Commentary for Friday, April 18, 2014 – Both financial and gold markets are closed today in observance of Good Friday. GoldDealer.com as well as the banks and post office are open and we expect very slow trading conditions at the store which is usually the case over this religious event.
There was late news Thursday regarding platinum as two large mines (Anglo and Impala) have agreed to union demands for higher wages. The increases in miner’s pay will begin in 2017 and this breakthrough in negotiations will likely end the 13 week strike which shut down platinum mining in South Africa. This strike did not push platinum prices higher because there was enough existing stock but the question remains as to what will happen as platinum mining becomes less profitable, a claim which has already closed some marginal mining operations.
(Kitco News) – Survey participants turned bearish toward gold prices for next week in the weekly Kitco News Gold Survey after a swift fall in values this week. Out of 33 participants, 21 responded this week. Seven see prices up, while 12 see prices down and two see prices sideways or unchanged. Market participants include bullion dealers, investment banks, futures traders and technical chart analysts. Last week, a majority of the survey participants said they looked for prices to rise this week. As of 11:45 a.m. EDT Friday, Comex gold for June delivery was down $20 for the week. Those who see weaker prices said after this week’s selloff, the market could see further losses. “April 15 has not been kind to gold each of the past two years. This year didn’t produce a record volume day or a $140 decline as was the case in 2013, but it probably has put the nail in the coffin for gold’s upside potential. I expect gold breaks the $1,280/75 support in the week ahead and appears poised for an eventual re-test of the $1,200 area,” said Ken Morrison, editor of online newsletter Morrison on the Markets. Those who see higher prices said they believe the break gold suffered this week was too much, too fast, so they expect to see price rebound. “Gold could inch up next week, but the market will be watching economic news out of China; anything that suggests the economy is slowly dramatically would be negative for gold. The other major recent concern—that the Federal Reserve might tighten soon—has eased and continued to fade … with Chair (Janet) Yellen’s comments on keeping interest rates low for a long time,” said Adrian Day, chairman and chief executive officer, Adrian Day Asset Management.
You can see from the above commentary that the experts continue to be split as to gold’s direction this coming week. Actually this market found its legs early in the year but failed to perform because the higher ground was not reached for the right reasons.
Gold expert Brien Lundin, (Gold Newsletter) makes this point nicely: “Western speculators began buying gold when the new year dawned, increased their buying when economic data started to weaken and then surged into the market en masse when Putin invaded Crimea. Then they left… leaving gold to fall back to where it began, and gold bulls to wonder what will drive the market from here. When you live by the sword, you must be prepared to die by the sword. That’s the advice I gave to our Alert readers recently, as the crisis in Crimea cooled and the Fed Chair Janet Yellen mistakenly moved up the ETA for rate hikes — two developments that sent Western speculators running from gold. They weren’t in gold for long, or for the right reasons. Some had begun to “buy” just as the calendar turned to 2014, as they closed out the short trades that had handed them such rich paper profits in 2013. Others jumped on the trade as the price began to recover, thanks to the aforementioned short covering as well as renewed physical demand from China. In a self-fulfilling manner, the added buying improved the chart picture for gold and silver, which in turn attracted more trend-following speculators. In fact, up until the Crimean “election,” we were witnessing a rare and fascinating event in the global market: both Western speculators and Eastern savers buying gold at the same time, albeit for entirely different reasons. Since 2001, we’ve seen such concerted buying episodes a few times, and each instance led to very powerful price gains in gold. So it was not surprising to see gold post very consistent gains through early march, culminating in a peak of around $1,385 on March 14 — not coincidentally before the Sunday vote in the Crimea. Which brings us to the (sharp and painful) point: Western speculators were buying gold as a supposed “safe haven” as Russian infantrymen goose-stepped their way into Crimea. In truth, they were doing no such thing; they were buying gold because they expected others to buy gold afterward and therefore drive up the price. It was pure speculation, and nothing more. There is no logical reason why a Russian invasion of Crimea should translate into a higher gold price, unless you somehow deduced that the event would cause the Federal Reserve and the European Central Bank to start printing fiat currency even more rapidly than they already were.”
The walk-in cash and phone trade today was quiet because of the Easter observance.
The GoldDealer.com Activity Scale is a “4” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 5) (Tuesday – 5) (Wednesday – 9) (Thursday – 4). The scale (1 through 10) is a reliable way to understand our volume numbers.
Live pricing on the site moves all bullion products up or down during the day. The Bullion Products link on the home page now includes our Bid (blue) and Ask (green) prices. Premium quotes vary with product and look like this – “spot plus $15.00” or “spot plus $50.00” and bullion products list them under the live prices on their respective landing pages.
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