Commentary for Wed, June 11, 2014 (www.golddealer.com) – Gold closed up $1.00 today at $1260.80 after a somewhat muted rally took prices as high as $1265.00 before losing steam. Still this is the highest level we have seen for gold in the last two weeks.
This type of action would suggest more of a bargain buying attitude instead of a short-covering rally especially if you look at the 30 day trading action in gold. From about late May ($1280.00) to early June ($1245.00) we saw weaker prices but once the short sellers got tired they covered and the market has since drifted higher ($1260.00).
This looks like the bottoming and beginning of rising which forms a kind of cup looking pattern. If we see a steady rise back to the $1280.00 and then a sell off on the right side of the cup we would have the classic “tea cup” formation – which would be bullish for gold. I appreciate this is a stretch in a generally negative market but it is worth mentioning as it seems there is a technical transition from extreme bearish to neutral and perhaps mildly bullish now in the cards.
Concern about the economy worldwide as the World Bank cut their forecast of global growth in 2014 from 3.2% to 2.8%. The dollar was steady at the relatively strong level of 80.8 on the index which probably accounted for the promising but muted run in gold. And oil at something over $104.00 a barrel is at the higher end of a slightly higher monthly trend which supports gold.
Silver closed fast asleep up $0.01 at $19.15. We have seen a few rather large sellers of silver bars at these levels but stock was just as easily scooped up in the physical market.
Platinum was down $1.00 at $1481.00 and palladium was up $6.00 at $860.00. Palladium has been pushed higher from the dual factors of the South African strike and strong car sales especially from China.
Our Exchange Traded Fund Totals is presented each Wednesday and includes platinum and palladium. What all ETF’s are doing as defined by total ounces – gained or lost will provide an independent idea of market thinking on the short to medium term.
All Gold Exchange Traded Funds: Total as of 6-4-14 was 54,890,136. That number this week (6-11-14) was 54,885,111 ounces so over the last week we lost 5,025 ounces of gold.
It might also be interesting to note that in 2013 the record high holdings for all gold ETF’s was 85,112,855 ounces. In 2014 the record low was 54,799,910 ounces.
All Silver Exchange Traded Funds: Total as of 6-4-14 was 631,020,076. That number this week (6-11-14) was 631,845,584 ounces so over the last week we gained 825,508 ounces of silver.
All Platinum Exchange Traded Funds: Total as of 6-4-14 was 2,784,523 ounces. That number this week (6-11-14) was 2,803,292 ounces so over the last week we gained 18,769 ounces of platinum.
All Palladium Exchange Traded Funds: Total as of 6-4-14 was 2,915,063 ounces. That number this week (6-11-14) was 2,966,102 ounces so over the last week we gained 51,039 ounces of palladium.
There has been plenty of talk these days about how the US is doing better which is comforting. But the average reader remains perplexed in that they know the cost of living is moving higher, the government is inflating and yet the price of gold remains range bound. So what gives? Like I have been saying the cause/effect scenario is there but we have managed to dodge the bullet – for now. And so you don’t think you are in the boat alone consider the comments of Chuck Butler (EverBank) and Richard Duncan.
“Alrighty then. Now that we’ve established that’s the corner I’m coming from, we can move along. Oh and for those of you keeping score at home, Personal Incomes haven’t risen in a few decades, but the cost of living just keeps rising. We as Americans can’t seem to dig out of the hole we’re in, and then we have the Gov’t piling loads of debt on top of us. YIKES! What’s a poor boy to do? Well, making certain that a portion of your investments are allocated outside of the dollar, so that you can recover the lost purchasing power of a weak dollar, would be the place to start! One thing I’ve been tracking is Credit. And the expansion of Credit here in the U.S., is amazing folks.
Now I like Richard Duncan, and I’ve told you all that before, and Richard does a great job illustrating what he calls Creditism. He believes that Credit in the U.S. has to expand by 2% per year, or else the house of cards which represents the U.S. economy comes crashing down. And what caused this Creditism? It was the removal of the dollar from Gold. Let’s listen in to Richard Duncan talking about all this. “When the private sector effectively defaulted in 2008, we would have spiraled into a new great depression then and there had the government not jumped in with Trillion dollar budget deficits every year, financed to a certain extent by paper money creation. It’s that government life support that kept us from collapsing into a great depression. We must continue to have that in order to prevent us from collapsing into a great depression in the years ahead.”
So. The U.S., according to Richard Duncan, who let me remind you, I admire quite a bit, has to continue what it’s doing now, which is borrowing and spending massive amounts through Trillion dollar budget deficits, financed in part through Quantitative Easing. Keep spending the way they’ve spent now, essentially without difficulty for another five years, and maybe even as long as ten years. Whenever that comes to an end, they will go bankrupt, just like Greece, and then we will collapse and enter a great depression.” – Richard Duncan – The reason I went down that road, was that I read a report last night about how the writer believed that the Credit Bubble was back here in the U.S. Here is some data to back up what he claims. Total (financial and non-financial ) Credit jumped $484 Billion in the 1st QTR to a record of $59.399 Trillion or 34% of GDP. Corporate borrowings grew at a 9.3% pace. Federal Government Debt mounted a 7.1% pace. Consumer Credit rose at a 6.6% rate. So, what gives? Why is this all ramping up now? Well, if you’re one of those people that say the glass is half full, then you’re dancing in the streets because the U.S. Consumer and Corporation is finally feeling good about the economy. But if you’re a glass is half empty kind of person, then you take the approach that basically, this was bound to happen eventually, due to the zero interest rates policy or ZIRP. I already told you about the car loans getting outrageous once again, and just last Friday, while everyone else was looking at the Jobs created out of thin air by the BLS, the Gov’t reported that Consumer Credit had spiked from $19.5 Billion in March, to $26.847 Billion in April. So, wages aren’t going anywhere, and haven’t for decades, but Consumer Credit is spiking. Does anyone else see this ending in tears once again, like I do?”
The walk in cash trade today was interesting as a few large sellers showed up but within hours the bigger trades were absorbed in a number of smaller transactions. The phone were quiet to relatively busy – about half and half so it’s easy to see that while the volume numbers trend lower the relative push/pull between the bears and bulls continues.
The GoldDealer.com Activity Scale is a “3” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 8) (last Friday – 6) (Monday – 4) (Tuesday – 4). The scale (1 through 10) is a reliable way to understand our volume numbers.
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