Commentary for Tuesday, June 25, 2013 – Gold closed down a tepid $2.00 at $1274.80 and considering recent volatility traders were happy for a quiet day. And with more positive economic news the implications over less quantitative easing were underplayed as new home sales hit their highest levels since 2008 up 2.8% and consumer confidence is at 5 year highs.
The dollar was a bit stronger today and for now watch both the dollar and Europe for the short term direction of gold.
It is amazing how fearful the Bank of India has become over gold imports. Their Central Bank told regional banks today that they would no longer lend money on gold and this is reaction to a record 162 tons of gold imported in May.
Silver was also quiet up $0.03 to $19.52. The silver market is shaping up to be an excellent trade as it has overreacted to weakness in gold and while silver might still have some shorter term weakness I think the physical trade will soon support actual physical sales setting up another run at higher prices. Be patient but begin buying this market in smaller units over time. The US Mint is slowing down on deliveries but most silver bullion products are available.
Platinum was up $21.00 at $1352.00 and palladium was up $10.00 at $667.00 both very quiet today.
This from Larry Edelson (Money and Markets) is worth the read: Most Investors Are About to Learn This Lesson the Hard Way – Millions of investors are soon going to learn about the financial markets the hard way — through giant losses. Why? Because they’re confusing normal times with abnormal times. Let me explain. In normal times, rapidly rising interest rates and Fed credit tightening would typically be bearish for commodities and stocks. But these aren’t normal times. We’re coming out of a period with the lowest interest rates in the history of the country. A period that was fraught with financial failures, even the near-total collapse of the monetary system. And a period when the Fed deliberately kept interest rates at record lows. Thing is, most investors aren’t making the appropriate distinction. They’re reacting in a knee-jerk fashion to the recent rise in interest rates. So they’re dumping gold and other commodities, and unloading stocks as if a giant bear is back on the scene. But based on all of my research and long-term indicators, I’ve concluded that those same investors are going to be very sorry. Why? Because this rise in interest rates, occurring during abnormal times, is going to have precisely the opposite effect. Instead of being bearish, it’s going to be resoundingly bullish for a lot of markets. Simple logic explains why. A rise in interest rates, occurring in abnormal times such as we have now, will be bullish for a lot of markets. First, rates were at record lows because almost nobody wanted to borrow. The demand for credit simply wasn’t there. So as rates and the cost of money and credit rises, guess what happens? Demand goes up too. Potential homeowners and businesses will want to suddenly borrow again before interest rates go any higher. And that, in turn, will stoke all sorts of demand, from housing, to commodities, juicing corporate earnings and the stock market. Second, interest rates are way below the true rate of inflation, which is running north of about 8%. In other words, we would need rates to move higher than the true rate of inflation ? higher than 8% ? to negatively impact any markets. Until that point comes, if at all, rising interest rates will actually become fuel for higher prices, once the knee-jerk selling has passed. Third, there will come a time in the not-too-distant future when our foreign creditors start to sell U.S. sovereign debt as they lose confidence in our government’s ability to manage its affairs. The resulting rise in interest rates will be very bullish for most markets, as money leaves the bond market in droves and seeks out alternative investments for appreciation and safety. So you see, right now millions of investors are selling everything from gold to stocks because they think we’re in normal times, or approaching normal times. But these are abnormal times. So you simply can’t apply the old rules. You have to think out of the box, or you’re going to get buried in the box with a whole lot of losses and missed opportunities. And that’s not what I want for you. Instead, I believe what’s going on now in the markets is a huge gift for savvy investors. For the following reasons: It’s helping gold slide into what should prove to be a major low. Ditto for silver. It’s helping the dollar rally. A rally that will, in turn, be aided by Europe’s coming demise. That, in turn, will eventually lead to a huge opportunity to short the dollar, because, ultimately, its long-term bear market will resume, offering you enormous profit opportunities. It will eventually drive huge amounts of money into gold. Other commodities as well. Right now, though, the selling can continue. So don’t be afraid to make hay with it in the short-term. For instance, if you’ve followed my suggestions in this column, then you’re short stocks via the ProShares UltraPro Short S&P 500 (SPXU) and you’re long the dollar via the PowerShares DB US Dollar Bull (UUP). Hold those positions. As to gold and silver, I’m loving that they are falling now. Why? Because the declines are setting up one of the greatest buying opportunities of all time.
Both walk in and phone trade was on the slow side today so it looks like the shorts are tiring and so is the public during these summer months. Look for the same kind of action in the shorter term as the precious metals continue to sort things out as far as quantitative easing is concerned both here and in Europe. Thanks for reading and enjoy your evening. These markets are volatile and involve risk: Please Read Before Investing
Written by California Numismatic Investments (www.golddealer.com).