Commentary for Friday, June 7, 2013 – Gold closed down $32.70 at $1383.00 moving lower as the Job’s Report from May showed 175,000 new non-farm jobs were created. This is another one of those curios moves because the number (175,000) under any another circumstance would disappoint but considering we are still slugging our way out of this latest recession the better than expected number provided encouragement. The reason gold moved lower was the obvious monetary taper argument meaning that if things are improving our friendly Uncle would be more inclined to diminish his very aggressive bond buying program.
What is goofy about this theory is that I am guessing the US jobs program needs something south of 250,000 for growth anything less is used up in attrition. Still the stock market loved the number and moved sharply higher further reinforcing the perhaps rosy outlook. When the job’s report number was released gold reacted softly down maybe $10.00 but the market continued to sell off breaking through my comfortable $1400.00 mark so my bet is that paper gold traders were just looking for another slamming excuse and pushed the short button.
Silver reacted badly to the slide in gold moving down $0.97 to close at $21.73 and this is a new post high low for silver and actually the lowest we have seen silver since September 2010 and still not much of a reaction from the physical market.
Platinum closed off $26.00 at $1504.00 and palladium was down $1.00 at $760.00.
And of course let’s not forget the famous gold survey: (Kitco News) – Friday’s U.S. monthly jobs report did not provide any guidance for market direction, so market participants are back to debating whether or not gold can break out of its current range. Participants in the weekly Kitco News gold survey are equally torn over next week’s price direction. Until Friday’s sell off, gold was looking to end the week with gains, but the late-session break erased those hopes. In the Kitco News Gold Survey, out of 36 participants, 22 responded this week. Of those 22 participants, nine see prices up, while seven see prices down and six see prices moving sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders, money managers and technical-chart analysts. Last week 63% of survey participants were bullish. As of noon EDT Friday, prices on the week were down about $11. If that holds, then most survey participants forecasted incorrectly. Since May 13, 2011 when the survey started, participants have been right 44% of the time, as of May 31. Until Nov. 23, survey participants had more than a 50% accurate rate, suggesting that since then there has been a change in the trend for gold. Participants who see higher prices next week said prices should holding above $1,350, the lows of the current range. “I think for the short-term the bottom in metals is in. We keep going back to that $1,400 area. To really flip this thing around in the short-term we need a close over $1,423, but for next week I think we’ll at least go back to $1,400,” said Bob Haberkorn, senior commodities broker at RJO Futures. Others who see higher prices said exchange-traded fund outflows are slowing which releases some pressure on gold; additionally, they said it’s unlikely the Federal Reserve will seriously look to taper its bond purchases anytime soon. The expectation for Fed curbing some of its bond buys put gold under pressure lately. Those who see weaker prices said a return to the downtrend is likely now that the U.S. May nonfarm payrolls report came in as expected. Ken Morrison, editor of online newsletter, Morrison on the Markets, said this week’s dollar losses did not support gold overall. “There was ample uncertainty, largely a result of the 3-4% rally in the yen, but dollar weakness served largely to hold gold steady. We expect the dollar-weakness has about run its course and with the anxiety over the U.S. employment report now behind us, we expect gold may attract new willing short-sellers in the week ahead. We expect the $1,360 area will be tested sometime within the week,” he said. The jobs report did little to alter survey participants’ views on gold and many said barring any big surprises, there is nothing to push gold out of its range. “(I’m) looking for the market to look left, right, then left again, to remain frozen, not cross the street, and not know what to do as prices bounce between the $1,425 to $1,350 zone,” said Ralph Preston, principal at Heritage West Financial.
From my be careful what you ask for column: the Bank of Japan now unlimited printing option will float enough yen to finally pull the Japanese out of the deflation which has plagued them for a decade. So the yen is very happy for the time being and this unending monetary easement is hailed as yet another reason to own gold. But remember these floating currencies are all related to one another and so what happens when the yen finally inflates itself lower? Japanese goods become cheaper and their manufacturing sector moves into high gear now competing with Europe. If the EU follows the BOJ lead so the euro becomes more competitive the currency wars are on but this in the shorter term may not be good for gold. Remember during this consolidation phase a stronger dollar will certainly be met with lower gold prices especially in today’s anti-gold talking environment. Eventually all currencies will be forced to re-inflate and this necessary race to the bottom will support gold prices and be the primary reason new records will be set. But in the meantime expecting more overhead resistance especially as things sort themselves out in Europe might be smart.
This from Peter Hug (Kitco): Ditto – “Although it was expected that the ECB would leave interest rates on hold, it created capital flows into the Euro and away from the US dollar. The weakness of the USD overnight is slight at best but enough to create enough buying to again bring gold over the $1,400 level this morning. Equities appear to be ready for a bounce at the open, which may create some selling in the metals this morning, but I suspect the market will maintain its recent range until the employment numbers release tomorrow. Everyone is falling over themselves calling the end to the gold bull market. This will be important in three years from now, when they are introduced at conferences. The question, if you remember to ask, is where were they when gold was at $1,700. My memory, albeit fading, recalls many of these experts calling for $2,200.”
I always read Hug because he is a seasoned trader who has seen it all…up…then down…then sideways. When you have that much experience one thing sticks in your mind and that is when everyone is running in one direction a time out might be a good idea. Most everyone is negative about gold today and like he says…when gold was $1700.00 everyone thought $2000.00 was a lock. Today the same pundits will not concede that prices are cheap and gold might well hold current testing but instead are incessantly negative.
Not long after the big crash I began asking everyone where they believed gold and silver would finish at the end of 2013 and 2014. I collected answers from regular investors and dealers: The results include the highest and lowest guess from each category: Dealers: Gold Highest 2013 ($2175.00) / 2014 ($4000.00) Lowest 2013 ($1500.00) / 2014 ($1600.00) same category Silver Highest 2013 ($68.00) / 2014 ($150.00) Lowest 2013 ($26.00) / 2014 ($28.00). Investors: Gold Highest 2013 ($3000.00) / 2014 ($4000.00) Lowest 2013 ($1444.00) / 2014 ($1555.00) same category Silver Highest 2013 ($60.00) / 2014 ($85.00) Lowest 2013 ($20.00) / 2014 ($22.00).
This was fun and one could conclude from the numbers that dealers are somewhat more optimistic than investors. I really thought the tone of this gold market would be more positive going into the weekend so the Friday sell-off is disappointing. Especially because the jobs report number was not that great which tells me paper traders are looking for a reason (any reason) to move lower within the range. Both walk in and phone trade was active today which is expected with weaker prices as the public is still very interested in cheap and we saw no big sellers. Thanks for reading and enjoy your weekend. These markets are volatile and involve risk: Please Read Before Investing
Posted by California Numismatic Investments (www.GoldDealer.com)