Commentary for Tuesday, Jan 21, 2014 – Gold closed down $9.40 at $1242.30 today in a round of profit taking. We are off to a good start price wise in 2014 but it is too soon to call a bottom. The most recent 5 week rise in prices may be the result of bargain hunting or just the result of last minute book squaring in 2013. So let’s call it a minor bullish trend in a generally bearish gold market which is still waiting for continued tapering. I will begin to be excited when gold moves above $1300.00 and will really get excited when we pass over the $1400.00 mark. But as you can see there is plenty of ground to cover before the bull gets out of the hospital.
Silver closed down $0.43 today at $19.83 in fairly quiet trading but we did see the expected pop in physical sales when we moved below $20.00. I think silver is becoming very price sensitive especially with the lack of fresh positive news.
Platinum closed unchanged at $1453.00 with increased recent activity in the physical market. Palladium also closed unchanged and physical activity has also been picking up.
From Kira Brecht (Kitco/TraderPlanet): “But, what about the debt? Over $17 trillion and rising. By some measures the current debt is 70% of gross domestic product. Last week President Obama signed a $1.1 trillion bill to finance the U.S. government through September 30. The bipartisan bill was viewed as a success following last October’s 16-day government shutdown as the two major parties were at an impasse over funding. Maybe that’s good news for now. But, Washington has a lot bigger fish to fry in the years ahead. The largest budget items are Social Security, Medicare and Medicaid. With an aging population, the debt issue doesn’t become any rosier down the road. Economists warn that the aging population and rising medical costs means the programs are growing at a significantly faster rate than the tax revenues the U.S. has to pay for them. There are current projections that Medicare will run out of funds in 2026 and Social Security around 2033. It does come down in part to demographics. With Baby boomers retiring and fewer workers in the workforce in the years ahead to pay for these aging citizen’s benefits, there are promises that can’t be kept—unless significant changes are made. The current tax system doesn’t raise enough money to pay those bills. It’s sort of like that advice that Joseph gave to the Pharaoh 3000 years ago: save up corn in the good years and use it in the bad years. Washington has not been working on that premise. Fiscal responsibility is not a partisan issue and any solutions are likely to require compromises from both Republicans and Democrats. The reality is that a solution would likely require a combination of higher taxes and a reduction in benefits—neither which are politically palatable choices.”
Increasing debt both in the US and Europe is of course the Achilles heel of everyone’s financial plan. And like Brecht points out no one wants to point out that the emperor has no clothes. Even the average guy on the street knows we are spending too much money and the US “plan” even when I was in college was to pay back the money when things improved. The proof that something is wrong with this kind of “improvement” can be seen in the destruction of America’s Middle Class.
Now couple that with a savings rate which is missing in action and it might be easy to see that sooner or later someone will have to pick up the bill. My take on the whole matter has always been that “someone” will be inflation. Any other solution will produce anarchy and what else but inflation allows the government to steal a little at a time while still promising everyone that things are improving? Sorry to be cynical but I really expect little else and so keep beating the drum that a gold insurance policy makes sense.
The walk-in cash trade was crazy today perhaps because we were closed Monday. And there was a big pop in national phone action. The majority of walk-in and phone business was the public buying. There were virtually no big sellers. The GoldDealer.com Activity Scale is a “5” for Monday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Tuesday – 5) (last Wednesday – 4) (last Thursday – 3) (Friday – 4) (Monday – 5). The scale is 1 through 10 and we believe this is a reliable way to “sense” real bullion business.
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