Commentary for Monday, March 10, 2014 (www.golddealer.com) – Gold finally closed up $3.30 today at $1341.40. And this was a push-pull market caused by the Chinese and the Russians. The possible Chinese slowdown (decreasing demand for aluminum and copper) pushed all the Asian paper markets into the red and because gold is a commodity there was a drag on prices. Now add the comment from the Chinese gold association saying that demand in China could drop as much as 17% as a result of higher prices. And consider that China is now the world’s largest physical gold consumer as citizens look for a store of value. If you are a complete pessimist you might say that the Chinese are trying to talk the price of gold lower but this sounds doubtful to me.
The Russian part of this story is of course the Crimea. Like I said Friday do not dismiss the Ukraine and don’t assume Russia is some sort of honest broker. This region could turn out to be a bombshell and until things settle any escalation will push gold prices higher regardless of the much talked about political solutions the US is trumpeting. Both the President and John Kerry would end up looking poorly.
Also consider that the gold ETF (GLD) has recently (Feb 21st) increased its holdings moving from 798 tons to 805 tons. It was not too long ago that all gold exchange traded funds were running for cover so this modest increase comes as good news and perhaps the worst is over for gold backed paper certificates.
Silver closed down $0.02 at $20.88 and again the physical silver market seems quiet. Silver has moved below its 200 day moving average ($21.00) which is not good for momentum players but I would not be jumping out the window at this point. Premiums on early silver dollars (1878-1935) seem strong but that is only because the telemarketing machine is hard selling these early dollars by telling the buyer they contain an ounce of silver. Early silver dollar contain about ¾ of an ounce so do the math. They are worth a premium but let’s not get silly.
Platinum closed down $6.00 at $1477.00 and palladium closed down $5.00 at $776.00 in a round of profit taking and the public seems to like the idea that the US Mint is once again producing the American Platinum Eagle 1 oz which was last minted in 2008.
From Reuters – Morgan Stanley lowered its gold price forecasts for 2014 on Monday, citing the impact of the US Federal Reserve’s reduction of stimulus along with mounting regulatory pressure on investment banks to scale back commodity operations. Despite a falling US dollar gold price, legal Indian gold imports remain low, in contrast with strong Chinese physical gold demand, the note from Morgan Stanley said. The steep sell-off by ETFs in 2013 countered the cushion provided by strong consumer demand for gold, resulting in a decline in gold prices, the bank added. “The lower price environment will pose significant challenges for gold miners given the substantial rise in costs over the past decade,” the bank said. Morgan Stanley lowered its 2014 average price forecast for gold by 11.6 percent to $1,160/oz, and cut its average 2015 gold price forecast by 12.5 percent to $1,138/oz.
And before you sell your gold holdings consider this from Carolyn Cui (Wall Street Journal) – Investors are piling into debt that protects them against inflation at the fastest clip in nearly two years, amid signs of wage growth and higher energy costs. In the week ended Wednesday, funds that invest in Treasury inflation-protected securities, or TIPS, took in a net of $359 million, the largest weekly inflow since May 2012, according to EPFR Global. The gains reverse outflows that started last April, as investors began bracing for the Federal Reserve to start reducing its monthly bond purchases. This week’s influx is a sign that inflation fears are creeping back into some investors’ minds after a long spell of quiescent prices. Oil and natural-gas prices rose sharply amid this winter’s bitterly cold weather, and surged again as Ukraine tensions increased. In the U.S., the latest employment report showed the average hourly earnings grew 0.4% last month, the biggest increase since August. Since the beginning of this year, the five-year break-even rate, a measure of the market’s inflation expectations, added 17.7 basis points, or hundredths of a percentage point, on Friday to 2.01%. The rate has only rarely exceeded 2% since the financial crisis, amid soft economic growth. TIPS are bonds or notes issued by the U.S. government that provide a shield against inflation. If the consumer-price index goes up, the principal on TIPS goes up, too. That boosts semiannual interest payments and repayment of principal at the date of maturity. In 2013, TIPS suffered their worst annual losses since inception in 1997, losing 8.6% in terms of total return, reflecting interest payments and price changes, according to Barclays BARC.LN -2.72% PLC. As a result, investors redeemed as much as $16 billion from TIPS funds globally. But the rally in energy prices this year has reawakened inflation fears in some investors’ minds and halted the outflows. Year to date, crude prices are up 3.5% and natural gas has risen 10%. Energy accounts for a large part of the consumer-price index. Outside the energy sector, some analysts see more signs of higher prices, which will eventually lift the still-subdued core CPI readings later this year. Core CPI excludes volatile food and energy costs. In a note to clients this week, Barclays chief U.S. economist Dean Maki said he expected the core CPI to reach 2.2% in the fourth quarter this year, up from 1.6% at present. One of the main sources of inflation is likely to come from shelter: As the apartment vacancy rate continues to fall, rental demand is expected to grow and push up rental prices. “Overall, we see the combination of rising shelter inflation, firmer wage growth, and less disinflationary pressure from sequester cuts and global growth producing a gradual rise in core inflation later this year,” he wrote in the note. Sequester cuts are federal spending reductions stemming from a 2011 deficit-reduction agreement. So far this year, TIPS have outperformed nominal Treasurys, luring some investors to allocate some fixed-income assets back into the sector. According to Barclays, TIPS were up 2.2% as of Thursday, while the U.S. Treasurys gained 1.3%.
The walk-in cash trade has moved from about average to boring and the phones were also on the slow side but there were a great deal of questions today and about 20% of the inquires were from customers not in our data base so this is encouraging. If you are buying or selling please ask the representative to check your address and email. This system is now automated.
The GoldDealer.com Activity Scale is a “5” for Monday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Tuesday – 4) (last Wednesday – 3) (last Thursday – 3) (last Friday – 3). Our scale (1 through 10) is a reliable way to understand volume numbers. For those who asked it is possible to have a lower Activity Scale and higher walk-in or phone traffic. When such a metric shows the public is asking questions but not buying or selling. So we are busy but not writing any orders which happens from time to time especially when the metals are conflicted.
On the new GoldDealer.com site: Comex closing prices are posted on the home page and individual product landing pages. Live pricing on the site moves all bullion products up or down during the day. The change number included next to the live pricing uses yesterday’s Comex closing prices as a reference. So if the change number is green and shows up $3.00 this is in reference to yesterday’s close. You now don’t have to visit several sites to find the Comex close relative to live trading numbers which are independently verified.
We reworked the All Bullion Products link on the home page. It now includes our Bid (blue) and Ask (green) prices. When you hover over it with your cursor the text is highlighted.
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 net with this transparency. For example click on the link American Gold Eagle and under Our Live Buy Price and Our Live Sell Price you will see: our Buy Premium Spot + $15.00 and our Sell Premium Spot + $50.00 – Easy.
Live Chat is doing well and new customers like setting up their own encrypted accounts. Improvements will continue through the 1st quarter of 2014. Let us know what you want. 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 and remember this is now live for you too so why not sound off? Reader insight is interesting and varied.
Email confirmation when you are buying or selling is functional. A PDF file will be added which will create a picture invoice identical to the store invoice. This invoice will include information like wiring instructions.
The four flat screens downstairs with live independent pricing (BullionDesk.com) are a big hit with the cash trade. This live stream moves all the buy/sell prices on each product so the cash buying 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 toll free (1-800-225-7531). We have guaranteed complete satisfaction for 30 years, same place, same people, and no changes in management. Like us on Facebook and follow us on Twitter @CNI_golddealer. Thanks for reading and enjoy your evening.