Commentary for Monday, April 14, 2014– Gold closed up $8.50 at $1327.70 after two weeks of modestly higher prices as tension escalates between Russia and Ukraine. Pro-Russian forces have captured government buildings in Ukraine and calls from Ukraine asking for evacuation have been ignored. So with Russian troops still on the Ukrainian boarder the pot might really boil if this incursion gets out of hand.
Still any rise in the price of gold at this point is an exercise for good paper trading and does not mean much to the physical world. Why? Because while Putin has played a good game of chess it is hard to believe he will really push the military envelope. At least let’s hope for a peaceful way to back out of this mess and not create more collateral damage.
The US retail sales for March are higher by 1.1% which is better than expected and continues to show Americans are spending: just where the money is coming from remains to be seen but such numbers make the significant case for continued quantitative easing which pressures gold short term. The dollar was only slightly stronger but still below 80 on the index. Forget the “improvement numbers” as significant relative to the price of gold and keep your eye on dollar strength one way or the other.
The gold and silver holdings of the large exchange traded funds might be an interesting metric to watch over time and use as a general guide to assess strength or weakness. The SPDR (GLD) exchange traded fund contained 25,863,015 ounces of gold as of April 11. Now compare that number to Thursday’s position (25,920,819) and you will see this large gold exchange traded fund is down 57,803 ounces during that time. This is not large relative to its size and I will keep a running total. Over time this number will provide a better sense as to what large exchange traded funds are doing.
Silver closed up a quiet $0.06 today at $19.99. The Blackrock silver ETF (SLV) contained 328,869,119 ounces of silver as of April 11. 2014. In a few days I will compare this number to current holdings and comment up or down depending. A beautiful new bar that has recently come out is the American Freedom Silver Bar.
Platinum closed up $6.00 at $1467.00 and palladium was up $5.00 at $811.00 another new recent high. Palladium has been higher because of strong demand for car auto catalysts and fears that the crisis is Ukraine could lead to less Russian palladium on the market.
From Chuck Butler (EverBank) – Well, stocks around the world aren’t finding any terra firma these days… Here in the U.S. the selling has been ugly. I received my daily email from MarketWatch on Friday, and as usual it was stuffed with links to articles on the internet about stocks. But one of them caught my eye. “Bank of America Merrill Lynch strategist Michael Hartnett says relax, this isn’t the big correction. That’s coming in September.” Oh, thank you for making us feel much better! NOT! Hey did you hear that Consumer Confidence in the U.S. as measured by the U. of Michigan soared to an index number of 82.6 from 80 in March? Looks to me as everyone is drinking the Kool-Aid again. But since this is a 6 month high for the index, does anyone else get the feeling that this index is like a star that’s about to die. It burns the brightest before flaming out. Today’s U.S. Data Cupboard has the all important, Retail Sales for March to print this morning. I told you last week that the BHI had indicated that Retail Sales in March would be stronger than February’s. I know I did my best to help the economy with regards to retail sales in March! But I can hear the pundits and Gov’t officials now, all spouting off about how this proves the previous month’s reports were held down due to bad weather. Whatever.
I thought the comment about a really big sell off in stocks this summer was interesting. Not that I am anti-stocks and not that I think this will happen but it is mentioned here because of a rumored big move in gold this summer. More than one mucky muck in the physical gold business has called for either a big turnaround this summer or even the end of this unwinding market so for someone at Merrill to call for a big drop in stocks caught my attention. I tend to discount anyone who claims big things for gold because I feel this business has a habit of crying wolf which in the long run hurts business. But good news for gold prices this summer would be a welcomed event. As far as Chuck Butler is concerned I read his commentary on a regular basis because he is an expert in world currencies. And he has over time generally discounted the “recovery” because of the absence of real jobs. This position would then also support the notion that quantitative easing will continue until there was a real jobs recovery which would support the physical gold market.
From Allen Sykora (Kitco) – Citi: Investors ‘Taking Commodities More Seriously’ As Portfolio Diversifier – Investors are returning to commodities, says Citi Research. Passive commodity index swap trading data for the first week of the second quarter suggest net inflows of $800 million amid roughly 1.7% total returns for both the Dow Jones-UBS and SPGSCI benchmarks, Citi says. Combined with listed commodity-linked exchange-traded funds, year-to-date total inflows are $5.8 billion, Citi says. While this represents only a 12% recovery of new investment money after $50 billion of net redemptions across the passive indexes in 2013, the data does suggest some stability for the asset class, which has rallied 8.5% compared to a 1.5% loss for U.S. equities in the year to date, Citi says. “Investors appear to be taking commodities more seriously as a portfolio diversifier as positive correlations with traditional asset markets have unwound and commodities have lost their tight negative correlation with the U.S. dollar,” Citi says.
I thought the above was interesting because it indicates average investors are once again at least looking at gold and silver as a defensive hedge. This is important in that the precious metals have been thrown overboard publicity wise since gold failed to reach the much publicized $2000.00 mark (Oct / 2011). And with the big comeback in stocks at least until recently a great deal of spec money has been moving to equities. I think the average person physical gold investor is still on the fence but at least they are looking for a significant change in direction.
The walk-in cash trade was improving today with relatively good action both ways. The national phone business was just average. Not bad but considering gold is now trading nicely above $1300.00 we should see more physical buying. The lack of follow though here would mean the public expects a pull-back and will wait for better prices. This may be true but also consider that a more deliberate buying on weakness policy is better in the long run.
The GoldDealer.com Activity Scale is a “5” for Monday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Tuesday – 3) (last Wednesday – 4) (last Thursday – 3) (last Friday – 3). The scale (1 through 10) is a reliable way to understand our volume numbers.
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