Commentary for Friday, Dec 27, 2013 – Gold closed up $2.00 at 1216.10 and while higher over several days the small higher number was somewhat disappointing considering the dollar was weaker Friday and oil was higher.
Still gold has held above $1200.00 which is fair considering we saw an intraday low of $1180.00 and a low close of $1195.00. The dollar fell as much as 0.06% today despite the higher 10 Year Treasury (3%). So while interest rates are moving higher the dollar is not responding.
The yen is also falling against the dollar so recent monetary policy in both countries has achieved its goal of a weaker currency.
According to John Paulsen of Wells Capital the velocity of money is increasing and 2014 will be a good year for commodities.
Another result of lower gold this year (down 28%) is that jewelry demand in the US is up 15% to 20% to around 46 tons in the fourth quarter.
Silver closed up $0.13 at $20.01 and the usual end of year US Silver Eagle shortages have not occurred.
Premiums on 90% and 40% silver bags are getting cheaper.
Platinum closed higher by $14.00 at $1376.00 and palladium was up $11.00 at $711.00. My underappreciated platinum/palladium recommendation goes unnoticed but I still forge ahead: both of these metals are in for a pop in price and I am a buyer. JM expects supply from Russian stockpiles of palladium to amount to 95,000 ounces this year while 2012 was 250,000 ounces.
This is a partial quote from Allen Sykora (Kitco): “Many observers have linked gold’s recent gains in large part to short covering, with Gero citing some year-end book squaring. “Normally, when interest rates spike up like this, it’s a headwind for gold because it’s anti-inflationary,” Gero adds. “Now, it seems to that economic recovery is signaling the possible inflationary winds that may be coming…Some gold buyers are starting to look at the possibility of some inflation coming next year.”
Positive commentary about gold these days seems to be waning but just when the gold market looks like a technical train wreck some begin to think about bottoming. Gold will eventually bottom and I think we are closer than most believe because sentiment is almost universally poor (an excellent time to reconsider but always the toughest time to buy) and we have had substantial physical demand from both China and India. What is always left outside in the rain when talking about gold these days is the return of inflation. It used to be a dreaded outcome of monetary policy gone amuck but today is more benign and some in the Fed have suggested a bit of inflation is good for the economic ride. The economy is showing signs of improvement and recent improvement in the jobs number and construction is encouraging. Stocks continue the Christmas rally and look solid in 2014 as long as interest rates remain low. The banks will soon have the legal fallout from the real estate collapse behind them another big plus as prosperity looks like it is breaking out all over the place. Whether this is exactly true is not the point, the point is that this economic enthusiasm is the perfect environment for the banks to once again begin lending. And as the stacks of money begin moving encouraged by low interest rates the formula for returning inflation comes up on the radar screen. Just how much inflation we will see is moot because this will be a minor point relative to the price of gold in 2014. The big play will center on the physical trade (China and India) and if 2014 turns into a big year for everyone both countries will have to do something with all that dough.
In the Kitco News Gold Survey, out of 34 participants, 17 responded this week. This was less than normal, with many still away from their desks for an extended Christmas holiday. Ten see prices up, while five see prices down and two see prices sideways or unchanged. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts. “The year-end long liquidation seems to have ended and mild short covering has taken over since the recent low on Dec. 19 as open interest declined 5% over the past four days,” said Ken Morrison, founder and editor of an online newsletter, Morrison on the Markets. “I expect a bit more short covering can carry gold a little higher into downtrend resistance at $1,230 in the week ahead. “It’s interesting to note the number of non-commercials reporting open futures positions to the CFTC (Commodity Futures Trading Commission) is the lowest level since December 2008, and down 35% y-o-y (year-on-year), while the number of commercials reporting a futures position is the highest level in at least six years. The takeaway here reinforces how specs are opting to avoid gold even as commercials feel more compelled to hedge price risk at $1,200 than at $1,600-$1,700.” Participants each way cited technical-chart considerations. Darin Newsom, senior analyst with DTN, looks for higher prices, with Comex February gold able to hold the $1,186 low hit Dec. 19. “Weekly Stochastics are turning bullish,” he added.
The walk-in cash trade was crazy today probably because we were closed for the Christmas holiday. The phone business was steady (almost all buyers). We have not seen much in the way of tax selling this year which is curious. The GoldDealer.com Activity Scale being “6” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Monday – 6) (Closed Tuesday, Wednesday and Thursday) (Friday – 6). The scale is 1 through 10 and we believe this is a reliable way to “sense” real bullion business.
It looks like live pricing on the site will be fixed and tested Monday. We will also then post the Comex closings on the front page under the live stream. For those who like the older format the Bullion link (upper left hand corner of the site) is being modified with traditional sort (all gold, all silver, all platinum, all palladium) we will then add our buy price next to our sell price for comparison. Keep in mind this site is a work in progress which will not be complete until the first quarter of 2014. We have added new buy and sell premiums: Example –
Buy Premium: Spot -$00.10 Sell Premium: Spot +$00.80
Premiums Are Per Ounce
The system will still ask you to call and talk with a live person to confirm and receive an order number. Live Chat is doing well and new customers can set up their own encrypted accounts. The automatic email confirmation (buying or selling) needs work. Thanks for your patience and if you have other ideas an email is appreciated.
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The live flat screens within the CNI Building are operational and include premiums so no more calculators to figure the cheapest bullion product. Our best price guarantee (buying precious metals or selling precious metals) is famous so call Kenny at 1-800-225-7531.
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For New Year’s we will be closed Tuesday and Wednesday (Dec 31st and Jan 1st).
Shipping during the holiday season slows so your patience is appreciated. Thanks for reading and enjoy your weekend.
Today our big seller was the Canadian Silver Maple Leaf
