Commentary for Monday, Dec 23, 2013 – Gold closed down $6.70 at $1198.40 (so again under the important $1200.00 level) in what appears to be simple bookkeeping into the Christmas holiday.
Trading all day was uninspired as the holiday season becomes more important. Gold sentiment remains subdued as we are only a few dollars away from one of the lowest closes since the summer of 2011.
Recent inflation numbers in the US have done little to stimulate buyers (as most commentators note) but remember the US market is not the center of the gold universe. About 80% of current world demand for gold comes from India and China. Before the financial crisis demand for gold from these two countries was 46% and let’s also note that inflation rates in China (3.5%) and India (7.5%) are no small blip on the financial screen.
Silver closed down $0.05 at $19.37 and physical activity also reflects the holiday season.
Platinum was down $5.00 at $1327.00 and palladium was down $3.00 at $695.00.
Not as much smaller Christmas buying this year in the metals as we have seen in past years.
My usual admonition when it comes to holiday trading: ignore, be careful and expect shenanigans. Short traders are moving to the sidelines, tax selling is an issue and the markets are thin because most are on vacation with Santa. Actually the same will be true next week when we deal with the New Year so look for choppy until 2014.
The following is taken from Kira Brecht (Kitco/TraderPlanet): “The central bank has never engaged in so much unconventional highly accommodative policy. The Fed has never seen a balance sheet approaching 4 trillion. The new chairman Janet Yellen and Stanley Fischer as vice chairman—even for those two with all their experience, the exit strategy will be a major challenge,” said David Jones, president of DMJ Advisors LLB, and long-time market watcher with 35 years on Wall Street. “It is fraught with danger and you could see extreme market volatility. “Inflation is always a risk,” Jones added. “Think of a scenario where the economy picks up more strongly than expected and we see wage and price pressures. It could force the Fed to act earlier than it expects, which could lead to financial market instability.” Or, on the other side of the coin, what if the Fed waits too long to hike rates? Yellen is a known dove, and her research has focused on the benefits of keeping the fed funds rate near zero to support the under-employment situation. “If the markets feel they’ve left rates at zero for too long, it could send 10-year Treasurys above 3.5%. If the market feels the Fed is getting behind the curve and it’s time to start normalizing, rates on 10-year Treasurys could push higher,” said Chris Rupkey, managing director, and chief financial economist at Bank of Tokyo-Mitsubishi. While Bernanke may have been the Fed chairman on a white horse that saved the U.S. from a second Great Depression, there is still a long road back to policy normalization. And, that road could be bumpy. Pointing to the handover to a new Fed chair, especially at such a critical time in monetary policy history, Rupkey concludes, “It’s a big change. It may be bigger than the market is expecting.” Fasten on your seat belt. The next year is going to be interesting.”
The crux of this commentary is something I have been talking about for years, namely that just because we have not seen inflation as a result of monetary debasement does not mean much. As Brecht rightly points out moving away from this government largesse is not easy, and in fact might be impossible without the subsequent failure of the economic machine. I don’t mean collapse but failure in the sense that the pigeons will come back to roost. If you believe the government can monetize at will creating paper money out of thin air and then reverse the process with no ill affects you should skip this missive. Don’t laugh there are some who believe hard asset conservative monetary people are out to lunch. Meaning the Federal Reserve can regulate commerce by increasing or decreasing the relative money supply and there is no price to pay. Using a more realistic approach, which even the Fed Governors embrace you can’t continue to get away with what stands in for monetary policy today. That was the reason for the modest taper and if you want to be logical you would also conclude there is the devil to pay at some point because the expansion ran the US balance sheet to 4 trillion dollars. Perhaps not much in the scheme of things given the US still represents the largest economy in the world. But we are playing with fire and the results could well be an inflation surge, asset bubble or something else out of the night which creates the next wave of financial uncertainty.
The walk-in cash trade continues active and there was a pop in the sale of 1 oz gold bars and rhodium bars. The phone business was steady but slowing and nether phone or walk-in presented many sellers. The GoldDealer.com Activity Scale being another “6” for Monday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Tuesday – 4) (last Wednesday – 3) (last Thursday – 5) (last Friday – 6) (Monday – 6). The scale is 1 through 10 and we believe this is a reliable way to “sense” real bullion business.
We still have server problems with the live pricing aspect of the new site. As soon as this is fixed we will be able to post the Comex closings like we used to do so comparison will be better. We will also add both buy and sell live prices on the larger landing pages so if you want to see all the pricing for all the basic categories open up the screen to include everything. The system will still ask you to call and talk with a live person to confirm and receive an order number. Live Chat is doing well and new customers can set up their own encrypted accounts. The automatic email confirmation (buying precious metals or selling precious metals) needs work. Thanks for your patience.
Sign up for our daily Gold Newsletter on the Gold Newsletter page if you are so inclined and remember this is now live for you too so why not sound off.
We also offer the choice of USPS or FedEx Ground.
The live flat screens within the CNI Building are operational and include premiums so no more calculators to figure the cheapest bullion product. Our best price guarantee (buying or selling) is famous so call Kenny at 1-800-225-7531.
Like us on Facebook and follow us on Twitter @CNI_golddealer.
The CNI Holiday Schedule: We will be closed Tuesday, Wednesday and Thursday (Dec 24th, 25th and 26th) for Christmas.
For New Year’s we will be closed Tuesday and Wednesday (Dec 31st and Jan 1st): a reminder that shipping during the holiday season slows so your patience is appreciated. Thanks for reading and enjoy the holidays. If you have a panic attack while the store is closed email me at RSchwary@aol.com. Ho! Ho! Ho!
Today our most popular products are the 1 oz Silver Round
and the 90% Silver Bag
