Commentary for Monday Oct 21, 2013 (www.golddealer.com) – Gold closed up a sleepy $1.30 today after last Thursday’s big $46.00 move to the upside after a deal was reached by Congress on the debt problem.
By now it’s common knowledge that this deal must soon be renegotiated and that outcome remains troubling. I think it is clear our government spends too much money and it is also clear the public wants something besides further delays in solving these challenges but in the midst of stirring which look like recovery no one wants to upset the apple cart. Most commentators see further quantitative easing through at least the first quarter of 2014: actually some are making the case that government “easing” is so baked into the cake that it could be with us for sometime but I think this outcome unlikely.
Existing home sales fell by 1.9% in September probably a result of higher prices and financing rates. Still not a good sign when everyone is looking for damage done by delays in budget financing. This “notion” of US default is seen as a kind of joke in the US but our European allies think this type of politics is dangerous and they are right.
The reason gold did not follow through today was because the original jump in prices last week was just so much “short covering” and the gold market still lacks real conviction even with further debt talks right around the corner. So for now I see a quiet market mostly range bound and looking for further actionable information.
Silver was also quiet up $0.36 at $22.23 and I can’t get a whiff of any good stories. There are plenty of silver bullion products with no delays out there and premiums are cheap so this should indicate that buzz is lacking.
Platinum closed up a $1.00 at $1438.00 and palladium was up $10.00 at $750.00. Baird Rhodium (1 Oz) bar sales still remain subdued but there are a number of smaller orders. This area is cheap and undervalued if you are looking for diversification but for now the big-boy money has not shown up to the dance.
This has to be either the most amazing coincidence I have run into lately or my banging on about gold acquisition by the Chinese has taken a new turn. This all began with me reading Ed Steer’s Gold and Silver Daily which is always a pleasure. From there he referenced an article he thought was interesting in zerohedge.com (Tyler Durden) – China’s Largest Conglomerate Buys Building Housing JP Morgan’s Gold Vault – Read on because it gets better. “In what is the most remarkable news of the day, which has so far passed very quietly under the radar, Fosun International, China’s largest private-owned conglomerate which invests in commodities, properties and pharmaceuticals also known as “Shanghai’s Hutchison Whampoa”, announced in a statement filed just as quietly with the Hong Kong stock exchange, that it had purchased JPM’s iconic former headquarters, the tower built by none other than David Rockefeller, at 1 Chase Manhattan Plaza for a measly $725 million.” This article finishes: “So, what the real news of today is not that JPM is selling its gold vault, we knew that two months ago, or that it is outright looking to exit the physical commodities business, that too was preannounced. What is extremely notable is that in one very quiet transaction, China just acquired the building that houses the world’s largest gold vault.”
Now this gold vault is the size of a football field and this transaction just pops up on the radar screen when China is keeping all the gold it mines and has increased its international buying of gold more than 3 fold since 2008. No one seems to care about this move just like no one seems to care that China and India are much more interested in gold than the Europeans or Americans. So a few thoughts: Could the Chinese be interested in promoting a gold backed yuan? Could the Chinese harbor plans to make their currency a world wide substitute for the dollar? I talked about this sometime ago and at that time considered the thought some kind of joke.
But during the writing of this missive I was watching The McLaughlin Group and liberal commentator Eleanor Clift (liberal yes but a smart lady and savvy) actually claimed there are now some who are thinking seriously of this possibility. Could such a move backed by gold reserves (like in New York) under their control be something of interest in their plan to become less dependent on their dollar reserves (which are huge) and further which they would like to hedge? Well this idea is not mine and has been floating around the internet for years especially pushed by the extreme gold enthusiasts of which I am not one.
Many years ago I was asked if the dollar would actually collapse and be replaced by another currency. My personal scenario has always been that the dollar would simply lose value incrementally over time just as it has since Bretton Woods. And this gradual loss in buying power would gradually push the price of gold higher. Bretton Woods (the economic conference) by the way got its name from the hotel the delegates met at which was located in Bretton Woods, New Hampshire. So could the once mighty dollar actually be replaced as the world’s currency in this extreme scenario?
I still doubt it because it takes a pretty big workhorse to support world trade. But the Chinese with a billion people who will work for nothing qualifies and buying the world’s largest gold vault should raise a few eyebrows. This is either a great story or a great coincidence but in either case it is worth sharing to those interested in gold bullion.
Our new CNI Activity Scale will take into consideration volume, open and closed orders (buying and selling), the cash trade, and the hedge book: (Thursday – 4) (Friday – 5) (Monday – 3). The scale is 1 through 10 (5 being relatively busy and this approach considers today’s business so it will be more intuitive). We believe this is a reliable way to give you an idea of what a real bullion business is doing without the sales pitch. Phase One of our new golddealer.com web site will soon be complete (Oct 28th best guess) and includes a new look along with live pricing. It will also include Live Chat, you will be able to set up your own customer account, and you will receive automatic email confirmation on buying or selling. Look for further improvements before year end which makes accounting, shipping and tracking easier (check to see if we have your email in the new system). We now offer the choice of USPS or FedEx Ground.
Our new flat screens within the CNI Building are up and operational and the cash trade loves this idea. The feed and graphs are live and bullion products are programmed with premium spreads so your choices are easier. There is nothing like this on the West Coast and visitors enjoy complete transparency when buying or selling.
Like us on Facebook and follow us on Twitter @CNI_golddealer. Our Daily Gold Newsletter archive has been moved and enlarged (30 days) to our Facebook page and the new website will include a direct daily newsletter. Remember our best price guarantee (call Kenny 1-800-225-7531 and save money). 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).