Commentary for Friday, Jan 17, 2014 – Gold closed up a nice $11.70 today at $1251.70 as consumer sentiment moves lower. The technical picture for gold short-term is improving as it moved above it 50 day moving average ($1243.00). We are also seeing numbers from housing that may give pause to this steady taper idea posed by the Federal Reserve. Today’s Michigan Consumer Sentiment Index was unexpectedly low at 80.40 down from 82.50. That may indicate consumers are still not on board relative to the expected economic turnaround.
Silver closed up $0.24 at $20.26 and sales of 2014 Silver Eagle Monster Boxes are picking up which is usual for a new issue product. It is interesting that even with a pop in Monster Box sales the modest 1 oz silver round is still in the lead relative to numbers.
Platinum followed gold higher up $22.00 at $1453.00 and palladium was up $5.00 at $748.00. Both are supported by positive commentary and mining strike issues.
From Reuters: “In the near term, we are likely to see sideways trading, as the impact of a negative investment climate is offset by good physical demand.” The latest economic data from the U.S. showed that the number of Americans filing new claims for unemployment benefits fell for the second consecutive week last week, suggesting a sharp step-down in job growth in December was likely to be temporary. The better labour market tone was also captured by a survey on Thursday showing an acceleration in manufacturing activity in the Mid-Atlantic region, accompanied by a rise in factory jobs. Earlier this week, the World Bank raised its forecast for global growth for the first time in three years as advanced economies started to pick up pace, adding to the pressure on gold prices. In China, premiums for 99.99 percent purity gold on the Shanghai Gold Exchange rose slightly overnight to $14 an ounce from $13. Buying from China, the biggest gold consumer, has been robust in recent weeks ahead of the Lunar New Year holiday on Jan. 31. Among other precious metals, platinum gained 0.4 percent as members of South Africa’s Association of Mineworkers and Construction Union voted in favour of a strike over wages at the world’s third-biggest platinum producer Lonmin. AMCU members have voted in favour of a stoppage at Impala Platinum, and the union will canvas its rank and file at Anglo American Platinum as well. The three are the world’s top producers of the platinum and account for more than half of global output.
My point about seeing a push-pull gold market based on physical demand is illustrated. But the more interesting comment is the continued unrest among the platinum mining industry. This has been going on for some time now and has gotten press but for reasons unknown has not pushed platinum prices higher to any degree. Car production is going crazy, the EU is getting better and there is not much in the way of platinum reserves. Still no particular buzz in the PGM metals which does not figure.
And now the famous Kitco Weekly Survey (drum roll please) – A majority of survey participants in the weekly Kitco News Gold Survey expect higher prices next week as they said they believe prices will try to sustainably break through the stubborn resistance at $1,250 an ounce. In the Kitco News Gold Survey, out of 33 participants, 27 responded this week. Sixteen see prices up, while eight see prices down and three see prices trading sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts. Last week participants were bullish. As of noon EST, February Comex gold prices were up $6.40 on the week. Several survey participants who see higher prices said they expect improving technical charts may support the yellow metal. “Gold has done a good job of confounding and confusing the consensus, who were nearly all convinced at year-end gold had only one way it could go: lower. But (Comex gold futures) open interest is up (over) 30,000 contracts, accompanying the rally, and technically it appears to have enough momentum to reach the $1,275 area … (around the) 38% Fibonacci retracement of the December low and August high. I expect that can be achieved next week,” said Ken Morrison, editor of Morrison on the Markets. Adrian Day, chairman and chief executive officer, Adrian Day Asset Management, pointed to other reasons for gold’s strength next week. “(The) recent jobs report, notwithstanding distortions that could have resulted from the extraordinary December weather, was weak, showing more people leaving the job market — and thereby helping the unemployment number. We suspect that the expectations for monthly reductions in bond buying will prove to be overly optimistic; any tapering of the taper would boost gold,” Day said. Those who see weaker prices next week think the current rally in gold won’t last, and at least one participant, Kevin Grady, president, Phoenix Futures and Options, gave a different view about the rising open interest in gold futures. “I think gold will be lower next week. The open interest in gold jumped by 32,000 contracts over the past week. I believe those are passive longs entering the market. Even with those new positions gold managed only a meager rally. I believe that once this buying subsides … gold will continue on its downward trend,” Grady said.
The walk-in cash trade was busy most of the day…all buyers. National phone action was steady but lacking any whales. The GoldDealer.com Activity Scale is a “4” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Monday – 4) (last Tuesday – 5) (last Wednesday – 4) (last Thursday – 3) (Friday – 4). The scale is 1 through 10 and we believe this is a reliable way to “sense” real bullion business.
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