Commentary for Wednesday, March 4, 2015 – Gold closed off $3.70 on the Comex today at $1200.60 as the dollar surged against the euro.
The Dollar Index numbers are impressive trading from a low of 95.32 to a high of 96.06 and finally settling at 95.99 as of this writing.
NEW YORK ( MarketWatch) – The U.S. dollar hit an 11-year high against the euro Wednesday after pushing through a key technical threshold, shrugging off a weaker-than-expected ADP jobs report and strong eurozone reports. The euro EURUSD, -0.89% tumbled to $1.1073, its lowest level since late 2003.
The market has dumping euros for the past week despite a string of upbeat eurozone data that could inspire the European Central Bank to revise its growth expectations upward at its policy meeting on Thursday, several analysts have said.
Wednesday’s moves were driven by a combination of eurozone bond investors, who are already facing record-low yields in Europe, searching for yield elsewhere, and the expectation that the Fed will be the first among its peers to raise interest rates. “We bounced off $1.1150 a few times in the last few days and I think the market may have thought if we moved through it, that would be a major break,” said Steve Englander, global head of G10 FX strategy at Citigroup Inc.
The European Central Bank is expected to make its first €60 billion purchase of private and public eurozone debt after Thursday’s meeting. “This is sort of a continuation in the selling we’ve seen all week,” Englander said. “Hawkish Fed expectations combined with the sense that once the ECB starts buying, there’s just not going to be enough bonds out there.”
Silver closed off $.012 at $16.13. Not much action today but silver prices are getting cheap and it won’t be long before the public lines up in my opinion. We are seeing additional trades of gold bullion for silver bullion lately and silver ETF numbers were stronger this week.
Platinum closed down $8.00 at $1183.00 and palladium was off $1.00 at $830.00. Positive car sales have failed to ignite the PMG numbers which does not figure especially as platinum is still trading at a $17.00 discount to gold and the Chinese typical load up when platinum is at or below the price of gold. Still platinum ETF numbers were stronger this week.
This is our usual ETF Wednesday information – Gold Exchange Traded Funds: Total as of 2-25-15 was 53,923,185. That number this week (3-03-15) was 53,523,639 ounces so over the last 2 weeks we dropped 399,546 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 54,094,507 and the record low for 2015 is 51,057,082.
All Silver Exchange Traded Funds: Total as of 2-25-15 was 623,239,065. That number this week (3-3-15) was 623,296,752 ounces so over the last 2 weeks we gained 57,687 ounces of silver.
All Platinum Exchange Traded Funds: Total as of 2-25-15 was 2,560,817 ounces. That number this week (3-3-15) was 2,570,556 ounces so over the last 2 weeks we gained 9,739 ounces of platinum.
All Palladium Exchange Traded Funds: Total as of 2-25-15 was 2,983,626 ounces. That number this week (3-3-15) was 2,961,197 ounces so over the last 2 weeks we dropped 22,429 ounces of palladium.
So what is in store for gold on the shorter term? Really no one wants to commit but the consensus is neutral to negative. The big players (Mitsubishi/Sean Lusk Walsh Trading/Kitco) are either cautious or negative. Both cite the probability of higher interest rates and the inability of gold to muster higher prices.
And the ETF (Exchange Traded Funds) numbers are not steller – total as of 2-25-15 was 53,923,185. That number this week (3-03-15) was 53,523,639 ounces so over the last 2 weeks we dropped 399,546 ounces of gold.
Most commentators are weary of this Friday’s jobs number – a good show here would add to their interest rate fears and perhaps prompt another attempt by the short trade to push prices below the important $1200.00 level.
But here is where it gets dicey. Everyone admits higher prices for gold are not in the cards on the short term if for no other reason than the technical picture is negative and the bears are happy. But gold does seem to stick to the rather narrow trading range on either side of $1200.00.
Kitco’s Peter Hug contends that a break from this current narrow range is immediate but will not commit to which way – higher or lower. My suspicion is that Hug favors a weakening in the price of gold but like all real traders he is also suspicious of gold’s ability to bounce off the $1200.00 number.
So the jury is still out – but all is not negative for gold in the shorter term. The European Union is buying bonds – another quantitative easing program which could be open-ended but the first number on the table amount to $1 trillion dollars. This is a serious amount of money and the results are unknown.
The Greek debt solution is tenuous and will be back in the news in several months. And everyone knows that both China and India are big buyers at these lower levels but will they step up to the plate or wait for lower prices?
Finally central banks around the world are lowering interest rates. Even the Germans are offering negative interest rates – in other words hoarding real cash might become a reality.
Also on gold’s side is how fast this negative technical picture can change sides. Remember that from last October through January the price of gold moved from $1140.00 to $1300.00 and the bulls were in control. During that time gold has little trouble moving through a big overhead resistance zone between $1180.00 and $1240.00.
On the physical gold side across our counter things are quiet. In fact they were quiet even when gold was moving higher earlier this year. And the US Mint now requires distributors to accept US Gold Eagle dated both 2014 and 2015 which would indicate they have coins from last year’s production. I would not read too much into this but it is another one of those factors which creates confusion especially when you consider the popularity of the US Gold Eagle series.
While prices are depressed there does not seem to be many gold bullion sellers at these lower levels. If the public believed even lower prices were in the cards why not lighten up their position? Also of importance is that our ethnic gold bullion trade (Pamp Gold Bars) across the counter has returned these past few weeks. And some commentators claim gold’s recent firmness is the result of renewed Chinese interest.
Is the gold market still unwinding? Probably – but there is enough interest at current levels to suggest we may be approaching a real bottom. And the fact that the US investor is still not selling much might suggest most weak hands in the physical market have already sold – or more importantly those who have not sold will ride out the rest of this down leg.
Finally consider relative value in gold – today we are trading on both sides of $1200.00 which is about where gold was 5 years ago. Ten years ago gold was trading around $400.00 so we are still 3 times higher than we were in 2005 – a full 3 years before the financial collapse woke everyone up and the dangers of unbridled fiat currency policy.
This from the Hindu BusinessLine (Alka Kshirsagar) – ‘Gold monetisation scheme will be a game-changer’ – “The gold monetisation scheme announced by Finance Minister Arun Jaitley in the Budget will be a game-changer in a country that has huge reserves of the metal, said Rajesh Khosla, Managing Director of MMTC-PAMP.
The company is currently the only LBMA (London Bullion Market Association) accredited gold refiner in the country. The earlier scheme of 1998-99, he said, had been a non-starter as it required a minimum of 500 gm of gold to be deposited, and mainly addressed temple trusts.
“India’s gold holdings are estimated to be around 25,000 tonnes, and over 90 per cent of this is with households,” said Khosla. While the earlier scheme had managed to mop up 18-20 tonnes of gold in 15 years, the gold monetisation scheme 2.0, which also covers retail buyers, can garner 100 tonnes in calendar year 2016. “This will have a huge impact on gold imports,” he said. Elaborating on their worldwide experience, Somasundaram PR, Managing Director-India, World Gold Council, said that monetisation has been very successful in Turkey, which has similar “under the pillow” stocks of gold.
Ideal rate – “There are many products available in Turkey, like current accounts, deposit accounts and savings accounts,” Somasundaram said, adding that in China, gold savings accounts were very popular. The prevalent rate is 1 per cent per annum, payable in gold at the end of the prescribed per term. Saurabh Gadgil, Managing Director of Pune-based PN Gadgil Jewellers, said that the scheme to mobilise idle gold and bring it into the system was a win-win situation for all stakeholders.
According to him, an interest rate of 3-4 per cent a year would attract depositors. While details of the scheme are awaited, issues such as building the eco-system to verify the purity of gold and whether the deposits will be taxable needed clarification.
The walk-in cash trade was surprisingly busy today and the phones were about average.
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