Commentary for Tuesday Sept 3, 2013 – Gold closed higher today up $15.90 at $1412.00 after seeing a sell off in thin overseas trading which pushed prices as low as $1375.00. Helping this move was the Syrian crisis and positive manufacturing gains in China. So we are once again looking at the high close of last week ($1420.00).
Silver jumped almost a dollar up $0.92 at $24.38 and the percentage action remains strong up nearly 4% versus 1% in gold although the physical follow through at these higher levels is dragging. Keep in mind however that silver bullion believers are convinced that $100.00 silver is still in the cards and so this contributes to a volatile mix of paper and physical.
Platinum was up $11.00 at $1538.00 and palladium was down $6.00 at $717.00 while South African miners turned down the latest offer insisting on raises from 60% to 150%.
Some commentators see this latest strength in gold as either safe-haven buying or bargain hunting. I don’t…this is purely the threat of a Syrian infrastructure attack by US missals. I now think that President Obama might be looking for a place to land politically and that is the reason he is putting the matter to a vote in Congress. Assad is no choir boy but I did listen to the interview with a French newspaper over the weekend and this is not the talk of a mad man releasing gas on his people. He sounds more like a person with his back to the wall against an Al-Qaeda enemy and warns that such a US air strike against Syria might release a wave of terror across the entire Middle East. To be honest I hope Congress votes down this attack initiative and looks for other ways to address this deteriorating situation. And as far as “proof” is concerned we are still operating back in the old days of “take my word for it”. At any rate if this attack proceeds look for higher gold prices and bad news for everyone involved.
Peter Hug (Kitco) is positive at least for now: Players Are Back – Tuesday September 03, “The markets rebounded overnight after Friday’s profit taking ahead of the long weekend. The desks, probably missing their chief traders, were instructed to go flat from a long book, which accounted for the sell off. Syria will remain a minor supportive factor, more so for the uncertainty of the disruptions of oil in the region should the issue grow to involve Iran or Saudi Arabia. The demand for physical gold continues strong in the Far East and debt ceiling issues will continue to drive investors into gold. A close above the $1,397 level will confirm the uptrend remains in place.” This recent post from Reuters is interesting: “India is considering a radical plan to direct commercial banks to buy gold from ordinary citizens and divert it to precious metal refiners in an attempt to curb imports and take some heat off the plunging currency. A pilot project will be launched soon, a source familiar with the Reserve Bank of India (RBI) plans told Reuters. India has the world’s third-largest current account deficit, which is approaching nearly $90 billion, driven in a large part by appetite for gold imports in the world’s biggest consumer of the metal. With 31,000 tonnes of commercially available gold in the country – worth $1.4 trillion at current prices – diverting even a fraction of that to refiners would sate domestic demand for the metal. India imported 860 tonnes of gold in 2012. “We will start a pilot project among some banks where we will allow them to buy back gold from individual households,” the source, an official familiar with the central bank’s gold policymaking, said. “This will start soon, we have discussed (it) with banks.” The RBI will ask the banks to buy back jewelry, bars and coins for rupees. Lenders will have to offer better rates than pawn shops and jewelers to lure sellers. Any talk of using the country’s gold to help meet India’s international obligations revives memories of a 1991 balance of payments crisis – when India flew 67 tonnes of gold to Europe as collateral for a loan to avoid a sovereign debt default. Earlier on Thursday, India’s Trade Minister Anand Sharma said the central bank should look into the possibility of monetizing gold holdings. It was not immediately clear whether Sharma was referring to the 557.7 tonnes of gold the RBI holds in its own reserves, or gold in private hands. He did not give more details of how the proposal would work. “I have not said there should be any mortgaging of the gold, or auction of the gold, that is incorrect. I have just said the RBI should look into … how they can benefit the people, particularly with regard to the bonds or the monetization,” Sharma said in response to a question in parliament. Earlier this week in comments reported in the national media, Sharma said “even if 500 tonnes is monetized at today’s value it takes care of your CAD”, or current account deficit. Selling gold reserves may sit badly with Indians, many of whom saw the 1991 sale as a public humiliation. The secret operation was only exposed after a vehicle carrying the first consignment of bullion broke down on its way to the airport from the central bank. “It (pledging gold) will be a desperate measure, and it will send a very wrong signal to the entire country because all the time we’ve maintained that things are under control even though things are adverse,” said Madan Sabnavis, chief economist at CARE Ratings in Mumbai. Such a sale would also dent international gold prices which took a hit earlier this year after Cyprus said it was considering selling its gold reserves to shore up its finances. India has taken multiple steps this year to curb imports of gold, its second-biggest import after oil, including raising duty three times to 10 percent. The rupee, the worst-performing emerging market currency in Asia this year, rebounded from a record low on Thursday after the RBI said it will provide dollars directly to state oil companies to shore up the currency. In comments published by The Hindu newspaper last week, David Gornall, chairman of the London Bullion Market Association, said India could raise $23 billion by swapping gold for a payable currency for a period of its choice, while remaining the long-term holder of the gold. Gold forms an essential part of a bride’s dowry in India and is considered auspicious as a gift or offering at religious festivals.”
This is just another example of why governments must eventually lose the battle in the fiat currency wars. And their plans offered for the “better good” should be limited to social betterment. There is no reasonable way the people of China or India are going to be “encouraged” to sell their gold. And the more industrialized both groups become the more gold they will buy. When the American middle class was established they made their money in the property game financed by government loans. Given the same set of circumstances both the Chinese and Indian populations will choose gold for cultural reasons. And when this happens (20 years) the usual “world/bank/consumer” balance which holds gold prices in check will be turned on its head.
I have made this case before but my reasoning is not widely accepted. So be it but I do think this metric is in place and will benefit long term holders of physical gold in a way which today might seem fanciful.
Phone and walk in trade at the CNI Building were steady but not hurried so the public is still not convinced the US will strike Syria. The CNI computers place my almost famous LA Physical Trade Business Number at a strong “6” so things are improving. Like us on Facebook and follow us on Twitter @CNI_golddealer. Thanks for reading and enjoy your evening. These markets are volatile and involve risk: Please Read Before Investing
Written by California Numismatic Investments (www.golddealer.com).