Commentary for Monday, May 5, 2014 – Gold closed up $6.40 at $1309.00 after reaching highs on the day of $1315.00 before settling. Trading overnight in Hong Kong and London was flat around the $1309.00 mark and in today’s domestic session we ran into overhead resistance approaching gold’s 50 day moving average ($1320.00).
This market is still primarily driven by Russian problems in Ukraine as dozens of people were killed this weekend as Ukrainian government forces tried to reclaim property taken by pro-Russian demonstrators.
But there are other background reasons for a firmer gold market coming out of Europe. Their Consumer Price Index was down 1.6% on the year which is deflationary. ECB President Mario Draghi has stated more than once that the European Central Bank will do anything necessary to avoid deflation which means quantitative easing continue to trump any austerity programs. It still remains to be seen just exactly what they have in mind but most figure they will follow the lead of the Japanese and American central banks.
Silver closed almost unchanged up $0.02 at $19.52. Judging by the big jump in physical sales when silver dipped below $19.00 it is clear the public likes the silver bullion market but is sold on price and sees no reason to overpay. This kind of sentiment will keep cap on any big run to the upside.
Platinum closed up $7.00 at $1447.00 and palladium was up $3.00 at $816.00. Not much of a stampede here but prices will remain firm as long as the Russian problem continues. Also keep in mind that sooner or later the notion that platinum, palladium and rhodium are cheap will help this market regardless of what gold or silver bullion do on the short-term.
Burton and Anita Folsom have published a great book called Uncle Sam Can’t Count – A history of failed government investments, from beaver pelts to green energy. (Amazon) Drawing on examples from the nation’s past and present—the fur trade to railroads, cars and chemicals, aviation to Solyndra—Uncle Sam Can’t Count is a sweeping work of conservative economic history that explains why the federal government cannot and should not pick winners and losers in the private sector, including the Obama administration. From the days of George Washington through World War II to today, government subsidies have failed dismally argue Burt and Anita Folsom. Draining the Treasury of cash, they impede economic growth, and hurt the very companies receiving aid. Why does federal aid seem to have a reverse Midas touch? As the Folsoms reveal, federal officials don’t have the same abilities or incentives as entrepreneurs. In addition, federal control always equals political control of some kind. What is best for politicians is not often what works in the marketplace. Politicians want to win votes, and they can do so by giving targeted CEOs benefits while dispersing costs to others. Filled with examples of government failures and free market triumphs, from John Jacob Astor to the Wright Brothers, World War II amphibious landing craft to Detroit, Uncle Sam Can’t Count is a hard-hitting critique of government investment that demonstrates why business should be left exclusively to private entrepreneurs.
From Mark Hulbert – Gold is likely to fall further before it rallies – CHAPEL HILL, N.C. (Mark Hulbert/MarketWatch) — Gold’s outlook is no better today than it was a month ago, when I said it still had further to fall before mounting a sustainable rally. That’s because there’s no widespread worry and panic, classic catalysts for gold. On the contrary, there appears to be an eagerness on the part of so-called gold timers to believe that every rally is the “real thing.” When gold is really about to stage a rally, according to contrarian analysis, the more likely reaction from the gold-timing community will be skepticism rather than eagerness. Consider the average recommended exposure to the gold market among short-term gold timers tracked by the Hulbert Financial Digest (as measured by the Hulbert Gold Newsletter Sentiment Index, or HGNSI). At gold’s low last June, 10 months ago, the HGNSI got as low as minus 56.7%, and at its low last December this average stood at minus 36.7%. Negative HGNSI levels mean the average monitored gold timer is short the market, betting on a decline. So levels from last June and December represented a lot of bearishness, and gold bullion dutifully rallied in the wake of both: 19% following last June’s reading and 16% after December’s. Today, in contrast, the HGNSI stands at minus 16.7% — negative sentiment, for sure, but nowhere near what it was on the two prior occasions. Worth focusing on is how the gold timers reacted to the geopolitical tensions surrounding Ukraine. After Russia took control of the Crimean peninsula in late February, the gold timers jumped on the bullish bandwagon — as you can see from the accompanying chart.
The gold timers weren’t being irrational, of course, since gold is widely touted as a hedge against geopolitical tensions. But the resulting exuberance proved to be too much for the gold market, as the gold timers’ eagerness caused bullion’s rally to quickly fizzle. As a result, even though the geopolitical tensions are no less pronounced today than in late February, gold has declined. Apparently, sentiment exerts a more powerful influence on the gold market’s near-term direction than do geopolitical tensions — at least those of the magnitude exhibited during the Ukrainian crisis. According to contrarian analysis, a tradeable low will come when there is a lot more bearishness than there is today, as evidenced not only by a lower HGNSI reading but also a reticence to jump back on the bullish bandwagon when a rally does begin to materialize. We’re not there yet — which is why I conclude this column with what I said a month ago: “Gold is headed lower before it heads much higher.”
I thought the above might be an interesting look into the paper world of gold trading to our readers which are physical buyers and sellers. You might have to read Hubert’s commentary a few times to get this idea but remember there are many gold services (Hubert calls them gold timers) which will recommend paper trades either short (gold will move lower) or long (gold will move higher).
Of course this is not possible in the physical gold business because it requires a specific type of license and the business is controlled and monitored by the Federal Trade Commission. I don’t recommend futures trading for amateurs although it is used in the physical business to hedge inventory.
At any rate Hubert is a smart fellow who has been around for years and now works for MarketWatch. He monitors a group of gold trading newsletter services and watches averages. If the resultant number is negative it means the service is recommending a short position or they believe the gold market is moving lower. At gold’s low last June more than 50% of the newsletters were recommending short positions and today we are still negative but the number has moved to about 16%. To put it another way paper players are a lot less negative today than they were last summer. Still negative is negative so sentiment among professional services remains bearish. And even if this index moved into positive territory it would not mean higher gold prices are assured. But it would mean those who sell this information for a living have a positive attitude. This type of bookkeeping is interesting and people watch carefully what Hubert has to say about gold. The genesis of the idea is probably more technical than fundamental but it helps make decisions easier especially if you are trading on a regular basis.
The walk-in cash trade today was a none-event and the phones were not much better. Business is not exactly slow but there is no buzz especially when you consider what is going on in Russia and Europe. Even the stock market is showing some red ink so perhaps the public like treasures on the short term until things settle down. If your interested in investing look at the PAMP Suisse Gold Bar Kilo and the Canadian Silver Maple Leaf 1 oz coin. Both have very low premiums.
The GoldDealer.com Activity Scale is a “3” for Monday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Tuesday – 5) (last Wednesday – 3) (last Thursday – 4) (last Friday – 3). The scale (1 through 10) is a reliable way to understand our volume numbers.
We are thinking of putting an In and Out Wagon in our parking lot when the need for a hamburger arises. Everyone loves a good hamburger and we thought it would be a nice way of saying “thanks” for the business. Anyone with a tax free invoice ($1500.00) can get a free Double/Double on the way out. The truck would be in the parking lot about 2 hours and we would have tables in one corner. The upside to this idea is getting a great hamburger when you make a purchase in person. The downside is that while we have a large lot this idea might create a parking problem for vegetarians. Please opine at RSchwary@aol.com and thanks for the input.
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.
This makes product comparison simple and GoldDealer.com is the only precious metal site on the internet with this transparency. Live Chat is doing well and new customers like setting up their own encrypted accounts. We recommend upgrading old browsers to Google Chrome (free/secure) especially as our site becomes more advanced.
Sign up for our daily Gold Newsletter on the Gold Newsletter page if you are so inclined. Also note that our old Specials Email list is not compatible with the new format so we have cleared all data.
If you want to be notified about specials please check the Special Offers box under All Bullion Products. Also note that the email list for the Gold Newsletter and our Special Offers are separate.
Email confirmation using a PDF File when buying or selling is functional and includes payment instructions. You can now see the actual invoice or purchase order on your computer screen.
When you buy or sell please check to see if we have your current email on file and that your computer will accept our email (no spam).
Our four flat screens downstairs with live independent pricing (BullionDesk) 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.
Our best price guarantee (buying or selling) remains famous so call Kenny (1-800-225-7531) and get more money in your pocket. We guarantee your satisfaction and include our No-Nonsense Policy (NNP) which clients consider a welcomed extra. Like us on Facebook and follow us on Twitter @CNI_golddealer. Thanks for reading and enjoy your evening.