Commentary for Thursday, April 10, 2014 – Gold closed higher today up $14.60 at $1320.10 so we are a bit more comfortable above the $1300.00 support level. But I would not consider this anything to write home about because there is a mountain of overhead resistance between where we are now and where we were when gold entered its last round of weakness (March 14th). This most recent high was $1380.00 and considering how fast we lost $100 per ounce gold will need to muscle up over something, which to me is not yet on the horizon.
Still any rising market makes the bulls smile so the general census relative to higher ground today relates to yesterday’s dovish FOMC (Federal Open Market Committee) comments which assures the market that quantitative easing will remain in place. And the 5 day trend in the dollar index is also decidedly lower supporting gold.
From Chuck Butler (Everbank World Markets) – “The FOMC Meeting Minutes (The Minutes) spelled it out plain and clear for everyone even the market participant with the thickest of heads, that their forecasts OVERSTATED THE RATE RISE PACE! That’s right, just like I tried to tell you that the Fed Heads can’t hike rates, not yet, anyway. And not in the next year either! It was as if the Fed Heads said, “Oops did we say that out loud? This news hit the markets running, and the dollar was sent to the woodshed Immediately! Look, if all the media and markets didn’t get so hyped up by a smartless comment by Janet Yellen in the first place, they wouldn’t have to reverse all the dollar buying they made then, now! But, it is what it is. And since the currencies and Gold got sold like funnel cakes at a state fair when Yellen OVERSTATED THE RATE RISE PACE! So, it’s only fair that the markets return the favor to the dollar, and sell the dollar like funnel cakes at a state fair! So, that’s what we have going on this morning, and probably throughout the day, as there’s not much else going on to change this course. Of course there’s always the PPT in the shadows, but so far no sign of anyone defending the dollar.”
Jim Wyckoff (Kitco) takes the usual view on China – “In overnight news, China’s latest trade data again disappointed the market place. March exports were down 6.6% year-on-year, while imports fell 11% in the same period. Part of the decline in exports was blamed on companies over-inflating their invoices on exports last year. This news is a bearish underlying factor for the raw commodity sector, as China is the world’s largest raw commodity importer.”
I disagree based on CNBC this morning which claims that the boarders between China and Singapore may soon be open which could help the Chinese immensely in their economic transition. And I have never understood why everyone questions a 6.6% growth rate? That number is smoking in any way you cut up the pie and now realize that China, like the US has no problem with their own quantitative easing program if they sense a hiccup. All of this must eventually lead to higher inflation numbers and remember that the “overbuilt” scenario often used relative to China might not hold much air when you consider the massive number of people they have who want a better life.
Also there is not much commentary on the continuing Russian problem relative to Ukraine: first front burner, then back burner then no burner. But make no mistake about it because a real blow up in this region will push gold higher. But this is lunacy and even if the Russians are drinking too much vodka world leaders will pay only lip service because the repercussions could be larger than life. So expect lots of talk but no real action and only mild sanctions. And the LA Times this morning claims the Jewish/Palestinian talks are once again deteriorating. Both of these political problems might also lead to increased safe haven buying.
According to USA Today: “The number of Americans filing new claims for unemployment benefits fell last week to its lowest level in seven years, beating economists’ estimate and reflecting an improved outlook for the job market. For the week ending April 5, seasonally adjusted initial claims fell 32,000 from the previous week to 300,000, the Labor Department said Thursday. The last time the number dipped below 300,000 was in May 2007.”
So far no pressure on wages but a growing workforce eventually pushes wage requirements higher and so can be inflationary over the mid to longer term. We have not seen much in the way of recognized inflation which is one of the big reasons gold has been a none-performer lately, but things in this area change quickly and are not that easily corrected once the inflation number begins to creep higher.
Silver closed up $0.32 at $20.07 again in quiet trading. You might also want to read all of Lawrence Williams silver article on MineWeb.com : “This brings us back to gold and silver’s general tendency to move in line with the yellow metal’s price but faster – in both directions. Should gold continue its upwards progress this year it is certainly in the cards that silver will resume this kind of relationship with its sibling. Currently the Gold:Silver ratio is around 65 – as against an oft quoted historical ratio of 16. Now while we don’t think the 16 level is likely to be achieved again as silver can no longer be seriously considered as a monetary metal as it used to be when this ratio was prevalent, it is definitely possible the ratio level will drop, and it could drop sharply below its current level. There remains huge investor interest in silver and coupled with what we see as a likely growth in industrial usage, along with a possible drop in mine supply over the next couple of years, the prospects for it to perform better than gold remain strong. However it should be borne in mind too that silver is a very small market in the overall scheme of things and thus perhaps more subject to potential market manipulation than for any other major traded metal we know as it does not take a lot of money to move the market up or down. This will continue to make investment in silver probably more risky than in gold – it’s not known amongst traders as the Devil’s metal for nothing. But overall the portents do not look to this writer nearly as gloomy as some would have you believe. Today the Austrian Silver Philharmonic 1 oz was very popular.
Platinum was up a big $22.00 at $1459.00 and palladium up $11.00 at $793.00. The Baird Rhodium bar 1 oz is selling at $1285.00. The common wisdom here is that there is enough supply to keep the lid on prices. I don’t believe this is the case and the reason all three are not much higher in price is because they do not have enough public exposure.
The walk-in cash trade was average today and actually I expected more with the pop in prices. The phones were quiet until after lunch and then things picked up considerably. This may turn out to be one of those physical “lag” days in which the public suddenly notices pricing are rising and so takes action.
The GoldDealer.com Activity Scale is a “3” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Friday- 4) (Monday – 6) (Tuesday – 3) (Wednesday – 4). The scale (1 through 10) is a reliable way to understand our volume numbers.
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