Commentary for Monday, Dec 9, 2013 GoldDealer – Gold closed up $5.00 at $1235.00 so it remains firm but still defensive. The reason it closed stronger is in reaction to the better than expected US economic news we heard Friday which should have prompted more Fed easing talk and pressure gold lower.
When this weakness did not develop traders covered their short positions and moved to the sidelines waiting for more Fed direction concerning their bond buying program.
The Wall Street Journal today pointed out that three Federal Reserve officials will talk ahead of the normal “black-out” period observed as the next meeting approaches (Dec 17th and 18th). Two of the Fed big-shots are hawks and one is a dove so anything they say collectively will be shifted through as those worried about tapering look for clues as to the $85 billion a month program called quantitative easing.
What will happen to this now famous bond buying program is still unclear but the precious metals trade believes tapering will soon happen and pressure gold lower. There is however another group which believes that all of this is saber rattling in that any substantial lowering of the $85 billion will push interest rates higher and derail the improving US economy.
So patience is required and so the reason gold was a bit firmer today means some are looking for a small insurance bet while waiting for more information.
Silver closed up $0.18 at $19.64 so firm but not too exciting. The physical action across the counter is steady but considering the steep discount from highs I would have expected more action.
Platinum closed up $10.00 at $1367.00 and palladium closed down $1.00 at $734.00.
I have had several readers ask why both platinum and palladium are lagging and if I had a few good reasons I would be happy to offer an opinion but look at the facts: (1) there is not much extra physical platinum or palladium on the world market today. (2) Mining of both is problematical. (3) The car industry is going crazy, a usage factor which should alone push prices higher. (4) The investment public is for the first time in my career buying physical product seriously. (5) In response to this sovereign countries are making platinum and palladium bullion coins and promoting them worldwide. (6) Unlike gold there are no reserves of either so any serious interruption in supply would send prices through the roof.
So why aren’t prices moving higher? Good question anyone out there have an opinion or is the world not acting on the best investment play seen in decades? We love the Pamp Suisse Gold Bar 100g lately!
I read Ambrose Evans-Pritchard in The Telegraph on a regular basis: “It is far from clear in any case whether the feat of closing the current deficit in Spain, Portugal and Greece is meaningful given the levels of mass unemployment, which erodes labour skills through “hysteresis” and therefore lowers the long-term economic growth rate, and that in turn makes it harder to tackle the debt mountain. A case can be made that the hysteresis damage of EMU policies is greater than the benefits of reform. If so, it is a brutishly stupid policy as well as causing great suffering. German Chancellor Gerhard Schroder said he needed to let the budget deficit rise for a while to cushion the effects of his Hartz IV reforms. The only way for Europe to break out of this trap is to lift the South far enough above the deflation line to gain breathing room. The whole eurozone must have a higher inflation rate. Fabio Bassi from JP Morgan says the ECB will surprise everybody, proving just as aggressive in fighting deflation as it was in fighting inflation. Let us hope so, but I doubt that any of the measures now being floated will make much difference. A cut in deposit rate or another burst of lending to banks will not boost the M3 money supply. The ECB has been behind the curve for most of the past three years, needlessly causing a double-dip recession that caused havoc to public finances, and too late at every stage since, despite the heroic efforts of Mr Draghi. It may now take full-blown quantitative easing to head off deflation, with bond purchases across the board. There is no chance of this before the German constitutional court rules on the legality of emergency measures next year, and little chance after that. Almost nobody is making the case for QE in the German press, economics profession or policy circles. It is view as anathema across the political spectrum. Yet to push it through against German protest would set off a political firestorm. We are moving nearer to the final battle for control of EMU where there can be no compromise.”
The deflationary word has been discussed for months now ever since Japan and the world began to wonder if deflation might become a problem. Of course it is too soon to know but let me throw my small hat into the ring. Never happen I say not because it can’t happen but because at the real first sign of deflation the monetary flood gates would be opened even wider and QE would again save the day.
For those who say that it might be too late to monetize once the deflation dragon is loosed I say nonsense there is always time for governments to print more fiat money.
Which highlights two points: (1) we face the dilemma of delayed inflation because of the massive bond buying programs used to float our way out of the 2008 financial crisis and (2) it is now possible that a double-down situation in Europe/Japan creates a deflationary scenario which will once again turn on the fiat money spigots.
When everyone is talking about the US tapering its quantitative easing program and how this will pressure gold lower we all might want to consider two facts: (1) gold has already been trading lower since the summer of 2011 meaning how much more downside do you think there is given the real physical demands of our Asian friends? (2) And this point could be mute because there might be a hidden shortage. This from Ed Steer’s Gold and Silver Daily: Swiss refinery report: Gold supply has never been tighter – Interviewed by GATA consultant Koos Jansen, Anglo Far-East Bullion Co.’s Alex Stanczyk discusses his recent trip to a Swiss gold refinery whose managing director told of an unprecedented shortage of metal as China consumes it all. The interview is headlined “Alex Stanczyk: Physical Supply Has Never Been Tighter” and it’s posted on the Swiss Internet site ingoldwetrust.ch…and it’s an absolute must read and today’s most important story. I found it posted on the gata.org Internet site early yesterday morning.”
The walk-in cash trade was busy today and the phones were steady neither produced any large sellers. The GoldDealer.com Activity Scale remains at “6”. The CNI Activity Scale takes into consideration volume, open and closed orders (buying and selling), the cash trade, and the hedge book: (last Tuesday – 7) (last Wednesday – 6) (last Thursday – 7) (Friday – 6) (Monday – 6). The scale is 1 through 10 and we believe this is a reliable way to “sense” what a real bullion business is doing without the sales pitch.
The new GoldDealer.com site is up and running and we continue to make changes and adjustments to various pages. Some pages on the old site were not carried forward so while the site ID has not changed a particular landing page might need adjustment. This new approach will show you live buy and sell bullion prices but you must talk with a live person to confirm and receive an order number. It will also soon include Live Chat, you will be able to set up your own customer account, receive automatic email confirmation, and ask for the daily Gold Newsletter email.
Phase Two will make accounting, shipping and tracking easier. We now offer the choice of USPS or FedEx Ground. Our new flat screens within the CNI Building are operational and cash is always available. The feed and graphs are live and bullion products are programmed with premium spreads: there is nothing like this on the West Coast and visitors enjoy complete transparency.
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Remember our best price guarantee (buying or selling) so call Kenny at 1-800-225-7531. 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 your evening.