Commentary for Wednesday, May 20, 2015 – Gold closed relatively firm but uninterested today on the Comex up $2.00 at $1208.90. This was in advance of the FOMC minutes release. And the aftermarket in gold after the release was another non-event so traders apparently did not garner much from the information.
WASHINGTON (MarketWatch) – “There was less enthusiasm for a June rate hike among Federal Reserve officials than had been the case in March, according to minutes from the April meeting released Wednesday. The minutes show that only a “few” Fed officials thought that the economic data would improve enough to trigger a rate hike at the Fed’s next meeting on June 16-17. In March, “several” Fed officials had supported a June move. The minutes of the April 29-30 meeting show that “many” on the Fed thought that June was likely too soon for a rate hike was warranted, although they generally did not rule one out. Overall, “most” Fed officials thought the weakness in first quarter growth was transitory and the economy would resume at a moderate pace, suggesting a rate hike sometime later in the year.”
Gold got some encouragement in early trading before any FOMC information was released. Last night gold was steady in Hong Kong and London but the range was tight ($5.00). Trading in the domestic market was also firm but capped by dollar strength.
The Dollar Index has been strong since Monday – we have moved from slightly above 93.00 to 95.62 as of this writing – and it’s difficult for gold to move higher against a rising dollar.
Frankly I am surprised we saw any green number today considering yesterday’s close ($1206.90) fell below gold’s 200 Day Moving Average ($1217.00) and the positive sentiment we saw in early May evaporated when gold could not move above $1230.00. And I still look for some weakness in gold moving into the long weekend – the US markets being closed for Memorial Day.
I would not say that the short paper players are back in force – there is still too much indecision in the current trading pattern but they will appear like an avalanche if the Federal Reserve goes back to the old idea of an interest rate hike this summer.
Silver closed up a tepid $0.04 at $17.09.
Platinum closed up $6.00 at $1156.00 and palladium was higher by $2.00 at $777.00.
For those who believe the 2008 financial fiasco will not repeat – consider that four banks plead guilty to currency market rigging today. This is more important than the press will allow because the banks involved are not of the country bumpkin variety – they are Citicorp, JPMorgan Chase & Co, Barclays, and Royal Bank of Scotland. These big boys are supposed to be pillars of transparency and a public bastion of trust. And they pleaded guilty to criminal charges – so let’s not put all our financial assets into one basket even though they look like the Boy Scouts from the other side of the teller window.
I read Peter Hug (Kitco) all the time because he understands traders. His latest comment crystallizes the single biggest gold question on the table today. And provides the central clue as to why these markets cannot make up their mind. “The “million dollar question”: is the U.S. economy recovering? Data indicates that it is tepid at best, and with no signs of inflation suggests the Fed doesn’t fire until 2016, which we opined late last year. But, what if the “recovery” actually softens into a recession; does the Fed accept the reality or does Yellen join the ECB party. It’s a low risk that she steps up to the punch bowl in the short term, but if she picks up the ladle or even suggests that the bowl is an option, there won’t be a discussion on the direction of gold. The global economic scenario strongly suggests that your core positions in hard assets need to be maintained.” Great insight into how the paper world works!
This is our usual ETF Wednesday information – these metrics are important to individual physical investors because they provide clues as to whether the physical market is enthusiastic and adding metals or is disappointed and selling metals.
All Gold Exchange Traded Funds: Total as of 5-13-15 was 51,926,827. That number this week (5-20-15) was 51,572,558 ounces so over the last week we dropped 354,269 ounces of gold.
The all-time record high for all gold ETF’s was 85,112,855 ounces in 2013. The record high for Gold ETF’s in 2015 is 53,901,867 and the record low for 2015 is 51,057,082.
All Silver Exchange Traded Funds: Total as of 5-13-15 was 617,637,749. That number this week (5-20-15) was 612,963,128 ounces so over the last week we dropped 4,674,621 ounces of silver.
All Platinum Exchange Traded Funds: Total as of 5-13-15 was 2,575,222 ounces. That number this week (5-20-15) was 2,575,156 ounces so over the last week we dropped 66 ounces of platinum.
All Palladium Exchange Traded Funds: Total as of 5-13-15 was 2,958,188 ounces. That number this week (5-20-15) was 2,969,809 ounces so over the last week we gained 11,621 ounces of palladium.
Last night I was watching the History Channel H2 and its latest presentation – America’s Book of Secrets – The Gold Conspiracy. This is one of a few gold bullion programs now airing. The better of the two that I have seen details Sprott’s investigation into what actually happens to much of the gold reserves held in different countries.
We know for example that Venezuela recently asked for its pledged gold reserves to be returned to its own bank vaults. Germany also made such a request and while the press made a big deal about whether this gold actually existed and when it would be returned – the rumors died down and little on the subject has since been made public.
These gold related programs are interesting because they bring into focus the kind of shadowy world of international gold trading. And in the process reveal how important gold reserves are to world powers – even though today they tend to push this reality into the background because it facilitates the printing of fiat paper money.
And real facts of course create interest in gold. I did not know for example that England secretly shipped all of the gold bullion reserves out of the country for protection during World War II. And they asked France to do the same with their reserves in an effort to raise money for the war effort. Charles de Gaulle refused claiming France would need the money after the war.
All of this of course raises questions about gold reserves. And questions bring out the conspiracy buffs who claim the gold reserves of the world are now just shadow statistics – even the gold reserves kept at the United States Bullion Depository in Fort Knox, Kentucky are questioned.
The last audit of the gold bullion held in Fort Knox was in 1953 and according to Wall Street Daily only 5% of the gold was actually tested at that time. I remember a kind of dog and pony show was conducted in the 1970’s when the vaults were opened to a few politicians and public cameras after rumors surfaced that perhaps there was a problem with our gold reserves – but this was not an independent audit.
Sprott, a respected leader in the world of physical gold ownership was asked if he thought the world’s gold reserves were unencumbered, meaning they were not in some way hypothecated. All he did was smile and suggested that this was an interesting question.
Now – gold bullion (a non-interest paying liquid asset) is often loaned to another party willing to pay interest for a fixed amount of time. And because these transactions are often secret they lead to more conspiracy speculation.
And gold conspiracy thinking encourages some to believe the price of gold is manipulated. This theory was actually made public when secret documents were released by Snowden. A document authored by China claimed that the US was manipulating the price of gold to support and reinforce faith in the US dollar. The notion that somehow the price of gold is manipulated was offered as “proof” when its price actually decreased after the massive quantitative easing program authored by the Federal Reserve.
Finally the conclusion of sorts drawn by many conspiracy advocates is that there could be a problem with the world’s gold reserves. And in the extreme a portion of the gold reserves may not be available as publicized.
Whether you buy this argument or not I found the History Channel presentation interesting in the extreme. Especially realizing that gold bullion is moving from the old money Western powers to the new money manufacturing giants like China and India.
This type is presentation, especially now with the press on gold being negative is worth viewing so check it out for yourself – and let me know what you think. One thing is for sure – if even a portion of this is true it could have extraordinary consequences for the physical gold world.
The walk-in cash trade today was slow and so were the national phones.
The GoldDealer.com Unscientific Activity Scale is a “ 3” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 4) (last Friday – 5) (Monday – 5) (Tuesday – 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.
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