Gold Marginally Down in another Round of Quiet Trading

Gold Marginally Down in another Round of Quiet Trading

Commentary for Friday, May 23, 2014 (www.golddealer.com) – Gold closed down $3.30 at $1291.60 in another session of “who left the trading floor early”? On the week gold was down $1.70 and for what it’s worth everyone seems more worried about meat prices than gold prices. The bigger positive picture for gold this week looks like the changes in gold import policy for India and perhaps evidence that the Federal Reserve may not have a heavy foot on continued tapering. Still the best we can hope for as far as quantitative easing is concerned is that the taper will become dragged out perhaps lasting into 2015.

How about a special on everyone’s favorite gold bullion coin to wake things up? Take $5.00 off the Canadian Gold Maple Leaf (.9999) (1 oz) while in house supplies last.

The official “start” of summer is June 21st which is about a month from now but as far as I’m concerned the physical market has already begun its typical summer season which is of course – slow and boring these days. And if the last few weeks are any indication add the word “hot” which makes for a toxic mix in California. At any rate – even with continued tapering and new record highs in the stock market I see flat markets with a slight downward bias. No big deal to the downside but the same as far as any breakout above $1300.00. Now what’s on the BBQ?

Allen Sykora (Kitco) – Barclays: Rise in U.S. Inflation Under Way – Barclays says an expected rise in U.S. inflation is under way. The consumer price index rose 0.3% in April and was up 2% year-on-year. Core CPI was up 0.2% in April and 1.8% year-on-year. “We see both overall and core CPI inflation rising to 2.4% y/y by December,” Barclays says. Higher food prices have been a significant driver of inflation, in turn the result of droughts in California and Texas that has driven up prices for some fruit, vegetables and grains. And, higher grains means smaller cattle herds, in turn pushing up beef prices. “Although food price increases certainly draw the attention of consumers, the FOMC (Federal Open Market Committee) tends to focus more on core inflation,” Barclays says. “We expect the recent move higher in core inflation to continue this year. A key driver is shelter inflation, which is driven mainly by inflation in rents and owners’ equivalent rent and represents 42% of the core CPI.” Also, Barclays adds, inflation in categories such as new vehicles and apparel is edging into positive territory after disinflation in recent years, and medical costs are starting to rise. LaSalle’s Nedoss: Gold Moving Averages Bunched Closely Together – The closely followed short- and long-term moving averages in gold are all bunched extraordinarily close together and could portend a sharp move in either direction whenever gold busts out of its recent trading range, says Charlie Nedoss, senior market strategist with LaSalle Futures Group. For the Comex June gold contract, the 10-day moving average lies at $1,294.90 an ounce, the 20-day at $1,295.40, the 50-day at $1,304.20, the 100-day at $1,294.30 and the 200-day at $1,300.70. “At some point, I think we’re going to have a very big move,” Nedoss says. “It’s going to be $1,250 or $1,350 really fast, and I’m erring on the side of $1,350 just because of the geopolitical stuff (with Ukraine). I think it’s going to get worse (there) before it gets better. The market has been very constricted and in a tight, tight range and at some point it’s going to break out.”

It’s pretty much common knowledge that the “fear” factor which began pushing gold prices higher in 2008 has left the theater. And gold enthusiasts howling about higher inflation being right around the corner makes us look desperate. The ready defense of higher gold prices these days has become the increasing demand from China and India. But even these powerful forces will bend against continued tapering and cheap money.

But have you noticed of late inflation data creeping into the legitimate gold commentary. It’s not big because inflation is still almost dormant but once in a while you run into commentary which makes you think something is stirring. During the monstrous creation of fiat paper money which began during the banking crisis I used to think inflation would come crashing through the front door at any time. This now looks impossible as Europe and other countries struggle with deflation. 

So I have replaced this thought with a more modest “inflation in baby steps” theme. This is what we are now facing and I believe the inflation numbers will gain speed perhaps even before this year is over. My personal “inflation gauge” is noted each time I visit the market. It is now rare that I spend less than $100.00. And if you want meat you can double the price. Forget reasonable housing which was virtually guaranteed to a college graduate in the 1970’s.

And now people are striking Mc Donald’s over minimum wage. They are asking for $15.00 an hour and even with this raise the situation for most of these folks is desperate. We may find that the “lost” inflation pop everyone was looking for is the result of “capped wages” and meaningful jobs which may have been lost forever. The “new normal” is discouraging for the rank and file worker but sooner or later inflation will create problems.

When it will really spook the gold market is impossible to say but we are beginning to see the next inflation wave. And I fear this time around will be a reckoning. So the working men and women of America are one of the first casualties of the unprecedented government intervention into the monetary system.

Silver closed down $0.10 at $19.39. The physical picture here remains constant – big buying hits this market below $19.00 and virtually stops above $20.00. And we have seen few large sellers at this lower end of silver trading range.

Platinum was down $20.00 at $1473.00 and palladium was off $5.00 at $831.00. The South African strike continues but is under mediation and the region looks troubled. Now look at the sharp jump in rhodium prices today up $80.00 at $1180.00 and higher by $150.00 on the week.

While sales of the PMG group are higher the public is still on the fence which does not figure. The pop in rhodium prices this week is a good example of simple potential relative to old highs ($10,000.00) – for charts and history see www.platinum.matthey.com. If you are sitting on a large gold bullion position think “diversification”.      

(Kitco News) – The Kitco News Gold Survey shows another week of split opinions between members forecasting prices for next week, with participants only nominally bullish, and barely that. Out of 33 participants, 22 responded this week. Of those, nine see prices higher, seven see prices down and six see prices trading sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders and technical chart analysts. Last week, survey participants looked for prices to fall this week. As of 11:30 a.m. EDT, Comex gold for June delivery was down about $1 for the week. Those who see higher prices said they wouldn’t want to be short gold going into the weekend. “Global monetary factors in particular continue to favor gold.  In addition, geopolitical risk remains high, particularly as the Ukraine elections approach, and, longer-term, Russia and China cozy up, a significant long-term global game-changer to which Washington appears oblivious,” said Adrian Day, chairman and chief executive officer, Adrian Day Asset Management. Those who see weaker gold prices said a slowly improving U.S. economy and a lack of physical demand will weigh on gold. “I continue to be bearish on gold at these levels. The language we continue to hear from the Fed (Federal Reserve) governors is that it is their belief that the economy is continuing to grow at levels which they perceive are quite positive. I believe that their posture regarding economic policy will reflect this view. I am still following the gold forward rates closely as I believe that they will continue to show us the direction for gold. The fact that these rates are now out of backwardation and in positive territory signals to me that the physical buying is waning at current levels. Our major support continues to be around the $1,270 level. A breach of this level should attract fresh sellers,” said Kevin Grady, owner, Phoenix Futures and Options LLC. Participants who are neutral on gold or see prices trading sideways said they wanted to wait to see what the outcome is for the Ukrainian elections.

The walk-in cash trade was active most of the day but the phones were just moderately active. With the uncertainty of Ukraine and a long weekend I would have expected more in the way of action especially because some are saying this “coiling” in the price of gold might break to the upside.      

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