Commentary for Tuesday, July 16, 2013 – Gold closed again a bit higher today up $7.00 at $1290.80 and the dollar was a bit weaker. Gold has had a positive attitude since it bottomed out in late June at around $1200.00 so technically the picture is improving and supported by some bargain hunting and book squaring as the shorts cover awaiting comments by Fed Chairman Bernanke tomorrow.
Most traders still believe tapering will soon begin but the Fed Chairman’s position remains stalwart and surprisingly he remains on the dovish side supported by the notion that their inflation numbers are within acceptable ranges. But I am always suspicious of the Federal Reserve not because I think they do not deserve credit for saving our collective behinds…they do deserve that credit…but because I am not sure just exactly what they are up to regarding this popular bond buying program.
It would seem they are divided on the notion of tapering but Wall Street has made up its mind that the free money show will soon be leaving a theater near you. So either the Federal Reverse Board are great poker players or they are wondering in the wilderness. At any rate Bernanke will speak tomorrow and unless he absolutely guarantees the world that the current policy is not subject to change anytime soon expect gold to sell off because this last week seems like an insurance bet to me and so paper traders should be looking at profit taking.
And besides my last estimate that gold must show strength above $1300.00 before the technical players will be happy is still in play.
Silver was also marginally higher up $0.09 at $19.92 and action today was another big yawn. The silver buzz has completely left this market so if anyone has a rumor (great or not) send it along.
Platinum was up $4.00 at $1425.00 again nothing of note happening so this $4.00 must be a sympathy move following gold. Palladium was up $3.00 (ditto) at $735.00.
This from Allen Sykora (Kitco): Standard: Gold Physical Demand Down From Recent Highs – Physical demand for gold remains robust but has eased from its recent highs, says Standard Bank. The Standard Bank Gold Physical Flow Index hit new highs last Wednesday. “Although demand remains strong, compared to the recent past, physical demand is easing, albeit from highs,” Standard says. “This marginal easing in demand is evident not only from a decline in our Gold Physical Flow Index in recent days but also in the physical premiums on the Shanghai Gold Exchange. The premium for physical gold on the SGE eased towards $28.30/oz yesterday. This is down from a high of $37.06/oz on Wednesday 3 July and $36.37/oz on Friday 7 July.” The premium was generally below $10 until the mid-April sell-off in gold, Standard says. “At that time, the SGE premium shot to $20/oz as demand increased on lower prices,” Standard says. “The premium then stayed between $10/oz and $20/oz from mid-April until late June. With gold then diving from just below $1,400 to well below $1,300 on 20 June, physical demand at that time increased even more, and the SGE premium climbed well above the $20/oz, and, more recently, above $30/oz.”
I thought this was interesting and wonder if it somehow correlates with what is going on in the physical world of coin dealers. Both today and yesterday were on the quiet side and while there is business to be done the real “pop” in the volume numbers is definitely missing. So are the glory days of higher prices and decade long profits for gold and silver gone or just sleeping?
Of course this is what everyone wants to know and is just another way of asking whether we are at the bottom of this consolidation because like our friend Ron Paul is fond of saying “both gold and silver are real money”. Well that is true but for the average investor a flat to trending lower market holds no fascination.
There are of course real believers who see higher prices around every corner but the ranks of these folks are thinner than a few years ago: which brings me to recent Doug Casey comments about not calling a bottom to gold. For some reason when gold is generally weaker no one wants to say the “bottom” is in but when gold is moving higher everyone claims success and sees higher prices.
So let me be the first to say that if gold does show strength above $1300.00 the worst is over…maybe. See I am the same way because the psychology of higher prices is built on well…higher prices. And the same holds true for the psychology of lower prices. Who is right might have more to do with the luck of the draw than any daily metric. If you believe the basic theory behind gold is immutable: a huge increase in the money supply must eventually equate to higher prices then your life is much simpler and your investment strategy needs little enhancement.
If you are like the rest of us the relative price is difficult to shake and doubt persists until it doesn’t. A commentary surely on the more metaphorical side but perhaps just what is needed in these changing times. While many continue to make a big deal out of the soon to be heard Chairman Bernanke comments I will double down on the Egyptian military mess. This must be stabilized (I am not sure it can be solved) or the price of oil will upset an already fragile world recovery. And this might even become the first big step in unleashing those inflationary forces everyone seems to have forgotten.
Walk in business and phone business was again decidedly slow today. Thanks for reading and enjoy your evening. These markets are volatile and involve risk: Please Read Before Investing
Written by California Numismatic Investments (www.golddealer.com).