Commentary for Friday, May 30, 2014 – Gold closed down $10.70 at $1245.60 so we continue lower and have lost $46.00 on the week. Troops have been removed from Ukraine and the expectation that the European Bank will go negative with interest rates next week (pushing the dollar higher on the short term) helped push gold lower amidst an already negative trading mood.
And to cement an already uncertain future US interest rates are moving lower so you could make a case that people are buying safety short term.
Up to this morning buying public has pretty much ignored weakness in the price of gold in that we have seen a few bigger sellers but virtually no large buyers. So what – you might say. Well to get a better picture of what gold is doing look at the 60 day chart but keep in mind gold began this year at $1201.00. In April we saw a nice push to the upside ($1280.00 to above $1320.00) and then a virtual closed market which traded between $1280.00 and $1310.00.
The break below the solid $1280.00 support is a serious beach so we saw significant technical selling pushing the price of gold toward $1250.00. Because this type of unwinding usually happens gradually, each time the market presses lower the short-sellers pick up a few bucks and the psychologically pushing weaker prices diminishes.
The reason being that while commentary for gold is negative – there are few who will push the short play after the technical money has been made between say $1320.00 and $1250.00. There is an old trading aphorism which goes like this – “You can be a bull or you can be a bear but don’t be a pig”. This is reasoning behind why I think this market now looks tired to the downside and we see bargain hunters entering the physical market.
Silver followed gold lower closing off $0.38 at $18.65 now a famous sweet spot for buying and the lowest we have seen this year.
And I love stories like these especially when silver prices are under pressure. From Solar Roadways – The Road To The Future, Paved In Silver? From Bodo Albrecht (tminsider@eniqma.com – Kitco) – Legend has it that, in ancient Rome, the streets were paved in gold. True or not, chances are the streets of Sagle, Idaho, will be paved in silver soon. And even though Sagle, Idaho, probably has fewer streets than ancient Rome, this would be a major accomplishment for Scott and Julie Brusaw, the owners of Solar Roadways LLC that has made it its mission to cover U.S. roadways entirely in solar panels. They came up with a design for highly resistant hexagonal solar panels that will pay for themselves, and more, by generating electricity all day. What is more, the panels are capable of illuminating roads at night, and of defrosting them in winter, solving multiple problems all at the same time.
Buoyed by much media attention from the start, the company just turned to crowd funding for its first major phase of expansion from proof of concept to pilot production. A week prior to the deadline, the company is already overfunded by nearly 50% above its $ 1 million goal, all in exchange for t-shirts and coffee mugs in further proof that great ideas do not require “angel investors” anymore. The panels will be made in the USA, and several official bodies have expressed their interest, and offered their support. And since solar panels, of course, consume silver and various other technology metals in their photovoltaic layer, electronics etc., this project could turn out to also pave the way for silver’s future.
Platinum closed down $9.00 at $1452.00, palladium was up $3.00 at $836.00 and rhodium was down $20.00 at $1140.00.
This from Chuck Butler (Everbank) is worth noting – especially because there has been talk recently that China is slow and this may add to gold’s recent pricing troubles. The Peoples Bank of China (PBOC) allowed the renminbi / yuan to appreciate overnight, for the first time this week. Sort of like the old joke about not taking a bath yet, because it wasn’t Saturday! I have to think that the Chinese authorities will begin to get antsy about the slow recovery, and although they said they wouldn’t implement stimulus measures, I think they’ll succumb to the weight of the pressure for the economy to recover. But remember, as I always say. China CAN AFFORD TO IMPLEMENT STIMULUS MEASURES, FOR THEY HAVE A TREASURE CHEST OF RESERVES IN WHICH TO SPEND! I always wonder when the rest of the world’s pundits, analysts, observers, economists, and so-called: Mr. Know-it-alls will get the memo on China’s Treasury Chest of Reserves? All I know is for the past 7 years, they’ve all be dead wrong about China, and I’ve been right. That’s all I know.
This has been my position on China for years in that this country has redefined industrial growth. And everyone knows they are sitting on a ton of money and willing to do anything necessary to continue the dynamic transformation of China going into the 21st Century.
They will continue to buy gold because they understand the construct between it and paper money. Most of their people are happy (at least for now) to work for nothing as the state amasses huge sums which are spent for infrastructure improvements, some of which are so large they had to think outside the accepted engineering box. And like I have said many times they all love physical gold which is part of the 5000 year heritage. Over the next 20 years they will be happy to buy all the gold the western world does not want and the only reason they don’t do this in 10 years is because they are too smart to upset the apple chart.
(Kitco News) –A solid majority of participants in the Kitco News weekly gold survey see weaker prices next week after the yellow fell through technical-chart support earlier this week.
Out of 33 participants, 27 responded this week. Of those, 18 see prices lower, seven see prices higher and two see prices trading sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.
Last week, survey participants were slightly bullish for this week. As of 11:30 a.m. EDT, Comex August gold was down about $45 for the week.
Those who see weaker prices continuing say now that gold fell through the technical-chart wedge formation, further losses are possible. Kevin Grady, president Phoenix Futures and Options, said both fundamental and technical reasons are weighing on gold.
“The forward rates are continuing their progression into positive territory which signals to me that the physical buying is drying up even at these levels. I would expect the price-sensitive buyers to surface again near the $1,225 area. We also saw the longs liquidate heavily with a drop in (futures market) open interest of 24,000 contracts from Wednesday’s trading. I will continue to monitor the forward rates for any sign of the physical buyers. Until that happens, I think gold will continue on its present course,” Grady said.
Those who see prices rising next week said gold could see a bounce after such a sharp break.
The “gold price faces a double-threat: record-breaking U.S equities and a strengthening U.S. dollar. As the unloved stepchild in the commodity family for the last six weeks, the family now finds itself under pressure with downturns in oil and copper and ominous warning signals coming from tumbling iron ore prices in China. The yellow metal is likely oversold and some technical relief may come with the new month. Russian troops pulling away from Ukraine’s border removes most geopolitical reasons to rally back to the $1,300 level, but gold could challenge this week’s high of $1,267 per ounce,” said Richard Baker, editor, Eureka Miner.
Those who see prices sideways or are neutral say gold prices may try to stabilize after this week’s selloff.
The walk-in cash trade was today was crazy. We sometimes joke when the store is full asking if there is a bus in the parking lot. Almost all the activity was buying – but there was one whale in gold. The phones were equally busy and be apologize if you could not get through. The phone action was almost all silver bullion related which is exactly what we saw the last time silver dipped below $19.00.
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