Commentary for Thursday, May 14, 2015 – Gold closed up $7.00 today on the Comex at $1225.40. Probably just follow through action from yesterday’s close which showed gold up $25.50 and a continuation of the largest short-covering rally we have seen since late April.
This recent run is a combination of several things but behind the big curtain is weakness in the dollar relative to the euro. Unfortunately you cannot ascribe today’s higher price in gold to dollar weakness – the Dollar Index closed yesterday at 93.62 and the range today was 93.13 through 93.76. As of this writing we are looking at 93.48 so no cigar.
You could attribute some of this recent interest in gold to safe-haven buying given the shaky state of affairs in Greece – but not much. The euro – has been stable to stronger after the EU decided to inflate so it figures the euro will be the first safe-haven across the pond.
You might also credit the recent miss in US retail figures to helping gold move higher – that makes sense but remember that the miss was not that bad. The market was just looking for a reason to believe the Fed will not raise interest rates this year.
At any rate all the above is window dressing – it was just ugly enough however to get the short paper action to run for cover – that has been pushing this market higher over the last few days. And I would not be surprised to see recent gains muted next week as soon as the smoke clears.
Still in this gold market any news which brings attention to gold is good – so let’s be happy someone is talking about us – but again let’s be patient before we decide to get out the party hats – unless the dollar continues lower – in which case gold will continue in the news.
Silver closed up $0.24 at $17.45. The moving averages for silver are also interesting – 50 DMA ($16.36) – 100 DMA ($16.61) – 200 DMA ($17.02). Today’s close above all three moving averages should be a wakeup call to those still waiting for better prices.
Silver’s all-time high close was $48.80 in 2011. Today’s close of $17.45 represents a 65% reduction in price – remember what I said yesterday – don’t worry too much about a bottom in the silver market. Silver bullion within this bottom range is very cheap – any paper trader will tell you that a 50% price retracement is stellar if you are looking at a value buy. The fact that silver is now 65% off highs should wake up all serious long-term buyers.
Platinum closed up $11.00 at $1161.00 and palladium closed down $9.00 at $780.00.
Let’s consider gold’s important moving averages – 50 DMA ($1189.00) – 100 DMA ($1211.00) and 200 DMA ($1217.00). Today of close $1225.40 is higher than all three long established averages so on the short term momentum favors the bulls.
So, for a change the price news on gold is improving – but let’s not be carried away. As we all know that pesky interest rate increase by the Federal Reserve will soon show and even a token rise in rates will hurt gold’s already struggling technical picture. The good news at least for now is that gold closed today at $1225.40 which is above the high point on its 30 day chart at $1210.00. That’s the good news – the bad news is that I typically don’t like these big moves to the upside, virtually higher prices overnight which are not supported by solid fundamentals (increased demand for example).
But I have been talking about the upcoming weakness in the Dollar Index so let’s be happy we have broken to the upside on the 30 day chart. The news is equally good when considering the 60 day gold price chart. Compare today’s gold close ($1225.40) with the old recent 60 day high around $1210.00 so again we have broken to the upside.
It’s when we consider the 6 month gold price chart that the picture’s a little cloudy – like the LA weather today. Gold saw a big sell-off in January of this year – moving from $1300.00 down to $1150.00 in early March. This is important because if this latest strength in gold is to have street cred it must now move above recent old highs of $1300.00. That higher $75.00 region is filled with paper land mines and so a big order considering the likely rise in interest rates by the Federal Reserve perhaps even by this summer.
If gold fails this “higher ground” test the physical investor can simply assume that we continue to be stuck in a rather flat trading range between going back to May of 2013 between $1150.00 on the low side and $1300.00 on the high side.
This is our usual Thursday Chicago Mercantile Exchange reports for the last 5 trading days – so we are looking at the trading volume numbers for the June Gold contract: Thursday 5/7 ( 227,187) – Friday 5/8 ( 221,660) – Monday 5/11 ( 208,032) – Tuesday 5/12 ( 198,488) – Wednesday 5/13 ( 195,953). These numbers remain high but we are moving lower from last week.
This from our friends at the World Gold Council – Gold Demand Trends – First quarter 2015 in summary.
Jewelry demand dipped by 3% in Q1 2015 to a shade above 600t
Jewelry demand for the first quarter totaled 601t, a level it has adhered to reasonably firmly since Q3 2013. Demand began the year by responding, in varying degrees according to specific local market conditions, to economic growth and price movements.
Investment demand rose 4% as ETF inflows offset a decline in bar and coin demand
Total investment demand grew moderately to 279t in Q1, slightly above Q1 demand in both 2013 and 2014 (at 260t and 268t respectively). The first quarterly inflow into ETFs since Q4 2012 outweighed a contraction in bar and coin investment.
Central bank net purchases of 119t extend buying run to 17th consecutive quarter
Central banks and other official institutions continued their buying momentum in Q1 with net purchases totalling 119 tonnes. This was virtually unchanged compared to the same period in 2014. Diversification continues to be the primary driver for the accumulation of gold reserves.
Technology slipped 2% to 80 tonnes as longer-term substitution trend continues
Demand for gold in technological uses slipped by 2% to 80 tonnes, the lowest quarterly level in our records (back to 2000). Substitution and thrifting in this sector continue to weigh on gold demand, as manufacturers seek out cheaper alternatives.
Total supply was virtually unchanged year-on-year at 1,089t; lower recycling offset growth in mine supply.
Mine production increased by 2% year-on-year to 729t in the first three months of 2015, with growth coming from a number of markets. This was offset by recycled gold supply, which fell by 3% to 355t in Q1. Overall, this left total supply virtually unchanged at 1,089t.
The walk-in cash trade today was average to packed – so higher prices always produces action. The phones ranged from average to slow for some reason – perhaps the general public is not paying attention to these higher prices and the current action model represents old veterans. And remember that the ethnic cash trade in gold across the counter remains alive and well.
The GoldDealer.com Unscientific Activity Scale is a “ 4” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Friday – 5) (Monday – 4) (Tuesday – 2) (Wednesday – 5). 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 busy and see a low number – or be 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. If the numbers are generally increasing – it would indicate things are busier – decreasing numbers over a longer period would indicate volume is moving lower.
When buying or selling you will receive an email confirmation. This includes a PDF File to confirm your invoice or purchase order and includes forms of payment and bank wire instructions. When doing business please check to see if your current email has been entered into the new system and check to see if your computer will accept our email (no spam).
We always appreciate keeping us up to date when moving or changing your email.
We believe our four flat screens downstairs with live independent pricing (BullionDesk.com) are unique in the United States. The walk-in cash trade can see in an instant the current prices of all bullion products and a daily graph illustrates the range of the markets on any given day.
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. We will even wire funds into your account that same day for a small service fee ($25.00) if you are in a hurry.
In addition to our freshly ground coffee we offer complimentary cold bottled water, Cokes and Snapple. We also provide fresh fruit in a transparent attempt to disguise our regular junk food habits as we sneak down the block for the best donuts in the world (Randy’s).
Like us on Facebook and follow us on Twitter @CNI_golddealer. Sal is now in charge of our Facebook page and he is a self-proclaimed expert on gold conspiracy theory. He would be happy to respond to even the most ridiculous conspiracy assertion on our Facebook page so why not join the fun?
Thanks for reading – we appreciate your business and enjoy your evening!
Disclaimer – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisers. The precious metals and rare coin market is random and highly volatile so it may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.