Commentary for Monday Sept 16, 2013 (www.golddealer.com) – Gold moved up $9.50 in a short covering bounce to close at $1317.90 but the session was uninspired after last week’s $78.00 loss. The dollar has been generally weaker these last 5 trading days so there is a discount as oil settles.
The Federal Reserve will meet this week and the markets expect some taper in the quantitative easing program decisions to be announced after the Wednesday meeting. To make the record clear Fed Chairman Bernanke never used the word “taper” and the last thing he wants to do is reduce stimulus before the economy recovers.
Lawrence Summers has withdrawn his name in the race for the new Federal Reserve Chairman which leaves Janet Yellen as the lead candidate. Gold imports into India fell to 3.5 tons in August which is about a tenth of normal inflow and is attributed to the government’s laws limiting imports.
Silver closed up $0.29 today at $21.96 in very lazy trading. I was recently listening to David Morgan’s (The Morgan Report) silver comments and he framed an idea nicely (paraphrasing): the total amount of silver bullion available at any given time is fixed but that product available to physical buyers varies considerably depending on price. In other words in a mature market there is much less for sale under $20.00 an ounce than there might be at say $50.00 an ounce. Now this might sound intuitive but it is an important principle to remember when thinking about real silver bullion. And my across the counter experience supports this notion as we saw virtually no big sellers below $20.00 so for those considering how to price silver this type of thinking might keep you from feeling like you are going out on a limb.
Platinum was down $4.00 at $1442.00 and palladium was higher by $6.00 at $704.00 and ice has returned to the PGM trading desk. By the way Rhodium remains on my radar and a small accumulation at these cheap levels in recommended.
The modest bounce in gold was the relief rally I talked about Friday and was expected as short players covered their positions and bargain buyers averaged down. I read Larry Summers withdrawing his hat from possible Bernanke replacement differently than most commentators. He was the front runner over Janet Yellen but the President changed his mind and gave Summers the opportunity to withdraw: this would mean Obama and followers are not as convinced things are moving forward as their press coverage would suggest.
Summers is the most hawkish of the choices (so pro taper) and anyone else would better support the old Bernanke programs (quantitative easing). Time will tell and the Fed meeting this week is important but you might find that given the current numbers the Fed might once again pass as to immediate changes in their bond buying program.
Also keep in mind there are other cross currents which are difficult to figure. The budget mess could throw water on the current stock market strength especially if partisan arguments are ugly and suggest a safe haven shift until things cool off. Less or no taper would mean interest rates continue lower which is good for gold. There could be a September Surprise in the physical markets especially if the new Fed Chair sounds more dovish than expected. Money is beginning to circulate and with continued lower interest rates the inflation rate might come to life. The US stock market could easily reverse direction and follow the dollar lower on profit taking supporting gold.
Finally don’t under estimate the Syrian and Russian resolve to out-fox the US. Russia wants assurance from any players in this endgame that her only base of deployment in the Mediterranean will remain untouched no matter what happens. And never trust either the Syrian government or Russians to be honest brokers so expect something to go off the rails in this latest negotiation over gas stockpiles. Syria and the greater Middle East will remain a hot spot supporting gold.
Like I said “cross currents” which will push gold higher or lower so expect continued volatility coupled with a relatively wide trading range.
This from Larry Edelson (Money and Markets): “Gold and silver have backing and filling to do. They have a lot of investors they still need to chew up and spit out. They will not bottom until most investors have turned outright bearish on them.” Like Larry I am not convinced the last time gold touched $1200.00 (June) should be called a true bottom because the follow through above $1400.00 (Aug) was weak and created not by demand but pushed to unrealistic levels by the Syrian problem.
This does not mean I would not buy dips in the meantime because buying dips has been my approach to gold bullion investments for years. It has worked extraordinarily well this past decade when gold was strong but even if gains were not strong I would still suggest the same approach. It just makes sense to use gold as a kind of insurance policy and at the same time it is available for cash if the need arises.
The real question I get today about gold is as follows: Are you positive or negative on the price of gold? Get ready…for the obvious. It really depends on your time frame. Not long ago a reader wrote that he has an extra ($100,000.00)…nice extra. He wanted a suggestion which would guarantee him safety and income over the next two years. Well of course no such “gold” investment exists so I asked why he asked: the short answer was that he was being played with several suggestions which would fulfill his wishes by telemarketers. So this admonition: gold or silver phone people will make up a story to fit your exact circumstances including the promise of profit because they are paid big commissions on all sales.
Another recent attempt at robbing you of your IRA retirement money is the sale of the Canadian silver Polar Bear by people charging premiums over melt which will make even professionals blush. The Polar Bear (1.5 ounces of silver) is a gimmick silver coin designed to punish the buyer with promises of limited production and a weight which is not easy to figure if you are new to the IRA investment game.
So let’s be careful out there and if you do not know exactly what you are doing please follow this advice. Do nothing and simply make a number of telephone calls before confirming any transaction.
I would say the walk-in and phone business today was again relatively active but did not create any pressure. The CNI computers place my almost famous LA Physical Trade Business Number at a receding “2”. For those who have asked this scale is actually based on combined volume numbers and anything over “5” would be relatively busy.
Everyone likes treasure but finding treasure is more fun than buying treasure. CNI is giving away (no purchase necessary) a dandy metal detector on our Facebook page: to enter the contest just “like us”. Of course this is a shameless self promotion but the detector is the real deal (Garrett) like the ones used on the reality TV show Diggers. So like us on Facebook and follow us on Twitter @CNI_golddealer. 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).