Commentary for Friday, Jan 23, 2015 – Gold on the Comex closed down $8.10 at $1292.80 on a round of expected profit taking and a stronger dollar.
The Dollar Index is reacting to the European Union quantitative easing program put in place Thursday. So the euro moves lower and the dollar continues strong – the Dollar Index low on the day was 94.11 and its high was a whopping 95.50. As of this writing it has settled somewhat around 94.88 but remains on a tear and is responsible for some of the weakness in gold this morning. I also think the reaction to the latest financial move by the European Union yesterday was disappointing – the markets look tired and it was easy to anticipate profit taking in gold, especially on the short term.
Like I hinted at yesterday – be careful what you ask for – if you are a gold enthusiast. The gold market reacted in the classic fashion – bought the rumor and sold the fact. So it remains to be seen how long it will take the new European quantitative easing program to push prices higher.
It’s too soon to guess – but we may be in another “wait and see” mode especially because there are so many changes now being made with the international monetary picture. All of these are not necessarily dangerous but with this many moving parts the results are not obvious.
Still the European Central Bank will buy a lot of bonds – 60 billion euros worth every month until Sept 2016 – a very aggressive program. And the Germans are not happy – they are actually making money so anything the ECB does out of the ordinary makes them very nervous – especially because when this road show got started this kind of quantitative easing was not allowed.
There is also another seasoning in this financial stew which continues to simmer on the backburner. Over the weekend there will be an election in Greece and the opposition Syriza party is holding a 6 point lead. Their success is likely to cause even more weakness in the Euro.
And finally with the dollar so strong there is concern about our still lethargic growth rate – most think this all will keep the Federal Reserve from raising interest rates anytime soon – which supports gold.
Still gold was up $16.00 on the week but considering all the financial fireworks I would have expected more action.
Silver closed down $0.06 at $18.28. Still the recently higher pop in the price of silver was a “cooler”. If you are so inclined consider the popular $1000 face 90% silver bag. Silver bullion in the form of 1964 or older silver coins is selling at $1.70 over spot – delivered. The competition ranges from $2.10 to $3.00 over spot.
Platinum closed down $17.00 at $1267.00 and palladium was up $1.00 at $774.00. Yesterday I mentioned that the Canadian Mint was the only world mint producing a 1 ounce platinum bullion coin. The US and Perth Mint have ceased production. Today the Canadians sold out of platinum bullion coins – they will continue to produce but it will take a few weeks.
It was not too long ago that Ukraine fighting pushed the price of gold higher by more than $50.00 on several occasions. Do you not find it interesting that the press has completely ignored this AP post and there is also no mention of safe-haven buying because of this escalation? This kind of non-action leads to my conclusion that gold is tired.
This from Associated Press – NATO: Fighting In Eastern Ukraine Fiercer Than Ever – Fighting in eastern Ukraine is fiercer than ever in some locations, NATO’s top commander in Europe said Thursday — adding that the weapons systems seen now in the region have in the past heralded a fresh incursion by Russian troops.
“Violence has intensified and changed character in Ukraine,” U.S. Air Force Gen. Philip Breedlove told a news conference at NATO headquarters. He said the fighting has re-escalated to levels seen before the Sept. 5 Minsk cease-fire agreement “and in some cases beyond.”
Questioned by reporters, Breedlove, the alliance’s chief commander in Europe, said he couldn’t confirm Ukrainian authorities’ statements that 9,000 Russian troops had entered the country.
“(But) what we do see is that the Russian-backed forces have renewed capability now to bring pressure on the Ukrainian forces, and have in several places moved the line of contact to the west,” he added.
What’s more, said Breedlove, NATO intelligence has begun to detect “the signatures of air defense systems and electronic warfare systems that have accompanied past Russian troop movements into Ukraine.”
He declined to specify which systems, and whether they include the Buk mobile surface-to-air missile battery blamed for shooting down a Malaysian jetliner on July 17, killing all 298 people aboard. But on two prior occasions, Breedlove said, deployment of such weaponry was accompanied by a border crossing by Russian troops.
“We see the same types of equipment, etc. in eastern Ukraine now,” he said.
Breedlove spoke after defense chiefs from NATO’s 28 nations met to help the alliance meet its wide-ranging agenda for 2015.
Without disclosing many details, Breedlove said a decision was made taken to restore direct contacts between NATO and the chief of the Russian general staff, Gen. Valery Gerasimov, ties that were broken off after Russia’s annexation of Crimea last March.
Chicago Mercantile Exchange reports for the last 5 trading days – so we are looking at the trading volume numbers for the February Gold contract: Wednesday 1/14 (178,496) – Thursday 1/15 (189,258) – Friday 1/16 (184,200) – Tuesday 1/20 (181669) and Wednesday 1/21 (176,363). On the higher end of the range but coming off somewhat meaning volume numbers are decreasing.
Precious Metal Closes & Dollar Strength – Jan 20 – 23
Gold – Silver – G/S Ratio – Dollar
Mon (Closed)
Tues $1294.20 $17.94 72.14 93.05
Wed $1293.70 $18.17 71.20 92.74
Thurs $1300.70 $18.34 70.92 94.31
Fri $1292.80 $18.28 70.72 94.81
Platinum – Palladium – Rhodium – Oil
Mon (Closed)
Tues $1287.00 $774.00 $1180.00 46.48
Wed $1277.00 $768.00 $1180.00 47.03
Thurs $1284.00 $773.00 $1180.00 47.28
Fri $1267.00 $774.00 $1180.00 45.54
Our Patented Employee Survey – Gold’s Direction Next Week?
Of course it’s not really patented but we do have some fun along the way. This is what the GoldDealer.com employees think – 5 believe gold will be higher next week – 3 think gold will be lower and 4 believe it will be unchanged.
Our Patented Customer Survey – Gold’s Direction Next Week?
Like the employees our customers were given three choices – up – down – unchanged. We limited the survey to a random sampling of 100 transactions – unscientific but worth considering because these people took action: 59 people thought the price of gold would increase next week – 28 believe the price of gold will decrease next week and 13 think prices will remain the same.
This from Associated Press – Recent moves by central banks, at a glance – It’s been an action-packed couple of weeks for some of the world’s central banks.
On Thursday, the European Central Bank unveiled its latest plan to support Europe’s stagnating economy: It pledged to start spending 60 billion euros on government and private bonds every month. The news helped lift stock prices and drove the value of the euro to new lows.
The ECB’s announcement followed surprise moves by the Swiss National Bank last week and the Bank of Canada on Wednesday. Here are steps that major central banks around the world have taken recently to try to support their economies:
EUROPEAN CENTRAL BANK – Interest rates: The European Central Bank kept its benchmark rate unchanged at 0.05 percent Thursday. Other policies: Later in the day, the ECB launched its most aggressive effort to date to revive the region’s ailing economy — a 19-month program to buy 1.1 trillion euros in government and private bonds starting in March. It acted after months of excessively low inflation in the eurozone that has discouraged borrowing and spending and kept the economy at risk of recession. By pumping new money into the eurozone’s banking system, the ECB’s bond purchases should make loans cheaper and easier to get so companies can invest, expand and hire. The size of the program exceeded investors’ expectations, and the value of the euro fell on anticipation that the new money from the ECB would drive down the currency’s value.
DENMARK CENTRAL BANK – Interest rates: Shortly after the ECB’s announcement, Denmark’s central bank announced its second rate cut in three days to try to discourage euro-fleeing investors from buying its currency, the krone. It lowered its deposit rate further into negative territory to minus 0.35 percent from minus 0.2 percent. On Monday, it had lowered the rate to minus 0.2 percent from minus .05 percent. Because Denmark pegs its currency to the euro, Danish officials have had to respond when the ECB’s actions threaten to destabilize that peg.
Other policies: The Danish central bank has intervened in currency markets in recent months to try to control the value of the krone.
SWISS NATIONAL BANK – Interest rates: Switzerland sent financial markets into turmoil last week when it slashed rates and abandoned efforts to cap the franc’s value against the euro. It cut the rate on commercial bank deposits to a shockingly low minus 0.75 percent in order to ward off investors from the Swiss franc.
Other policies: Since 2011, the Swiss National Bank has had a program to keep its franc from appreciating too much against other currencies — most importantly the euro. The bank had set a limit of 1.20 francs to the euro to keep its rise in check. But it became untenable for the SNB to keep up its program as the euro weakened. So the SNB decided on Jan. 15 to allow the market to re-price the franc. In doing so, it triggered a massive re-pricing that drove the currency to gain more than 20 percent against the euro.
FEDERAL RESERVE – Interest rates: In contrast to their counterparts in other big economies of the world, the Federal Reserve is moving closer to raising rates from record lows. But it will be “patient” in deciding when to do so, the central bank said after its last meeting in December. Fed Chair Janet Yellen said the strength of U.S. economic data and the level of inflation, not a calendar date, will dictate when it raises rates. The Federal Open Market Committee meets next week.
BANK OF CANADA – Interest rates: Canada’s central bank surprised investors this week when it cut its key interest rate to 0.75 percent from 1 percent. Many economists had been expecting the Bank of Canada to keep rates steady until later this year or early 2016. The central bank said Wednesday’s decision was driven by the “recent sharp drop in oil prices, which will be negative for growth and underlying inflation in Canada.”
CENTRAL BANK OF BRAZIL – Interest rates: Brazil’s central bank on Wednesday hiked its benchmark interest to 12.25 percent to control high inflation. The central bank’s inflation target is 4.5 percent, with an upper limit of 6.5 percent. But consumer prices over the past year have been stuck above that ceiling.
PEOPLE’S BANK OF CHINA – Interest rates: Chinese authorities have been cautious in tweaking monetary policy. The People’s Bank of China lowered its benchmark rates in November for the first time in more than two years. The bank cut the rate on a one-year loan by commercial banks by 0.4 percentage point to 5.6 percent. The rate paid on a one-year savings was lowered by 0.25 point to 2.75 percent.
But the People’s Bank of China may be pressured to do more as the world’s No. 2 economy decelerates. Data released Tuesday showed that the Chinese economy grew 7.4 percent in 2014, its weakest performance in nearly a quarter-century. And its growth is forecast to slow even more over the next two years. Though China continues to grow at more than twice the pace of the overall world, its growth rate marks a sharp drop from the sizzling double-digit expansion of previous years.
The walk-in cash trade was average at best and the phones were sleepy.
The GoldDealer.com Unscientific Activity Scale is a ” 3” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – closed) (Tuesday – 5) (Wednesday – 3) (Thursday – 4). The scale (1 through 10) is a reliable way to understand our volume numbers. The Activity Scale is weighted and is not necessarily real time – meaning we could be busy and see a low number – or be slow and see a high number. This is true because of the way our computer runs what we call the “book”.
Our “activity” is better understood from a wider point of view. If the numbers are generally increasing – it would indicate things are busier – decreasing numbers over a longer period would indicate volume is moving lower.
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