Commentary for Monday, Aug 12, 2013 (www.golddealer.com) – Gold closed up $21.80 at $1334.70 testing the upward end of the downward channel and broke to the upside. This crossover indicates short covering and buy stops and the follow through was strong reaching a high of $1343.00 before selling off. And today’s close was just under recent previous highs ($1336.00) so the technical picture continues to improve helped by continued support from physical buyers in both China and India. Also supporting higher gold prices today was data showing exchange traded funds are now buying.
Silver also snapped higher up $0.93 on the day at $21.33 but the physical action is disappointing given today’s surge and severe discount from recent highs.
Platinum was down by $2.00 at $1498.00 and palladium also moved lower by $3.00 at $738.00. The physical market at the CNI Building has some ice on it perhaps an air conditioning failure?
Kira Brecht (Kitco) is hinting at a bottom for gold and sees “a potential sloppy inverted head and shoulders bottom could be forming. If a confirmed close above the neckline it could project well above $1400.00.”
So is the gold market bottoming or not? I don’t want to harp on the advantages of owning gold too much because I have been in the business of selling gold for 30 years so it begins to sound self serving. And if you are a regular gold believer the standard case of “dramatically increased money supply eventually equals high gold prices” is singing to the choir. And if you are not a believer in higher gold prices there is really nothing so dramatic in the tea leafs to move you to action. After all the banks have not collapsed, the stock market is back on track and the general feeling of “doom” has moved to the back burner. But the background chatter is beginning to increase which favors gold ownership and this is something new. Stories of Greece failing and Germany not willing to pony up anymore dough or the inflationary binge now apparent with Bank of Japan coming to life. The JP Morgan “whale” investigation involving billions of dollars in losses will soon be at a theatre near you and President Obama wants to put an end to Fanny and Freddie replacing the lending giants with private enterprise. Even the President just talking about government withdrawing the punch bowl sent housing stocks off the cliff. My point being that the government dynamic (money) is so invisible today that it creates an unpredictable outcome even if the outward picture seems stable. So how does this relate to gold bottoming? Regardless of whether you believe or not the financial system now requires some outside protection from this monolithic government influence. I would even go further in saying that even nonbelievers will at some point be forced to participate in government default insurance (gold or silver bullion). This is just equal to good sense and may not have much to do with the actual price of gold bottoming or not.
Walk in trade and phone business was a big disappointment today given both Friday and Monday’s firm pricing in both gold and silver. But gold is rising against a generally stronger dollar so the dichotomy remains which mixes the result of a stronger dollar (economy driven) and what should be lower gold (because of the inverse relationship). So either the floor trader believes the proposed September tapering program is a bluff or the short players are running very scared (which might be good news for gold given the bottoming scenario). Like us on Facebook and follow us on Twitter @CNI_golddealer. Thanks for reading and enjoy your evening.
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Written by California Numismatic Investments (www.golddealer.com).