Commentary for Tuesday, March 11, 2014 (www.golddealer.com) – Gold closed up $5.10 at $1346.50 and moved above last week’s high close ($1351.70) in early trading before settling for modest gains on the day. Gold’s most recent strength is the result of safe-haven buying brought about because of the Ukrainian military problems with Russia.
Still gold is struggling at the higher end of its current trading range and the question becomes how strong will demand be in light of the 12% increase in price so far this year? This last month or two the general trend of the dollar has been to lower ground which supports gold to some extent but over the last year dollar value is almost unchanged which is amazing.
Silver closed down $0.10 at $20.78 in quiet trading and even with all the new silver bullion products coming to the market the action is muted with perhaps a few bright spots in the physical market.
Platinum closed down $12.00 at $1465.00 and palladium was off $6.00 at $770.00. The US mint announced sales of 8,500 1 oz American Platinum Eagles on their first day of selling and we are taking orders and will have live coins in about a week.
From Peter Hug (Kitco) – Safe-Haven Continues To Be the Story – As tensions continue to grow in the Ukraine, the “what if” play on gold is becoming more a “when” scenario, as European capital is finding safe-haven demand. The Euro is somewhat weaker, but still not reflecting a belief that the Ukraine situation is beyond salvage. The PGMs, especially palladium, remain well bid as fears increase that Russian supplies may be affected by any retaliation from Russia against Western penalties. It’s difficult to discern what, if anything, the west can do with their dependence on Russian energy, however, the continued heightened geopolitical drama will continue to support the metals. It is again important to watch the $1,355 level, which if broken on the fear fundamentals may add some technical interest to a generally non-convicted market.
Hug is clearly a savvy trader because he notes that even with all the push upward in gold over the last 30 days, trouble in the Crimea, perhaps perplexing economic data, safe haven buying because of Europe and China and weak paper markets in the Pacific Rim gold has flattened out. The push to higher ground turned into a push-pull market for gold in the last week of February and since that time has stalled, trading between $1330.00 and $1350.00.
This stall is significant because the push to higher ground ($1275.00 to $1350.00) was just enough to get everyone’s attention. Hug’s position that a break above this stalled trading area is important technically is sound because such a move would produce the happy face rising bottoms technical picture which is needed to get computer traders back on board. Anything else will turn into a ho-hum exercise and increase the doubt factor that gold is doing anything and remains range-bound.
As I said before there are a few credible technical players that believe gold will bottom this summer setting the stage for the “big-comeback” in prices. I think this unlikely and figure both gold and silver will punch around current trading areas producing lackluster commentary looking for anything which indicates a new breakout to the upside. Of course, sooner or later, when all this artificial liquidity begins to circulate the inflation number will begin to creep higher and gold will be back in the spotlight. But it’s hard to say when this natural occurrence will happen.
Like I said yesterday we are seeing new customer accounts being created which is good but lacking in this new mix are whales. And until the whale reappears any big jump to the upside will be controlled by geo-political fallout because, for the time being anyway the stock and bond trade worldwide is sufficiently sound to attract new money.
Bullion Morning with Commerzbank – Gold price ‘to average $1,400/oz in Q4′ – Posted on March 11, 2014 by Eddie van der Walt (fastmarkets.com) – The outlook for the gold price remains bullish, with the metal likely to average $1,400 in the fourth quarter of this year, with platinum at $1,600 and palladium at $825, Commerzbank senior commodity analyst Carsten Fritsch told The Bullion Desk. “We remain optimistic for this year, in contrast to many market observers who forecast further declines in prices,” he said on Tuesday in an exclusive interview. But even Commerzbank was surprised by the speed of the recovery, believing that “it would happen in the second half of the year,” he added. Having dipped to just above its lowest in more than three years at $1,183 on the last trading day of 2013, gold has rallied throughout the first quarter. It was last at $1,347.50/1,348.30 per ounce, up $7.35 or 0.5 percent on Monday’s close. “The most important development was the sudden stop of ETF outflows,” Fritsch said. “We saw massive outflows last year – nearly 900 tonnes, according to the World Gold Council, or nearly three tonnes per trading day – but since January it stopped and since February we have seen inflows of 23 tonnes, with yesterday alone recording eight tonnes of inflows.” “We expected to see net inflows in the second half of the year, and this informed our bullish view, but the change came about earlier than we expected,” he added. He highlighted two factors for the sooner-than-anticipated change in the market: “One is the interruption of constant the upward move in the major stock indices; the other is the sharp drop in real interest rates, with the US 10-year [bond] yield dropping, thus lowering the opportunity cost of holding gold.” But the potential for further advances in the second half of the year has subsided and, while a rise to $1,400 or even beyond may eventuate in the coming in weeks, the traffic will not be all one-way, Fritsch said. “Much of the recent gains were speculatively driven, with money managers, according to CFTC data, increasing net long positions in nine weeks out of 10, with net long positions now above 100,000 contracts for the first time since December 2012. This creates the risk of profit-taking leading to corrections,” he said. Another factor perhaps undervalued by the gold market more widely is the developing situation in India, he added. “The Indian current account deficit improved markedly, it is down to a four year low according to numbers out last week. So pressure is rising on the central bank and government to ease gold import restrictions,” Fritsch said. Mumbai jewellers went on a one-day strike on Monday to protest against import restrictions, which include high custom duties the provision that 20 percent of gold imported into the country must again be exported with value added before more gold can be brought in. “Elections are imminent and, if there is a change of government, the opposition is likely to ease these restrictions, while the incumbents also said they may reassess their position once full-year numbers are in. This will lead to an increase of imports and will be extremely bullish for gold prices,” Fritsch said. China overtook India as the world’s top gold consumer last year following the government curbs.
Both the walk-in cash trade and phones were slow today so considering the number of questions we answered yesterday buyers remain a bit more optimistic but still very cautious.
The GoldDealer.com Activity Scale is a “5” for Tuesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 3) (last Thursday – 3) (last Friday – 3) (last Monday – 5). The scale (1 through 10) is a reliable way to understand our volume numbers.
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