in the fast changing world of international currency.
If you are old enough to remember the 1970’s physical gold business there were many who opted to hold the paper Swiss Franc instead of dollars because of its rumored gold backing. As a curious side note in the history of the physical gold business here in America we used to offer paper Swiss Francs to those who – for a time were convinced the dollar would not survive.
The Swiss vote looks like it will be close and if – by some sort of upset were to pass – would be a big win for those who use gold bullion as an insurance policy.”
The walk-in cash trade was steady most of the day and the phones were only average. I still think the public is waiting on the FOMC results.
The GoldDealer.com Unscientific Activity Scale is a “4” for Tuesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 4) (last Thursday – 3) (last Friday – 3) (Monday – 2). 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.
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