Commentary for Tuesday, May 20, 2014 (www.golddealer.com) – Gold closed up $0.80 at $1294.50 and if you have not fallen asleep yet this is the third day in a row gold has closed up or down less than a dollar. Some believe the market is just stuck. Others think that traders are trying to decipher Federal Reserve comments. Some are claiming a watchful eye on Europe will reveal secrets as when the European Central Bank will begin their much threatened slant toward monetary accommodation. But only I have the real answer – they all left early for the Memorial Day weekend.
Gold is certainly range-bound as the bulls and bears fight it out over who has the best story. But in the end a range-bound market decreases appetite in the physical market as investors are easily bored. And there is little new in the way of buzz which also calms things down quickly. Still the world is a dangerous place and there are enough “insurance bet” owners to keep from falling asleep.
There has been recent talk of a “coil” pricing patter in gold which might prove interesting. A pricing “coil” in gold is a technical term used to describe a trading pattern in which the highs and lows move closer together over time. In other worlds the ranging range gets closer and closer. For some reason technicians believe this pattern has a way of “storing” energy which can lead to a breakout from a usually quiet trading pattern.
It is worth thinking about especially if you are looking for a good place to enter the market. I don’t think anyone would say $1300.00 is a bargain but if you have little or would like to add to your core position the discount from recent highs is substantial. The bigger pattern is of course between $1200.00 and $1400.00 dating back to last summer. But before you bet the rent consider that the longer a trading pattern persists the more difficult it becomes to do something different.
I know this sounds goofy but the fact is once gold gets comfortable it is liable to stay in that mode for some time waiting for a fundamental change in demand. When gold broke down in 1980 it took more than 20 years to get anyone’s attention even though prices were at give-away levels.
The argument used by most believers is that the money floating round today is massive relative to the old days. But let me tell you there were plenty of stories about the dollar’s demise and banking failure in the 1970’s. In fact there were more books about everyone getting rich with gold then than we see today. So let’s not get discouraged but I think patience will become a virtue.
Silver closed up $0.04 at $19.36.
Platinum closed down $1.00 at $1468.00 and palladium was up $10.00 at $825.00. From Debbie Carlson (Kitco) – INTL FCStone: ‘Remarkable’ That PGM Prices Aren’t Higher – Strikes in South Africa against the major platinum group metals producers continue with no real end in sight, says INTL FCStone. While platinum and palladium prices moved higher on Monday, INTL FCStone says “considering how long the strike is dragging on, it is quite remarkable that prices are not pushing higher still. We attribute this to the fact that both platinum and palladium demand remains steady, but not remarkable, while more importantly, there apparently is plenty of idle inventory on hand to accommodate the buying that does exist.”
London, 20 May 2014 – Q1 2014 gold demand shows core fundamentals remain robust – The latest World Gold Council Gold Demand Trends report, which covers the period January-March 2014, shows a return to the long-term quarterly average demand trends established over the past 5 years. Following an exceptional year in 2013 gold demand in Q1 2014 was 1,074 tonnes (t), almost unchanged compared to the same period in 2013 – a clear demonstration that the fundamentals of the gold market remain robust. Global demand for jewellery, the most significant component of overall demand, totalled 571t in Q1 2014, a 3% rise on the same period last year, representing the strongest start to the year for jewellery since 2005. Most notably, there was a 10% rise in demand for jewellery in China, which became the largest global market for gold demand in 2013. Central banks continued to be strong buyers, purchasing 122t in the quarter. While this represents a fall of 6% compared to Q1 2013, it is the 13th consecutive quarter in which central banks have been net purchasers of gold and indicates their continued commitment to diversifying their assets. Overall investment demand dipped slightly, to 282t in Q1 2014, compared with 288t in the same quarter last year. Demand for bars and coins was 283t in the quarter, a fall of 39% on the same time last year. This coincided with the first rise in the quarterly average gold price seen since Q4 2012. The fall was particularly noticeable in India, where investment in bars and coins dropped 54% to 45t. Factors including duty and restrictions on gold imports coupled with restrictions on the free movement of cash and other assets, such as gold in the run up to the election, had the effect of dampening down genuine purchases of gold using cash. However in contrast, outflows from gold-backed Exchange Traded Funds (ETFs) slowed to just 0.2t, compared to the more substantial fall of 177t seen in Q1 2013. Consumer demand of 853t was unsurprisingly lower than the figures seen throughout much of 2013, when buyers took advantage of the lower gold price and drove consumer demand to record levels. Q1 2014 data indicates a return to long term average demand trends and is in line with the 5-year quarterly average of 850t. Marcus Grubb, Managing Director, Investment Strategy, at the World Gold Council, said: “Following an exceptional year in 2013, Quarter 1 2014 signals a return to the long term average patterns of demand, holding steady at 1,074 tonnes. It is clear that the longer term underpinnings of the gold market – such as jewellery demand in Asia – remain firmly in place demonstrating the continuing resilience of the gold market and the unique nature of gold as an asset class, rebalancing to reflect demand.” In value terms, gold demand in Q1 2014 was US$45bn, down 21% compared to Q1 2013. The average gold price of US$1,293/oz was down 21% on the average Q1 2013 price. The key findings from the report are as follows:
• Total global jewellery demand was 571t in the first quarter, a rise of 3% on the same quarter last year, as consumers continued to be the dominant drivers of the demand for gold.
• Total investment demand was 282t, compared to 288t in the same quarter the previous year. Demand for bars and coins fell 39% from the previous year to 283t. However this coincided with the first rise in the quarterly average gold price seen since Q4 2012, which encouraged private investors to wait for clearer signs about the longer term path of the price of gold before deciding on their investment strategy.
• ETF outflows were just 0.2t, a fraction of the outflows seen in Q1 2013.
• Q1 2014 saw central bank net purchases again top 100t. This is the 13th consecutive quarter in which central banks have been net purchasers as they diversify their assets. Central bank net purchases were 122t in Q1 2014, 6% lower than a year ago.
• Taken together, the figures demonstrate that the core fundamentals of the market remain in place following an exceptional 2013.
Gold demand and supply statistics for Q1 2014
• Q1 gold demand of 1,074t was fractionally lower than the 1,077t seen in Q1 2013
• ETF outflows slowed to just 0.2t. With demand for bars and coins totalling 283t, this means overall investment demand was 282t, a 2% fall on Q1 2013
• Demand in the jewellery sector was up 3% to 571t. Jewellery demand in China was up 10% to 203t, while demand in India fell 9% to 146t
• Demand in the technology sector was 99t for the quarter, down 4% compared to the previous year
• Q1 2014 mine production was up 6% on last year at 721t. Recycling fell 13% resulting in total gold supply that was 1% higher than a year ago at 1,048t
• Net central bank purchases totalled 122t, 6% lower than a year ago, making this the 13th consecutive quarter in which central banks have been net purchasers of gold
• Gold demand in value terms in Q1 2014 was US$45bn, down 21% on last year
• The Q1 2014 average gold price was US$1,293/oz, down 21% on the year before
The Q1 2014 Gold Demand Trends report, which includes comprehensive data provided by GFMS,Thomson Reuters, can be viewed here and on our iPad app which can be downloaded from iTunes, and a video can be seen here. The World Gold Council is the market development organisation for the gold industry. Working within the investment, jewellery and technology sectors, as well as engaging in government affairs, our purpose is to provide industry leadership, whilst stimulating and sustaining demand for gold. We develop gold-backed solutions, services and markets, based on true market insight. As a result, we create structural shifts in demand for gold across key market sectors. We provide insights into the international gold markets, helping people to better understand the wealth preservation qualities of gold and its role in meeting the social and environmental needs of society. Based in the UK, with operations in India, the Far East, Europe and the US, the World Gold Council is an association whose members include the world’s leading and most forward thinking gold mining companies.
Although the Activity Scale number would not indicate much activity the walk-in cash trade was reasonably busy all day. And the phones were better than average but most of that was conversation meaning we ran into plenty of questions but the public was simply not pulling the trigger.
The GoldDealer.com Activity Scale is a “2” for Tuesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Wed – 5) (last Thurs – 2) (last Friday – 3) (Monday – 3). The scale (1 through 10) is a reliable way to understand our volume numbers.
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