Commentary for Wednesday, April 15, 2015– Gold closed up on the Comex today at $8.70 in a small round of short covering and dollar weakness. The Dollar Index traded between 98.22 and 99.36 – now at 98.42 – so considerble off its highs for the day.
US economic data today came in weaker than expected – this helped soften the dollar and encourage equity markets as traders are slowly beginning to believe that a Federal Reserve rate hike is not in the cards in the short term.
In fact quantitative easing and cheap money is getting great reviews in both China and now Germany. The EU and Japan of course are already on this bus.
India’s Central Bank is once again concerned about the rise in gold imports. March 2015 imports through legal channels amounted to 125 tonnes versus Feb imports of 55 tonnes. March 2014 imports amounted to 60 tonnes. The Bank of India is trying to come up with some kind of
new initiative that would encourage individuals to deposit gold in their banking system and earn interest. Indian families hold approximately 25,000 tonnes of gold which is three times the amount held by the US (8,000 tonnes).
Silver closed up $0.11 at $16.26 – again in quiet trading.
Platinum was $2.00 higher at $1155.00 and palladium was up $4.00 at $766.00.
Most understand that gold’s weakness of late is caused by the mighty dollar – this scenario along with the eventual rise in interest rates will be the two key factors to consider for the rest of 2015. The interest rate factor you have nothing to do with it so why fret – it’s not even certain we will see a rate increase this year. And if rates do move higher the increase will be a pittance considering our near zero interest rate plan has been in place since 2008. Even with warnings from some Federal Reserve members about the possible damage over such a crazy monetary policy – the no inflation result has emboldened the process.
In the meantime the dollar remains the prime mover in gold. And the case for a strong dollar is sound but only recently. If you consider the dollar strength over the last 6 months it’s easy to see why gold is struggling. The Dollar Index has moved from around 85.00 to almost 100.00 during this time frame.
But there is something else about the dollar you should consider – take a good look at the 3 year price history of the Dollar Index. This time frame runs from 2012 to 2015 – well within the financial unrest period but far enough away from the panic period to be a reasonable comparison.
The Dollar Index for most of this time traded around 80.00! So there are some who believe we are in a dollar strength bubble (HSBC for example). And if the dollar returns to these long standing lower levels (a move which is encouraged by our own government) the subsequent rise in gold might be surprising.
I am not suggesting a one to one relationship – but gold could easily add $250.00 to its current price structure and such a move into the $1450.00 range would signal a solid bottom and perhaps the beginning of a new bull market in gold.
This is our usual ETF Wednesday information – these metrics are important to individual physical investors because they provide clues as to whether the physical market is enthusiastic and adding metals or is disappointed and selling metals.
Gold Exchange Traded Funds: Total as of 4-8-15 was 51,929,558. That number this week (4-15-15) was 52,017,908 ounces so over the last week we gained 88,350 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 4-8-15 was 615,373,062. That number this week (4-15-15) was 619,088,285 ounces so over the last week we gained 3,715,223 ounces of silver.
All Platinum Exchange Traded Funds: Total as of 4-8-15 was 2,569,946 ounces. That number this week (4-15-15) was 2,565,405 ounces so over the last week we dropped 4,541 ounces of platinum.
All Palladium Exchange Traded Funds: Total as of 4-8-15 was 2,889,867 ounces. That number this week (4-15-15) was 2,887,325 ounces so over the last week we dropped 2,542 ounces of palladium.
Kitco’s Kira Brecht sees an inverted head and shoulders pattern forming in gold since mid-February – a bullish technical pattern. She also points out that gold bulls have defended dips under $1150.00 on two occasions in recent months (Nov. and March) but point out that gold must move above $1225.00 to confirm an upside breakout.
This is interesting – a technical green flag for gold amid a sea of trader worry and currency wars. John Hathaway (Tocqueville Gold Fund) warns it’s time to own real assets like gold, not paper. The genesis of Hathaway’s conviction aligns with most people who want to own gold to protect against calamity. They all see modern bankers as hicks who have no real world business experience and playing with fire when it comes to monetary easing.
There is no doubt on this side of the table that today’s Wall Street comeback is fueled by cheap money but I think the connection between quantitative easing and the subsequent inflation driven rush to gold remains to be seen. The connection is there alright but there are other factors which influence the end game to a great degree. Who could have seen the implosion of oil for example? This economic hail storm alone might keep the lid on inflation until well into 2016.
And the trading markets have become anesthetized to constantly changing economic data and end-times rhetoric. Gold used to be sensitive a possible Greek financial collapse but with a dozen lines already drawn in the sand does anyone still pay attention. Greek bonds this morning were fetching 24% and the only reason I even paid attention was because the CNBC commentator did not even mention the problem.
And today’s gold sentiment among the uninformed in America is deplorable. They don’t even care that China and India are buying gold with both hands. Their interest in gold accumulation by the world central banks is zero and any scare that may have been created by the 2008 financial collapse is long forgotten. We have become so uninterested in government folly that we don’t even challenge the idea that a country like Iran can be trusted to dismantle their nuclear program. We seem perfectly willing to throw money at that rogue regime and hope the Israelis are wrong!
I was talking with one of the downstairs employees today (Ed Hodson) – the go-to guy on our staff for putting your IRA money into gold or silver bullion. We were both surprised at the lack of buzz in this morning’s gold market and lamented that with all the live wire tension in the world today gold should be in a scramble and moving above $2000.00. He then noted that this market price action reminded him of the 1990’s.
The price of gold from 1990 through 1996 was for the most part around $400.00 – it was then somewhat weaker for several years finally recovering in 2004. From that point forward we moved rather steadily to the upside in stages (2004 – 2006) up $180.00 (2006 – 2008) up $320.00 (2008 – 2011) up $600.00.
But the more I thought about it the more recent physical action across our counter reminded me of those lost years of virtually no buzz for more than a decade. Then bam – the reason to own gold as a financial asset came crashing through the front door. But it still took the majority of the American speculative money years before coming on board.
The big difference this time around is of course the immense amount of fiat money which is now floating around. During the 1990’s a quantitative easing program which might push trillions of dollars into the banking systems of the world would have been dismissed as folly.
But today it is accepted by the people of the United States and will soon be adopted by Europe. If the next big run in the price of gold took half as long (because the money supply and relative debt is much larger) we could expect gold to be approaching $4000.00 by the year 2020. Believe me this scenario is no more farfetched than the rush we experienced after the 1990’s quiet time.
Finally let me pose a question. If you suspected my $4000.00 scenario might be true but were not sure (the exact gold sentiment we experience today) would you wait until half the upside potential was gone before entering the market? That is what most speculators did on this last run.
The walk-in cash trade was again lethargic – it’s not that nothing is happening but the cash across the counter market is usually a place of action. Small deals, large deals – people always negotiating something – the live action boards downstairs usually create this type of action. But for the past few days it has quieted down – almost feels like a summer day. The national phones were just average to quiet.
The GoldDealer.com Unscientific Activity Scale is a “ 2” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 4) (last Friday – 3) (Monday – 4) (Tuesday – 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.
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 (BullionDesk.com) 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.
In addition to our freshly ground coffee we offer complimentary cold bottled water, Cokes and Snapple. We also provide fresh fruit in a transparent attempt to disguise our regular junk food habits as we sneak down the block for the best donuts in the world (Randy’s).
Like us on Facebook and follow us on Twitter @CNI_golddealer. Sal is now in charge of our Facebook page and he is a self-proclaimed expert on gold conspiracy theory. He would be happy to respond to even the most ridiculous conspiracy assertion on our Facebook page so why not join the fun?
Thanks for reading – we appreciate your business and enjoy your evening!
Disclaimer – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisers. The precious metals and rare coin market is random and highly volatile so it may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.