Commentary for Wednesday, Fed 4, 2015 ( www.golddealer.com) – Gold closed up $4.10 at $1263.80 as the overnight market in London and Hong Kong traded on either side of $1265.00. This flattening out carried through into the domestic market as traders look for new actionable information. Perhaps available this Friday as the latest jobs number is studied for a possible indication of the Federal Reserve’s next interest rate move.
This from MarketWatch – “Private-sector employment gains decelerated in January, with employers adding 213,000 jobs, according to Automatic Data Processing Inc. The firm also revised its estimate of December private-sector payroll growth to 253,000 from an initial estimate of 241,000. “The data look fairly consistent with consensus expectations for the [Bureau of Labor Statistics] report on Friday — just fractionally weaker,” said Jim O’Sullivan, chief U.S. economist at High Frequency Economics. The data comes ahead of the January U.S. nonfarm payrolls report on Friday, which economists surveyed by MarketWatch expect to show a rise of 245,000 after a gain of 252,000 in December.”
The ADP employment data today hurt the bond market but I think the gold trade is more interested in US nonfarm payrolls out Friday. This later number could create problems for gold if the date comes in strong – meaning traders will then assume the Federal Reserve will be more inclined to raise interest rates on the shorter term.
But the world continues to print – China today cut the reserve ratio required by its banks. This will create more liquidity to spur on their economy but keep in mind you are dealing with a horse of a different color in China. Their most recent growth rate (7.4%) is the slowest they have seen in 23 years! That is why any worry over how much gold the Chinese are buying is misplaced – be happy they don’t decide to buy it all before we can get our share.
Silver closed up $0.07 at $17.37. The US Mint reports silver eagle sales of 5.53 million in January, up 16% from 2014.
Platinum closed up $3.00 at $1240.00 and palladium moved higher by $4.00 at $790.00. As platinum is trading at a $23.00 discount to gold the physical platinum market remains active.
This is our usual ETF Wednesday information – Gold Exchange Traded Funds: Total as of 1-28-15 was 53,346,798. That number this week (2-04-15) was 53,717,134 ounces so over the last week we gained 370,336 ounces of gold.
The all-time record high for all gold ETF’s was 85,112,855 ounces in 2013. The record high for Gold ETF’s in 2015 is 53,780,194 and the record low for 2015 is 51,361,279.
All Silver Exchange Traded Funds: Total as of 1-28-15 was 618,060,403. That number this week (2-04-15) was 616,761,293 ounces so over the last week we dropped 1,299,110 ounces of silver.
All Platinum Exchange Traded Funds: Total as of 1-28-15 was 2,611,703 ounces. That number this week (2-04-15) was 2,620,475 ounces so over the last week we gained 8,772 ounces of platinum.
All Palladium Exchange Traded Funds: Total as of 1-28-15 was 3,018,467 ounces. That number this week (2-04-15) was 2,998,549 ounces so over the last week we dropped 19,918 ounces of palladium.
Gold continues to struggle – safe-haven buying is waning and the technical picture on the short term has deteriorated for the bulls. There is also something resembling a partial bearish head and shoulders pattern forming since January 2 nd but look closely at the last few days of trading. The price holds well below $1300.00 but the $1260.00 level has been tested twice and held. This seems to me a sign that the current price pattern while not bullish is also not completely bearish.
The enthusiasm which drove gold from $1180.00 to $1300.00 in late January has dissipated – buyers viewing a troubling Europe have lost interest and the momentum players have booked profits and moved to the sidelines.
Like I have said these past few days however, a break below Gold’s 200 Day Moving Average ($1252.00) would place the bears back in charge and we might be looking at a pullback position which would test the next big support level for gold around $1230.00.
I am also not seeing much in the way of physical buying by the public across the counter although last week’s ETF numbers were reasonable. This is another sign of a “wait and see” attitude which has plagued gold over the past few months.
It’s important to watch the price of crude oil. In the past 5 days we have moved from $44.00 to $54.00 a barrel. This has hurt gold but the oil guys think there is not much change in the fundamentals – so this bounce could be simply speculative in nature. Oil has already begun selling off – most recently moving to around $52.00 – a profit taking slide back to $45.00 will reinvigorate the gold trade.
This could easily initiate another drive towards $1300.00 and would mean the early in the year bullish market has been resting – and waiting on developments in Europe. We will have to again be patient and I would not place too much emphasis on further pullback in gold if US economic numbers impress through Friday. This will encourage the bear trade on the short term only – the fact is they are weary of a large short position with so many unknowns unwinding in Europe. Finally remember that while everyone seems to be rejoicing over this latest injection of worldwide liquidity (fiat paper money) and raising their champagne glasses high – someone has to pay for this party.
As some data relative to the US economy continues to improve the talk about the Federal Reserve raising interest rates will get louder. I appreciate the position our government is in – half full or half empty comes to mind. They simply must push an optimistic agenda – because after all things are improving but even the hint of a move in the Federal Funds rate will hurt gold on the shorter term. The interest rate boogie man has replaced the quantitative easing boogie man – if you know what I mean. And I’m certainly not anti-recovery – just want to make sure everyone does not short-change gold in a rush to financial judgment.
So before you believe the US economy is completely out of the woods consider the following by Jim Clifton (Chairman and CEO at Gallup) – The Big Lie: 5.6% Unemployment – “Here’s something that many Americans — including some of the smartest and most educated among us — don’t know: The official unemployment rate, as reported by the U.S. Department of Labor, is extremely misleading.
Right now, we’re hearing much celebrating from the media, the White House and Wall Street about how unemployment is “down” to 5.6%. The cheerleading for this number is deafening. The media loves a comeback story, the White House wants to score political points and Wall Street would like you to stay in the market.
None of them will tell you this: If you, a family member or anyone is unemployed and has subsequently given up on finding a job — if you are so hopelessly out of work that you’ve stopped looking over the past four weeks — the Department of Labor doesn’t count you as unemployed. That’s right. While you are as unemployed as one can possibly be, and tragically may never find work again, you are not counted in the figure we see relentlessly in the news — currently 5.6%. Right now, as many as 30 million Americans are either out of work or severely underemployed. Trust me, the vast majority of them aren’t throwing parties to toast “falling” unemployment.
There’s another reason why the official rate is misleading. Say you’re an out-of-work engineer or healthcare worker or construction worker or retail manager: If you perform a minimum of one hour of work in a week and are paid at least $20 — maybe someone pays you to mow their lawn — you’re not officially counted as unemployed in the much-reported 5.6%. Few Americans know this.
Yet another figure of importance that doesn’t get much press: those working part time but wanting full-time work. If you have a degree in chemistry or math and are working 10 hours part time because it is all you can find — in other words, you are severely underemployed — the government doesn’t count you in the 5.6%. Few Americans know this.
There’s no other way to say this. The official unemployment rate, which cruelly overlooks the suffering of the long-term and often permanently unemployed as well as the depressingly underemployed, amounts to a Big Lie.
And it’s a lie that has consequences, because the great American dream is to have a good job, and in recent years, America has failed to deliver that dream more than it has at any time in recent memory. A good job is an individual’s primary identity, their very self-worth, their dignity — it establishes the relationship they have with their friends, community and country. When we fail to deliver a good job that fits a citizen’s talents, training and experience, we are failing the great American dream.
Gallup defines a good job as 30+ hours per week for an organization that provides a regular paycheck. Right now, the U.S. is delivering at a staggeringly low rate of 44%, which is the number of full-time jobs as a percent of the adult population, 18 years and older. We need that to be 50% and a bare minimum of 10 million new, good jobs to replenish America’s middle class.
I hear all the time that “unemployment is greatly reduced, but the people aren’t feeling it.” When the media, talking heads, the White House and Wall Street start reporting the truth — the percent of Americans in good jobs; jobs that are full time and real — then we will quit wondering why Americans aren’t “feeling” something that doesn’t remotely reflect the reality in their lives. And we will also quit wondering what hollowed out the middle class.”
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