Commentary for Wednesday, June 24, 2015 – Gold closed down $3.60 on the Comex today at $1172.60. So we continue to zig-zag – something below $1200.00 – so no new conviction and something higher than $1160.00 so no capitulation. It’s important to note that physical PAMP gold bar sales continue strong within this price range from the ethnic trade.
The longer this scenario holds the more traders will expect this market to break-down citing technical factors. But for now there is not much consensus – and not much happening to force either the bullish or bearish hand. For sure the technical picture favors the bears but it was not long ago that a considerable break above $1200.00 was on the table – so let’s hope for fresh news which matters.
We have been talking about the Greek debt problem and the dollar for some time and its interesting how trade views differ relative to the price of gold. Everyone agrees that if the dollar gets stronger gold will get weaker and that if the dollar weakens either by design or fate gold will move higher. There are also a number of writers who believe the deck is rigged against the dollar once all this commotion in Europe is over – so the European Collapse Theory does not hold much water.
There are plenty of smart writers who disagree on gold’s price direction if Greece cannot solve its debt problems. Peter Hug (Kitco) thinks that gold would be much lower if it were not for Greece and their possible debt default.
I think Hug is one of the best real traders around but we disagree as to the importance of Greece in any wider scenario. It used to be that if the Greek debt problem came up on the radar gold was good for $50.00 to the upside – safe-haven buying was cited and traders worried about a European contagion.
Today all of this is old hat in my opinion. Europe is not going to blow up regardless of what happens to the debt talks which happen to be on and off daily. The world dodged that bullet when everything did not cave over the real estate collapse in 2008.
More fiat money made everyone feel safer – look at the Nikkei this morning – even Japanese manufacturing is looking up and stocks are moving higher.
As far as the Greek debt problem the chances of a reasonable settlement which will make all parties happy is zero. What the new and altogether massive fiat money programs have done is introduce the world to some ill-defined version of pseudo-prosperity. No one knows what the end result will be – they are just happy to make the current picture look less grave.
Who knows maybe Central Banks of the world will get away with this Keynesian monetary play but in the long term this would be a first relative to currency strength. Normally when you create much more paper money than is needed you are either crazy or scared. Take your pick – in the meantime consider what we really do know about gold.
Its price between $1140.00 and $1180.00 seems sound. The market remains technically weak but some believe we are putting in a solid bottom within this trading range. If the price of gold holds up during and after the expected interest rate rise it will be very bullish for the precious metals. And it won’t take much physical demand to hold this line – China and India will do the lifting.
Remember that now gold has a fundamental metric working in its favor – the cheaper it gets the more people who really want to own gold bullion can partiscipate. In others words this market has transformed itself from a specualtive shot at higher prices to real interest in real ownership.
We have not been talking about gold making new highs since August 22, 2011 ($1888.70). That’s about 4 years now and plenty of time for the weaker hands to sell and move on to the next big deal. The big attentive audience that gold once owned is now much smaller but those who remain are much more committed – to these it is not a question whether they want to own gold or not – it’s just a matter of price.
Want to know when the Federal Reserve will raise rates? Watch the real estate market – this morning building and sales remain strong – this scenario more than anything else will cause the Federal Reserve to move rates a quarter point before year end because when housing is healthy the government figures it can get away with most anything – including raising rates.
Silver moved higher by $0.11 today at $15.84 – and silver bullion sales are steady with the usual suspects – $1000 face 90% silver bags, 10 ounce silver bars, 1 ounce silver rounds and the usual array of Monster Boxes.
Platinum was up $6.00 at $1074.00 and palladium was unchanged at $695.00 – the more the price of platinum and palladium drift lower the better the deal. Take advantage of these lower prices relative to your core bullion holdings – even if this means trading gold bullion for platinum bullion.
I also like the price of rhodium it was down $30.00 today at $925.00. We are selling the Baird 1 oz Rhodium Bar for $1045.00 delivered – another contrarian play which should be considered. Rhodium traded for $10,000.00 an ounce in 2008 so prices today seem very cheap and the world’s industrial complex is picking up speed.
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 6-17-15 was 51,029,786. That number this week (6-24-15) was 51,185,212 ounces so over the last week we gained 155,426 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 51,019,356.
All Silver Exchange Traded Funds: Total as of 6-17-15 was 621,562,258. That number this week (6-24-15) was 620,864,824 ounces so over the last week we dropped 697,434 ounces of silver.
All Platinum Exchange Traded Funds: Total as of 6-17-15 was 2,581,212 ounces. That number this week (6-24-15) was 2,533,600 ounces so over the last week we dropped 47,612 ounces of platinum.
All Palladium Exchange Traded Funds: Total as of 6-17-15 was 2,967,262 ounces. That number this week (6-24-15) was 2,970,677 ounces so over the last week we gained 3,415 ounces of palladium.
This from Neils Christensen (Kitco) – Inventories and Stockpiles To Keep PGM Prices In Check In 2015 – CPM Group – “One research firm is not expecting to see a turnaround in platinum group metals (PGM) in 2015 as platinum prices remain near six-year lows and palladium hovers at a one-year low.
Tuesday CPM Group, released its Platinum Group Metals Yearbook for 2015, noting some of the major highlights in the past year. Looking ahead, they note that significant stockpiles will continue to weigh on prices in 2015.
“It is clear that investors and other market participants have been selling metal from inventories in 2014 and the first half of 2015…” the firm said in a press release. “Any significant increase in prices may be limited to some degree by continued sales from these inventories.
“Even the longest and most severe labor strikes in South Africa’s platinum mining industry could not support platinum prices during 2014, as a combination of weak fabrication demand and sales from large above ground inventories built up in previous years sent prices lower,” the analysts said in the report.
CPM Group noted that the labor issues in South Africa caused significant withdraws from above-ground stockpiles; however, inventories still remain above levels prior to 2009.
While inventories helped to cap prices on the supply side of the market, CMP Group also noted that demand has been lackluster. The firm said that platinum fabrication declined to 7.02 million ounces in 2014, down 2.8% from 2013; the firm also noted that this was the second straight year of declining demand.
“Platinum fabrication demand during 2014 was the lowest since 2010. Demand was driven lower by weaker consumption of platinum jewelry and reduced demand from the auto sector,” the report said.
Platinum is a key component mostly in diesel engines and CMP said that last year Auto sector demand declined to 3.13 million ounces. The only auto markets to see an increase in platinum demand was in North American, Europe and Japan. “Platinum use in all other regions and countries declined 25%,” the report said.
The report highlighted falling demand in Russia, Brazil, and India, in particular.
Another drag on platinum, according to CPM Group, is weakening jewelry demand. The report noted that platinum jewelry demand dropped for the second straight year because of low interest in China and Japan, “which account for around 90% of platinum jewelry demand.”
Although palladium prices managed to see a positive return in 2014, CPM Group said the precious metal saw a drop in net investment demand.
“The decline reflected some investors selling palladium from their unreported inventories as they took profits derived from the strong prices during 2014 and reduced concerns regarding mine supply from both South Africa and Russia during the second half of the year,” the report said.
CMP Group is a little bit more positive on palladium as the metal has seen some renewed demand and declining supplies. The firm said that in 2014 supply declined 1.4% from the previous year, to 9 million ounces; however, demand rose for the fifth consecutive year to 9.02 million ounces, up 2.5% from 2013.
“Strong palladium demand growth from the auto and electronics sectors helped push prices higher during 2014. Fabrication demand for palladium is forecast to continue rising during 2015, albeit at a slower pace than that seen in recent years,” the firm said.”
The walk in trade was steady today – less busy than yesterday with virtually no sellers. The phones were either busy or slow – nothing in the middle so choppy.
The GoldDealer.com Unscientific Activity Scale is a “ 4” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 4) (last Friday – 4) (Monday – 5) (Tuesday – 6). 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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