Commentary for Tuesday, June 10, 2014 (www.golddealer.com) – Gold closed up $6.30 at $1259.80 on a short-covering bounce today despite a stronger dollar. But the mood on the floor continues to be very lackluster – so the bears and bulls are now tired.
This from Ed Steer (Gold and Silver Daily) – Indian, Chinese Central Banks on track to absorb 90% of Gold mine output – MUMBAI (Scrap Register): Indian and Chinese central banks on track to absorb the equivalent of 90% of all mined gold production this year, said ETF Securities in its Precious Metal Weekly. China, India and central banks absorbed just over 80% of global mine supply in 2 013 according to recent data. Recent data indicates that these three entities alone are likely to absorb the equivalent of nearly 90% of mine production in 2014m said ETF Securities. Demand from India is likely to increase with the curtailing of the 2013 import restrictions. Central banks purchased 122 tons of gold in Q1 which is essentially unchanged year-on-year and China’s imports of gold from Hong Kong are up 18% year-on-year as of April.
I believe it has only been since 2004 that Chinese citizens could buy gold with the government’s blessing. Of course their underground market has been alive and well for 5000 years and also consider there are 1.38 billion people in China today. The point being they could easily absorb all the gold in the world and leave Indian demand in the dust.
I have never like the use of “tons” in describing gold transactions but could never think of a better way to describe the transaction. The world “ton” to me imparts a large quantity and if we were talking about potatoes it would work fine. But we are talking about “real money”.
If you are also looking for a relative value in today’s fiat currency world consider that 165,000 tons of gold exists today above ground which amounts to $8.5 trillion dollars or about half of today’s US debt.
Silver closed up $0.10 at $19.14 and the sale of monster boxes seems to be picking up at this lower end of the most recent silver pricing model.
Platinum closed up $28.00 at $1482.00 and palladium was also higher by $12.00 at $854.00 probably on news that union/mining talks broke down yesterday as both sides still seem far apart. This coupled with climbing car sales must at some point lead to a further price squeeze. The high closing price for platinum this year is $1493.00 and this represents a 36% decline from the all-time high of $2300.00 (2007) so prices still remain at bargain levels.
The International Metals Institute (IPMI) meets each year during the summer months and participates represent every aspect of the precious metal business. These types of conventions are important not just to rally the troops but to share information between precious metals professionals.
The consensus is that things are slow for everyone (we agree) but all the news is not discouraging. There are bright spots in the physical demand market (India and China) and Jeffery Christian (CPM/Kitco) talked about the big demand coming out of Switzerland.
But the real question all professional dealers face today is whether gold has actually bottomed. Everyone has an opinion and each opinion is usually supported with an either/or scenario because the bulls and bears can’t seem to make up their mind.
Professionally I think there is a downside bias which is usually kept behind closed doors – because it’s kind of like playing the Don’t Pass in Vegas. You can make money at it but when you cash in the whole table loses and you are the party pooper.
Everyone likes higher prices in anything (stocks, real estate, precious metals) because it represents the best possible outcome for the rank and file investor. The corner guy in the plumbing business does not want to hear about writing paper options – he just wants to buy a few ounces of gold and save it for a rainy day. And if that insurance policy goes up – so much the better and he is ready to repeat the process.
In a steady to down market the fizz in the champagne is missing. Not only the guy on the street but all professionals who make their living buying and selling the metals become doubtful. You can talk about higher demand or secret buyers all you want but without an upward pricing trend it will have little effect on the psychological mood of this market.
Today’s pop in the price of gold does not qualify because the market mood is downbeat the higher price will be seen as just a short covering rally. And most honest professionals will share that at this time that is about all that can be expected in this drawn out unwinding.
It is not that I’m disappointed prices are not going higher because over the years you come to expect both bull and bear markets.
But the “selling” of this generally negative news is not easy. So meetings like the IPMI help professionals take realistic stock of what other dealers are experiencing. Overall the meeting coordinator would like a positive spin more than anything else but in the end trade people react just like the public and most hate to play the Don’t Pass.
They are still working on two new systems within the CNI Building so the walk-in trade cash trade was below average. The phones were below average and even with a small pop in prices today there does not seem to be much buzz in the air. I am definitely back to my popcorn machine idea and the hamburger truck idea got more negatives than positives but I remain hopeful.
The GoldDealer.com Activity Scale is a “4” for Tuesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Tuesday – 6) (last Wednesday – 6) (last Thursday – 8) (last Friday – 6) (Monday – 4). The scale (1 through 10) is a reliable way to understand our volume numbers.
Live pricing on the site moves all bullion products up or down during the day. The Bullion Products link on the home page now includes our Bid (blue) and Ask (green) prices. Premium quotes vary with product and look like this “spot plus $15.00” or “spot plus $50.00” and bullion products list them under the live prices on their respective landing pages.
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The new USPS server is installed with the upgraded post office software! This new system will allow you to track USPS like Fed Ex – provide pinpoint location – allow you to reschedule if you were not home during the delivery and even provide text updates in route.
Our four flat screens downstairs with live independent pricing (BullionDesk.com) are a big hit with the cash trade. This live stream moves all buy/sell prices so the cash buying or selling public can see the markets move on a real time basis. Our site uses the same pricing model so no more guessing and we guarantee your satisfaction.
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