Commentary for Tuesday, Feb 11, 2014 – Gold closed higher again today up $15.50 at $1290.25 and once again getting ready for a test of the important $1300.00 overhead resistance. Gold is up for the 5th straight session today and closed at the highest level this month. It was helped by news that China imported some 25,000 kilos of gold yesterday from Shanghai. They have been absent from the market for a week and this bullish news added to announcements yesterday that their consumption increased by 41%.
Later in the session Janet Yellen talked with Congress for the first time in her new role and made points very similar to her predecessor Chairman Bernanke. She is very focused on the labor market and says that “recovery in the labor markets is far from complete”. That implies that although we are very close to the original target of 6.5% (now 6.6%) we will still see accommodative action by the Federal Reserve. She also later mentioned the Fed’s quantitative easing program could be accelerated if the economy stumbles (how about that insight).
Silver was up a modest $0.07 at $20.17 as 1 oz Silver Rounds seem to be on everyone’s buying list.
Platinum closed up $2.00 at $1387.00 a bit disappointing really considering gold’s strength and palladium closed unchanged at $717.00.
With everyone sifting through the Janet Yellen testimony today I think you will find she will make a steady Federal Reserve Chair ready to continue a monetary easing policy which has been in place for years. I listened to her comments; she is steady and measured. She will not be pushed around but is flexible in her defense of quantitative easing.
Gold closed higher continuing on a firm course which is not spectacular and why should it be? According to Yellen the disappointing economic numbers for December and January were a surprise but do not change the big picture. Quantitative easing will continue at a reduced rate, with no large changes so the Fed wants to slowly back away from this program and at the same time imply that long term interest rates will remain low and accommodative to the business environment.
All of this will increase overhead resistance on the price of gold. But if you are looking at a wild card keep an eye on large food stock companies because their earnings are flagging the reason being that inflation is capping their normal profit range. Inflation then is one of the Big Three for gold. The other two important factors are Asian demand for physical metal and flight to safety concerns if this financial recovery goes off the tracks.
But again look at the pop in the price of gold today. Clearly floor traders liked what they heard from Yellen and this latest move into higher territory draws further attention because stocks were also very strong today. A refocused stock market reconfirms that all is well with the American recovery and perhaps things really are improving. This should have been a negative for gold but was pushed aside probably because of Yellen’s comments to Congress.
So technically gold is looking better and its recent slow rise in pricing is encouraging in a world which has pretty much placed gold on the back burner. But let’s not get too excited as we are in prime territory for a pull-back technically and my bet is that paper traders are already considering profit taking.
Today’s commentary by Peter Hug (Kitco) is worth noting: Baby Steps – North American traders set the market up perfectly yesterday, edging gold near the $1,278 level by the close and allowing the thin opening in Asia to propel it as physical demand continues. Gold moved quickly to within $2 of our suggested $1,292 target and now awaits “guidance” from Janet Yellen. Technically, the market “looks” good, but momentum continues to concern me. Taking out $1,292 should create a path to around the $1,325 range, but speaking to the “chief dealers” at a number of institutions; their bullish convictions are soft with an attitude to take the money early. Nevertheless, the market creeps, putting in higher lows on retracements, and although not surging, taking out resistance levels one by one. It took a lot of work to breach $1,278 and now the bulls need it to hold.
Activity with the walk-in cash trade was active but not hurried. Incoming phone business was slow up to about 10 AM (remember we are in California) and then it went crazy and Yellen was still answering questions. Action subsided and they picked up again as the cycle repeated. After lunch the entire place went quiet so inconsistency rules for today. The public’s favorite area was first US Gold Eagles, and second 1 oz silver rounds. American Gold Eagles are always a big favorite and for some reason 1 oz silver rounds have moved into the first place silver bullion choice lately even outselling the mighty American Silver Eagle Monster Boxes.
The GoldDealer.com Activity Scale is a “4” for Tuesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 4) (last Thursday – 4) (last Friday – 4) (last Monday – 5) (Tuesday – 4). The scale is 1 through 10 and a reliable way to understand our volume numbers.
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