Commentary for Wednesday, April 23, 2014 (www.golddealer.com) – Gold moved up $3.60 today closing at $1284.20 in quiet action within a short $8.00 trading range. Most traders are waiting for the other shoe to drop but gold did hold the important 100 day moving average ($1277.00).
Aggressive sellers may drop out of the sky when gold approaches a key support level. This trading action triggers sell stops and gold is driven lower by short-traders. This has happened on numerous occasions since the gold peak in 2011 and is responsible for pushing gold to $1180.00 by the end of 2012.
And it might have happened again yesterday when 480,000 ounces of gold traded in one minute on the electronic Comex platform. But this time the support did not break and gold rebounded from the lows and finished slightly higher today. It is too soon to say if this is significant but it does show that the short traders are not in complete control. Technically especially short-term I am not happy but it is good for the physical trades especially when these bear raids are not so easy pickings.
This from Bloomberg (Debarati Roy and Nicholas Larkin) – Gold Futures Rise From a 10-Week Low on U.S. Home Sales – Gold futures, trading little changed, rebounded from a 10-week low as falling U.S. home sales triggered concern that the economy still faces challenges, boosting demand for haven assets. Sales of new homes dropped to the lowest in eight months, Commerce Department data showed today. Gold rebounded 6.6 percent this year through yesterday on concern that U.S. growth was faltering and as tension escalated in Eastern Europe. Ukraine resumed operations to oust militants from eastern cities as the U.S. said 600 troops will be sent for exercises in four countries bordering Russia. “Gold seems to be getting some bids after the disappointing home-sales data,” Frank Lesh, a trader at FuturePath Trading LLC in Chicago, said in a telephone interview. “Renewed tension in Ukraine is also giving it some support.” Bullion futures for June delivery rose 0.2 percent to $1,284.10 an ounce at 11:20 a.m. on the Comex in New York, heading for the first gain in four sessions. Prices touched $1,275.80 yesterday, the lowest for a most-active contract since Feb. 11. “Prices are finding some haven support as investors keep a close watch on the Ukraine-Russia conflict,” Mark To, head of research at Wing Fung Financial Group, a Hong Kong-based trader and refiner, said in a telephone interview. “Physical interest is also picking up as prices fall.”
These are the changes in the largest gold Exchange Traded Fund (GLD – SPDR Trust) since our last reported numbers. We moved from 25,863,015 gold ounces on deposit (April 11, 2014) to the current holdings of 25,468,060 gold ounces on deposit (April 23, 2014). This means that fund has moved lower by 394,955 ounces over the last 12 days. In future newsletters we will track this number on a weekly basis which will provide a better short-term feel of which way speculators are moving in this exchange traded gold fund.
Silver closed up $0.08 at $19.43 following gold but we have seen some bargain hunting in physical silver buying show up at the store.
These are the changes in the largest silver Exchange Traded Fund (SLV – BlackRock iShares) since our last reported numbers. We moved from 328,869,119 silver ounces on deposit (April 11, 2014) to the current holdings of 330,599,095 silver ounces on deposit (April 23, 2014). This means that fund has moved higher by 1,729,976 ounces over the last 12 days. In future newsletters we will track this number on a weekly basis which will provide a better short-term feel of which way speculators are moving in this exchange traded silver fund.
Platinum closed up $3.00 at $1403.00 and palladium was higher by $3.00 at $786.00. Action here too seems sluggish given all the positive factors which might push prices higher.
This from Chuck Butler (Everbank) is worth pondering – “The American middle class, long the most affluent in the world, has lost that distinction. While the wealthiest Americans are outpacing many of their global peers, a New York Times analysis shows that across the lower- and middle-income tiers, citizens of other advanced countries have received considerably larger raises over the last three decades. After-tax middle-class incomes in Canada – substantially behind in 2000 – now appear to be higher than in the United States. The poor in much of Europe earn more than poor Americans. The numbers, based on surveys conducted over the past 35 years, offer some of the most detailed publicly available comparisons for different income groups in different countries over time. They suggest that most American families are paying a steep price for high and rising income inequality.”
I quote the above because yesterday I read that gold bullion is more popular with the working class than the affluent. Why this is true is beyond me because in today’s America I can’t imagine a person of means not buying gold bullion insurance. I don’t give much credence to the “blow-up” scenario like we saw in 1929 but that does not mean this unfortunate end is impossible: an important point to someone with a lot of fiat money in the bank.
I would also pose another question which is not often raised. If the size of the middle class is moving lower and gold is popular with those of lesser means could this support the price of gold into the next decade? This gold dynamic is already alive and well in developing countries like China and India. If the number of disenfranchised American citizens continues to grow will they turn to precious metals as a source of independence from government edict?
Just average walk-in cash trade today and the phones moved from quiet to relatively busy. The number of coffee pots we brew for the downstairs was off considerably today, a sure sign of a slow day. But our activity scale was high today (7) because we ran into several large gold sellers.
The GoldDealer.com Activity Scale is a “7” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 4) (last Friday – 4) (Monday – 5) Tuesday – 5). 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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