Commentary for Thursday, Jan 23, 2014 – Gold closed up $23.60 today at $1262.60 and the strength of gold was surprisingly strong given recent profit taking and is the result of just released Chinese economic numbers which disappoint.
Most of the Pacific Rim took these manufacturing numbers to mean there is continued trouble in China and so regional stocks moved lower. There is also a Federal reporting issue relative to China regarding full disclosure which is troubling. US stocks looked weak yesterday and this news today sent them lower – the dollar moved lower and gold gathered strength.
I think too much is made of the so-called developing China disclosure but even Cramer made a big deal out of possible paper default within her banking system.
There was even the news that India will ease import restrictions which joined the party.
Gold did jump higher probably because trouble in stocks generally woke up the large gold short contingent and we are seeing another short-covering rally within a minor uptrend channel. Unless we see significant follow through from current levels I expect gold will once again sell off and remain range bound between $1230.00 and $1260.00.
Technically the bears are still in charge but I would reconsider if gold breaks above $1260.00 because shorter term momentum players might decide there is money in the trade. Now is the time to watch the moving averages carefully: Gold 50 Day ($1238.95) – 100 Day ($1285.45) – 200 Day ($1325.25).
Silver closed up $0.18 at $19.98 and we saw some mid-size selling over the counter today. Also worth watching are the silver moving averages: Silver 50 Day ($19.98) – Silver 100 Day ($21.11) – Silver 200 Day ($21.51).
Platinum closed up $1.00 at $1463.00 and palladium closed down $3.00 at $746.00.
The continued tapering of the Fed’s monetary easing program will keep a lid on gold prices. Expect another $10 billion reduction in the spending sooner than later.
I love the contrarian position but it can wear on you especially at the lower end of the demand curve. So this from MoneyNews is encouraging: “Steven Kaplan, CEO of TrueContrarian.com expects that with so many leaning in one direction, the unexpected could occur. Because “financial markets always do whatever rewards the fewest people, a powerful rally in 2014 is therefore extremely likely,” Kaplan predicted. He is calling for gold to charge to a new all-time high in late 2014 or early 2015. Another noted investor known for fighting conventional wisdom tides, DoubleLine CEO Jeff Gundlach, also has said he expects a gold upswing in 2014. The Hulbert Gold Newsletter Sentiment Index concludes the average short-term gold timer is recommending that clients put 30 percent of their gold-oriented portfolios into going short, MarketWatch reported. David Morgan, publisher of The Morgan Report, estimated only about 6 percent of analysts are bullish on gold now, which he predicted “nearly guarantees a bottom.” He expects gold to achieve $1,700 per ounce in 2014.”
Recent Reuters: (1) Platinum eased from a 2-1/2 month peak hit on Monday as half of world platinum production is set to grind to a halt on Thursday as South Africa’s hardline Association of Mineworkers and Construction Union vowed to press ahead with a strike over pay. (2) A South African court ordered the AMCU union to suspend its planned strike in the gold sector pending a ruling on whether the action is legal, the Chamber of Mines said. (3) SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings fell 1.20 tonnes to 795.85 tonnes on Wednesday.
The platinum news continues to favor higher prices but Kitco’s Hug thinks platinum is too expensive relative to gold. I usually like Hug’s thinking but on this one I will take the other end of the trade. I still can’t figure out why platinum is so cheap. It has a great deal of upside regardless of what gold does short or long term.
The South African court order to suspend a planned gold mining strike will have little to do with the price of gold in the short or medium term. No one cares at this point and this information will be lost in a market which feels heavy and is still looking for good news.
It is clear that the gold traded funds are leaking but most of the damage has been done. The amount of loss month over month continues to be smaller and smaller increments. The core holdings will remain in the long game and will be positive for gold medium to long term.
The walk-in cash trade was steady but not busy. The phone business was exactly the same and the number of fresh pots of coffee is moving in the wrong direction. Don’t laugh this is also an excellent gauge of relative activity.
The GoldDealer.com Activity Scale is a “4” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Friday – 4) (last Tuesday – 5) (Wednesday – 6) (Thursday – 4). The scale is 1 through 10 and we believe this is a reliable way to “sense” real bullion business.
On the New GoldDealer.com site: Comex closing prices are posted (upper right hand corner of the home page) and are included on individual landing pages. Live pricing and the change function works: you can now compare the Comex close with live product pricing for a true value picture.
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