Gold Firm over a Weaker Dollar and Equities Sell Off

Gold Firm over a Weaker Dollar and Equities Sell Off

Commentary for Wednesday, March 25, 2015 ( – Gold closed up $5.60 on the Comex today at $1197.30 – sniffing around the big $1200.00 mark as the dollar slumps somewhat and stocks continue to wobble.

This is the sixth straight advance for gold – the dollar having fallen around 3% since Janet Yellen had her heart to heart with Wall Street last Wednesday. Not to sound lighthearted about this affair but discount what the Federal Reserve has to say and watch for real improvement in the number of jobs. Real improvement = an increase in the Federal Funds rate.

Gold continues to be supported by a slightly weaker dollar but I think traders remain very cautious – they are modest buyers for now but could turn on a dime. This semi-interested attitude is caused by some renewed physical demand in Asia and we are also seeing renewed interest across our counter in the ethnic gold bar trade. The Dollar Index yesterday closed at 97.23 and as of this writing the index is trading at 96.89 – the range so far today being 96.54 through 97.30. Weakness this morning being blamed on a weaker durable goods number but there may be more to the story.

We may even be seeing a change in the general dollar sentiment and this would be welcome news for gold. Consider that recent QE in Europe has supported the euro which deters the dollar bulls. Carrying more weight is the notion that traders might feel the dollar is now oversold – it has been a long and wild ride to the upside so traders may want to take some profits. It’s too soon to tell but at least consider that the mighty dollar may move from bullish to perhaps neutral watching the euro trade and then weakening depending on how far out the Federal Reserve pushes the expected rise in interest rates.

The durable goods number was down 1.4% in February. While this is a volatile index it points out nicely what happens when the dollar is so strong. This is why the Fed has yet to move off their emergency near zero interest rate policy.

Gold on the other hand continues to carry a negative bias, the result of a decidedly lower price model since its peak close in 2011 of $1888.70. There are also the more recent buyers which took advantage of lower prices – the common complaint here is that it has not gone “up” as yet.

To counter this bias – if you purchased gold 10 years ago you would have realized a 10.6% annualized yield if you sold today. If you sold at the peak the gain would be 15.6% per year. We know that the US debt is around $18 trillion and we know that the Fed has added about $4 trillion to their balance sheet in the past 7 years. Now consider that all the gold held in private hands and all the gold held by central banks has a value around $7 trillion so this negative drag will not last forever.

Silver closed up $0.02 at $16.98 in very quiet trading. Despite silver’s recent bounce from lows to higher ground our sales of the popular US Silver Monster Box (500 coins) remain solid.

Platinum closed up $5.00 at $1146.00 and palladium closed up $2.00 at $765.00. And platinum’s $51.00 discount from gold keeps a thin supply of platinum bullion products moving right along.

This is our usual ETF Wednesday information – Gold Exchange Traded Funds: Total as of 3-18-15 was 52,475,650. That number this week (3-25-15) was 52,255,983 ounces so over the last week we dropped 219,667 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 54,094,507 and the record low for 2015 is 51,057,082.

All Silver Exchange Traded Funds: Total as of 3-18-15 was 623,446,033. That number this week (3-25-15) was 620,275,105 ounces so over the last week we dropped 3,170,928 ounces of silver.

All Platinum Exchange Traded Funds: Total as of 3-18-15 was 2,587,454 ounces. That number this week (3-25-15) was 2,579,675 ounces so over the last week we dropped 7,779 ounces of platinum.

All Palladium Exchange Traded Funds: Total as of 3-18-15 was 2,915,673 ounces. That number this week (3-25-15) was 2,880,574 ounces so over the last week we dropped 35,099 ounces of palladium.

This from Kitco/CPM Group – Gold to Face Repeating Challenges: CPM Group's Gold Yearbook – New York – The factors which weighed on gold’s decline in 2014 are expected to carry over this year, said research firm, CPM Group on Tuesday.

The New York-based consultancy released its annual gold yearbook at Bloomberg’s headquarters during an event fittingly called, An Evening On Gold which featured a panel of gold experts. The yearbook is considered one of the industry’s staples for forecasting the metal.

In 2014, gold prices faced relatively weaker fabrication demand from China, ongoing selling by shorter term investors, a stronger U.S. dollar, equity markets scaling record highs, and oil prices slipping lower in the final part of the year, CPM said. In turn, gold prices slipped to some significant lows last year.

“The annual average price decline during 2014 was smaller than the 15.6% decline seen in 2013, however, on an intraday basis, gold prices slipped to $1,130.40, their lowest level since 2010,” CPM Group said.

CPM expects these factors to remain in place in 2015.

“Gold prices may weaken based on investors’ likely negative views toward gold and commodities in the face of imminent U.S. interest rate increases. Such speculation could drive gold prices to their lows for the year,” the research firm said in a press release.

However, the firm expects gold prices to rebound from losses relatively quickly. “The downside is limited as much of the impact from these issues already is baked into the price of gold. In fact, any significant weakening of investor enthusiasm for U.S. stocks, or the dollar, could prove supportive of higher gold prices, the reverse of 2014’s trends.”

Buying Interest – Investors purchased 28.1 million ounces of gold in 2014, a 16.3% decline from 33.5 million the previous year.

CPM Group said that although the reduction in purchases weighed on gold prices, it still ranked in the top 15 for highest level of investment demand since 1950.

“This relatively healthy investment demand was one of the primary factors that helped support gold prices at historically elevated levels during 2014. Longer term investors were largely responsible for the net additions,” CPM explained.

CPM anticipates investor purchases to decline in 2015 to 26.9 million ounces. This would still rank investment demand during 2015 in the top 20% of net additions to investor holdings on an annual basis.

Central banks – Central banks remained net buyers in 2014, with 5.5 million ounces of gold purchased, compared with a net reduction of 0.3 million ounces in 2013. CPM said, “[C]entral banks reported adding 9.5 million ounces of gold to their holdings on a gross basis during 2014. This compares with 6.0 million ounces of gross purchases during 2013.” Russia led the pack adding 5.56 million ounces to its reserves. “Increased hostility between Russia and the West, particularly with the United States, over Ukraine and other issues, encouraged the Russian central bank to increase its reserve gold holdings during the year,” CPM noted, adding that Russia is expected to continue to buy in 2015 as a means to diversify away from its U.S. dollar reserves in 2015.

On the flip-side, the largest net disposals of gold came from the Bank of International Settlement (BIS), which reduced its holdings by 5.54 million ounces during the year. This accounted for 95.5% of total reduction of central bank gold holdings, CPM said.

Gold Supply – On the supply side, CPM found that gold supply rose during 2014, reaching 126.7 million ounces during the year, up 1.1% from 2013. Mine supply reached a record 90.5 million ounces in 2014. Despite the big numbers in mine supply, total supply did not hit records since secondary supply, which accounts for around a third of total supply, was declining during the year, CPM said.

Fabrication demand – CPM is forecasting gold fabrication demand to rise to 96.9 million ounces in 2015, up 4.2% from 2014. “This healthy increase in fabrication demand during 2015 is predicated on an expectation of relatively soft gold prices and on gold prices forming a base at this relatively low level. Both of these factors are important to boosting demand,” CPM said.

The firm said that India will also play an important role in boosting global fabrication demand for gold during 2015, “[T]here has been a partial scale back in import restrictions during 2014 and an improvement in the country’s macroeconomic fundamentals,” it said.

CPM is scheduled to release its Silver yearbook on April 29 and its Platinum yearbook on June 23.

On February 20 th the Greek debt problem was extended 4 months to give them additional room for negotiations . They really cannot pay all the money owed and unless there is some kind of miracle financial move Greece will continue to plague the EU. Each time the possibility of debt contagion is raised gold moves higher and each time Greece is given more time the gold market gives up its gains. And to be fair things have improved within the EU but not in Greece. I bring up this point only to point out that Greece is only one of many big problems in Europe.

This from Barry Norman (FXEmpire) – “In a dramatic attempt to stop the downward spiral, the Central Bank of Russia made an astounding move it raised its key interest rate from 10.5 percent all the russian oilway up to 17 percent. The prime reason for the free-fall of the ruble is the fact that the Central Bank of Russia just printed up about 625 billion rubles and gave it to their friends at Rosneft. Rosneft is an absolutely massive oil company that is controlled by the Russian government. For months, Rosneft has been asking for a bailout to refinance loans that can no longer be rolled over with western banks because of economic sanctions. In an attempt to quietly slip this massive injection of new money past everyone, Rosneft issued 625 billion rubles worth of new bonds just before the weekend and the Central Bank of Russia gobbled most of those new bonds up with freshly created money.

Rosneft issued 625 billion rubles, about $10.9 billion at the exchange rate at the time, in new bonds on Friday. The identities of the buyers were not publicly disclosed, but analysts say that large state banks bought the issue. When these banks deposit the bonds with the central bank in exchange for loans, Rosneft will have been financed, in effect, with an emission of rubles from the central bank.

The White House said Tuesday that President Obama would sign a bill allowing additional sanctions against Moscow, as officials warned that Russia’s economy is on the “brink of crisis.” “If I were chairman of President Putin’s council of economic advisers, I would be extremely concerned,” Jason Furman, who holds that position in the Obama administration, told reporters at the White House.

The new sanctions legislation comes as the value of Russia’s currency, the ruble, has collapsed in recent weeks alongside a dramatic fall in the price of oil, Russia’s top export. A year ago, Russia’s economy was growing by about 1.5% and President Vladimir Putin was preparing to host the Sochi Winter Olympics.

Russia is facing the perfect storm, which would have been unpredictable by Vladimir Putin when he began meddling in the Ukraine. Putin had left the Russia economy to dependent on oil and gas production as the world clamored for more production. With oil revenues keeping the government and friends of Putin flowing in cash no one paid much attention. Next along came Western sanctions after Putin pushed his way into the Ukraine. After months of largely symbolic sanctions aimed at Russian officials – including asset freezes and travel bans — first the U.S., then Europe, were stung into serious action by the shooting down of a Malaysian airliner over eastern Ukraine in June, and Moscow’s continued support for rebels blamed for the crash.

They took measures to prevent Russia’s biggest banks and companies raising funds in the West, and targeted the country’s key energy and weapons industries with restrictions. Who could have ever foreseen the global oil markets collapsing as the Saudi’s initiated their own war against US producers.”

The walk-in cash trade was busy today and so were the phones. Silver remains in the spotlight – followed by platinum bullion products and some trading of gold bullion for platinum bullion.

The Unscientific Activity Scale is an “ 8” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 4) (last Friday – 7) (Monday – 5) (Tuesday – 4). 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.

When buying or selling you will receive an email confirmation. This includes a PDF File to confirm your invoice or purchase order and includes forms of payment and bank wire instructions. When doing business please check to see if your current email has been entered into the new system and check to see if your computer will accept our email (no spam).

We always appreciate you keeping us up to date when moving or changing your email.

We believe our four flat screens downstairs with live independent pricing ( are unique in the United States. The walk-in cash trade can see in an instant the current prices of all bullion products and a daily graph illustrates the range of the markets on any given day.

Yes – you can visit the store with cash and walk away with your product. Or you can bring product to the store and walk away with cash. We will even wire funds into your account that same day for a small service fee ($25.00) if you are in a hurry.

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