Commentary for Thursday, May 7, 2015 ( www.golddealer.com) – Gold closed down $7.90 today on the Comex at $1182.40 in quiet trading. The big deal (if there is one) at this point is tomorrow’s job numbers – a better than expected showing would pressure gold lower because it would enforce the “sooner scenario” relative to the expected interest rate hike. Obviously if jobs created are less than expected it would enforce the “later scenario” (mine) that the Fed will continue to stall – this might support current prices in gold.
Still this close ($1182.00) is below gold’s 50 Day Moving Average ($1191.00) which makes tense – a solid jobs number tomorrow coupled with a weaker technical picture could be worth $20.00 to the downside.
All of this may still be another tempest in a tea-pot – as gold has been a contrary beast of late. Gold pricing remains quiet – the overnight Hong Kong, London and domestic US market today traded between $1180.00 and $1190.00.
If you want to look into further quietness look at the 30 day gold price chart – $1180.00 through $1210.00. And if you are not yet asleep consider the lowly 60 day pricing chart – $1150.00 through $1210.00. That amounts to about a 5% range which is just enough to put everyone of this side of the pond to sleep.
The dollar was a bit stronger today – the Dollar Index closed yesterday at 94.16 and is 94.62 as of this writing.
We apologize for the rather large server crash supporting GoldDealer.com which began sometime last night. It took the tech guys 6 hours to correct the problem – it’s amazing how dependent we all have become on the internet. Thanks to all who emailed – I appreciated the heads-up and the nice comments as well.
This from Neils Christensen (Kitco) – Gold Still Finding Support in Asia, Despite Higher Equity Markets – Triland Metals – “Analysts at Triland Metals note that demand on Asian gold exchanges has been historically high and are wondering just who is buying all that gold as physical demand continues to help to support prices around the $1,175 area. “The larger investment community still seems to shun the precious metals complex in the face of buoyant stocks and low yields which is causing the gradual decline in prices in the medium term,” they say. “And yet there is definite support here…” Analysts add they expect gold to remain range bound around $1,200 an ounce in the face of impending rate hikes. As interest rates rise, they say that gold might start to attract more investment interest.”
Silver closed down $0.21 at $16.23. 2014 saw a big reduction in the silver supply deficit. In 2013 we used 111.9 million ounces of silver less than produced. In 2014 that deficit was reduced to 4.9 million ounces. Silver supply was at the highest level since 2010 at 1,061 million ounces, 877 million from mine production. Physical silver demand at 1,066 million ounces. Jewelry demand at a record 215 million, coin and bar demand down 20% to 196 million, industrial demand flat at 594 million ounces. The expectation is that supply will fall in 2015 because of lower prices and demand will move higher especially in industrial demand led by solar cell production.
So that is the latest from the Silver Institute – but there is something worth mentioning relative to simple across the counter silver bullion business. Remember silver has been hammered from all -time highs which occurred in the summer of 2011 ($48.88).
So today’s price of $16.23 should have people standing in line – they are active but not standing in line because they are waiting for a better deal. The longer however that silver does not dip significantly lower the more the physical market will be convinced that this range represents value and a solid bottom. That has to be good for business and good for the silver bullion investor.
Platinum closed down $11.00 at $1131.00 and palladium was off $10.00 at $785.00. A large South Africa platinum producer (Lonmin) has been in discussion with unions to shut down a few mining shafts. Platinum production has been unprofitable as a result of higher wages and lower platinum prices.
As we have discussed platinum pricing has been depressed because of the worldwide economic slowdown but it has become a darling in the physical business as investors trade their gold bullion for platinum bullion – supplies of solid bullion products remain thin.
This is our usual Thursday Chicago Mercantile Exchange reports for the last 5 trading days – so we are looking at the trading volume numbers for the June Gold contract: Thursday 4/30 ( 260,388) – Friday 5/1 ( 258,421) – Monday 5/4 ( 250,236) – Tuesday 5/5 ( 245,774) – Wednesday 5/6 ( 237,963). These numbers remain high but we are moving lower from last week.
This from A. Anathalakshmi (Reuters) – Gold capped below $1,200 as bond yields jump – SINGAPORE, May 7 (Reuters) – Gold remained under pressure on Thursday as higher bond yields dented the investment appeal of the metal, while uncertainty over the timing of a Federal Reserve rate hike also weighed.
Bond yields in Europe and the U.S. have been rising as deflation fears have eased with recovering oil prices, and in anticipation of a Fed interest rate rise later this year.
Higher bond yields undercut gold’s appeal as the metal does not pay any interest.
Germany’s 10-year government bond yield hit a 2015 high on Wednesday, while the 10-year U.S. Treasury yield rose to a two-month high.
Fed Chair Janet Yellen warned that low long-term U.S. interest rates could rise as the Fed normalizes its policy, causing disruption across the financial system.
“Yellen’s comments that bond yields could see a sharp jump continued to weigh on gold,” ANZ analysts said in a note on Thursday.
Bullion failed to get a boost from a softer dollar, which languished at its lowest in over two months against a basket of major currencies on disappointing economic data.
Data on Wednesday showed U.S. private employers in April hired the fewest number of workers in more than a year, further diminishing hopes of a strong rebound in economic growth after the first-quarter slump.
Weakness in data and the dollar typically boosts safe-haven bids for bullion, but that failed to materialize on Wednesday.
Investors are focused on the critical U.S. nonfarm payrolls data on Friday for stronger cues about the economy and its impact on the timing of an interest rate hike.
Strong data could prompt the Fed to soon hike rates, a move that could hurt demand for non-interest-yielding gold. Markets had expected a hike in June, but recent data showing a sluggish economy has made investors push back expectations.
Atlanta Fed bank president Dennis Lockhart said on Wednesday he still feels conditions would be in place for a midyear U.S. rate hike despite a weak start to 2015, and that markets betting on a September increase were in “reasonable alignment” with the central bank.
The walk-in cash trade was steady but on the slow side, and the phones were slow which is weird considering the problems we had with the web server crash. It reminded me of the old Pink Floyd lyric “is there anybody out there”.
The GoldDealer.com Unscientific Activity Scale is a “ 4” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Friday – 3) (Monday – 6) (Tuesday – 3) (Wednesday – 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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