Commentary for Thurs, May 15, 2014 – Gold closed down $12.20 today at $1293.50 which is disappointing but typical of a market which just can’t seem to hold on to higher ground.
The US economic picture improves and today the weekly jobless claims dropped to its lowest level since May 2007 according to MarketWatch. This will enforce the Federal Reserve tapering of its monetary easing program and the result will continue to pressure gold.
The Consumer Price Index was up 0.3% in April – so higher than its March reading of 0.2%. This was in line with expectations and failed to ignite the inflation motivated buyers. Yesterday’s Producer Price Index which is seen as a more forward indicator was up 0.6%.
The stock market was in decline today and while I don’t think things are going too far south I would consider taking some profits at this point. I can’t be alone here so this possible shift in paper thinking might benefit the physical gold market.
We have been tracking the largest gold and silver exchange traded funds and posting results each Wednesday. We will now expand this coverage to include the total of all exchanged traded funds each Wednesday which should be interesting.
And for the record ETF’s worldwide have slipped to the lowest total we have seen in 9 years. Specific totals to follow this coming Wednesday but before you jump out the window consider that this is just another sign of gold bottoming because sellers have already left the market.
Silver closed down $0.29 at $19.44 and supplies of the silver Falcon (1 oz) are running low. Physical silver bullion sales are subdued but steady and we have not seen any large sellers of late.
Platinum closed down $16.00 at $1469.00 and palladium was also off $16.00 at $812.00 The Wall Street Journal claims platinum might give gold a run for its money in India but I find that hard to believe.
From Chuck Butler (Everbank) – Recall the other day, I said that I thought that most of the bad feeling about additional stimulus had already been priced into the euro. Well, apparently there was more! Well, it appears that I’m going to have to admit I was wrong next month. Yesterday, Reuters reported that the European Central Bank (ECB) was readying their policy options ahead of the June meeting. “Five people familiar with the measures being prepared detailed plans involving a potential rate cut, including the ECB’s deposit rate going negative for the first time.” You will recall, that I said that I thought ECB President Draghi was only jawboning the euro weaker and keeping it from going past 1.40. This could still all end up to be nothing but window dressing for their plan to get the euro weaker, but when you read stuff like: “A June rate cut is more or less a done deal” (according to one of the 5 sources) and “This will be the first major central bank to move to a negative deposit rate.” You have to think that physical intervention is on its way.
I like Butler because he is great at currencies but it is difficult for me to believe that the European Central Bank will go negative with interest rates. I guess it could be possible – but what they are saying is that it will cost you money to save money. How can this possibly fit with any type of austerity program?
At any rate this is amazing in these goofy financial times and could produce mixed results. The pro-gold physical market will trumpet this move claiming continued easy money policy will support gold prices which sounds good on paper. But a weaker euro will support a higher dollar which could produce a significant headwind for gold this summer.
And remember the tapering of our own bond buying program will continue and perhaps even be finished by year end. How in the world the Fed is going to accomplish this without bashing the housing and economic recovery I will leave up to smarter readers.
Walk-in cash traffic was steady today but not hurried. If this continues the typical slow summer season in the metals might be here early. The phones were also below average which accounts for the dismal activity rating today of 2.
The GoldDealer.com Activity Scale is a “2” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Fri – 6) (Monday – 4) (Tues – 4) (Wed – 5). The scale (1 through 10) is a reliable way to understand our volume numbers.
An update on the In and Out Hamburger Wagon in our parking lot idea. Everyone loves a good hamburger and we thought it would be a nice way of saying “thanks” for the business. Anyone with a tax free invoice ($1500.00) can get a free Double/Double on the way out. The truck would be in the parking lot about 2 hours and we would have tables in one corner. The upside to this idea is getting a great hamburger when you make a purchase in person. The downside is that while we have a large lot this idea might create a parking problem. Please opine at RSchwary@aol.com and thanks for the input.
The initial reaction is mixed. Some love the idea and some claim the parking lot can be crowded at times and this idea will create more problems for those who are in a hurry.
So the jury is still out but the most creative answer to our free hamburger dilemma has to go to this reader: First Prize (there really was no prize giveaway but we needed some sort of drum roll) – LOVE the idea of burgers in the parking lot. I can buy bullion to protect against hyperinflation, whilst hyper-inflating my waistline.
Live pricing on the site moves all bullion products up or down during the day. The Bullion Products link on the home page now includes our Bid (blue) and Ask (green) prices. 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.
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