Gold Moves Lower as the Dollar Gains Strength

Gold Moves Lower as the Dollar Gains Strength

Commentary for Thurs, July 31, 2014 (www.golddealer.com) – Gold closed down $13.60 today at $1281.30. The latest FOMC news release yesterday in which the Federal Reserve cut another $10 billion from its monthly bond buying program was a none event.

Still I might be the only one who thinks that gold is generally better off because it did not move significantly lower after yesterday’s news. This brought virtually no comment from anyone – the common theory being that this is what everyone expected.

Gold was weaker today but not due to further Fed adjustments to the punch bowl – it was weaker because of the jobs number and the Dollar Index (81.0) has a decidedly upward bias this week.

You might also consider that European stocks took a hit over default news and US stocks moved lower over higher wages – this stirs up the flight to safety relative to the dollar. 

With tensions simmering as Putin creates more trouble in Ukraine – despite sanctions, bad news in housing, the Argentina default, and the Chinese buying with both hands – you would think gold prices should be trending higher.

But this is not the case today as the “big sanctuary” continues to be the dollar. A common trend when traders move to the sidelines – waiting to see what happens. 

Forbes – “The tremors started late Thursday when talks between Argentina and its creditors hit a stalemate and Standard & Poor’s declared the country had entered “selective default.” (See “Why Everyone’s A Loser In Argentina’s Default.”) Early Thursday in Europe, Portugal’s Banco Espirito Santo recorded a $4.7 billion loss that may severely impede its ability to raise needed capital.”

If you look at gold’s 30 day pricing chart the market is generally moving lower – off about $50.00 with a downward slope. There is some support in what looks like a bumpy landing coming from a troubled world even though the US economy improves.

For now – it looks like the $1280.00 area is important and if gold holds we are looking at a triple short term bottom – which could turn into a technical plus. For now the bears are once again in charge as gold has moved below its 200 Day Moving Average ($1285.00). 

The 60 day gold pricing chart shows a virtual sideways market developing from late June and wandering mostly between $1320.00 and $1300.00 so I am not going to jump out the window yet but a further break to the downside might bring up this consideration.

Encouraging short-term support in the local physical market this summer has been missing in action. Things usually pick up in September so if gold stays in this holding pattern for another month and suffers no more technical damage a real bottom may be in place.

We can then begin another building attempt perhaps challenging $1400.00. Any strength above that number would be very bullish and we could be off to the races perhaps supported from increased physical demand.

In the meantime most large bullion dealers will admit things are very quiet and I am beginning to see the usual “get rich with gold” infomercials on cable television – a sure sign the telemarketers are going broke without their usual source of uninformed buyers.

This old pitch begins with “buy real US gold coins” at cost – followed with a few celebrity endorsements – followed with a room full of people clapping about how much money will be made overnight. They show a US Gold Eagle and quote a price at cost but never include the weight so the information is useless.

You are usually shown a one ounce coin and delivered a 1/10 ounce coin – a shameless use of promotion. The finish is a call to action – “call for your free information kit today” or “operators are standing by”. This entire approach is alarming but the theme is repeated – with high quality filming on a regular basis so some phone-rooms must be one step ahead of the Feds.

What these people really want is your name, address and phone number which will then become their new telemarketing base and you will be solicited during dinner about the huge profits in gold which are right around the corner. 

So my usual admonition – if you run into this joke late at night resist the phone call and compare prices between legitimate bullion dealers in the morning.

Remember that certified gold bullion coins are a waste of your resources – buy weight and avoid the flimflam.

Be especially careful about your IRA choices. The so-called “IRA Specialist” is a phone jockey they hired off the street which follows a prepared script.

Placing certified bullion coins in your IRA is also a guaranteed money loser – the selling dealer makes 30% to 50% in commissions and this money comes directly out of your IRA funds.

If you are placing gold bullion in your IRA there are good choices. (1) Acceptable bullion coins at $25.00 to $50.00 over spot / available anywhere. (2) American Eagle Proof coins are popular these days. If you decide proofs are for you make sure all original packing is complete and you are not paying too much premium.

We sell them for about $275.00 per ounce over spot. This is fair but most telephone rooms – that background selling noise is taped – charge 2 or 3 times that premium hoping you won’t figure the deal yourself.

If you are not sure about pricing – which is common about half the time – email Ask an Expert at GoldDealer.com and I will get you in the ballpark.

Silver closed down $0.18 at $20.37.

Platinum closed down $16.00 at $1465.00 and palladium was off $7.00 at $873.00. Rhodium is higher again today by $15.00 ($1285.00) and the popular Baird 1 oz bar is selling for $1405.00 delivered. If activity in rhodium continues we might have a mini-rush and its 10 year average price looks like $2879.00.

The December 2014 COMEX Gold contract is the most active future month and provide insight into how “hurried” or “not hurried” traders become over world events. Volume for the previous 5 days is as follows: Thurs 7-24 (33,002) – Fri 7-25 (44,668) – Mon 7-28 (57,697) – Tues 7-29 (150,849) – Wed 7-30 (130,868).

Note that the volume numbers stable and increasing Thurs through Mon and jump substantially Tues and Wed – this is due to contract expiration and nothing else – so volume numbers are uninspired.  

Chuck Butler’s (Everbank) comments were funny today – “So, I missed the GDP number yesterday. Silly me, for I was using the fact that real capital expenditures (capex) has averaged only .8% annually, or hardly one-third of its prior historical rate, and the net investment in real plant and equipment after capital consumption allowances, has actually decline by 20% since 1999-2000, thus ruling out the true measure of future productivity growth, as reasons to believe that GDP would be disappointing.   As my friend Bill Bonner said the other day: "Capital Investment is what lies behind productivity and prosperity. Without it, the economy staggers."  

I guess I wasn’t the only person to miss on the GDP number yesterday. But I might be the only one that you read, so therefore you think I’m a dummy! And rightly so! But I come by my dumbness honestly. I use logic. So, logically looking at 2nd QTR GDP, could you really get 4% growth out of an economy that saw Retail Sales drudge along, manufacturing slip and household income decline. Durable Goods remain nascent and as I state above capex is still non-existent? I didn’t think so, but apparently the Gov’t can.”

The walk-in cash trade today was average for the summer – that is code talk which means everyone is planning lunch early. By the way, we are once again working on our in-person delivery downstairs – we have added fresh fruit and Hersey’s Candy Kisses to our usual organic coffee – cold bottled water and coke.

The phone trade is slow – really slow – which is shown in today’s Activity Scale coming in again at well below 5.

The GoldDealer.com Activity Scale is a “2” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 5) (last Friday – 4) (Monday – 3) (Tuesday – 2) (Wednesday – 2). The scale (1 through 10) is a reliable way to understand our volume numbers.

Email confirmation using a PDF File when buying or selling is functional. It also includes the various forms of payment and includes bank wire instructions. And you can now see your actual invoice or purchase order on your computer screen.

When you buy or sell please check to see if we have your current email on file and that your computer will accept our email (no spam).

About shipping information – when buying or selling your rep will walk you through your current mailing information. Thanks for keeping us up to date if you have moved.

Our four flat screens downstairs with live independent pricing (BullionDesk.com) are a big hit with the cash trade. Live pricing moves all the buy/sell product prices on a real time basis. Yes – you can visit the store with cash and walk away with your product. Or you can bring product to the store and walk away with cash. When buying from us remember if you exceed $10,000 in cash (the real green kind) a Federal Form is necessary.

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Thanks for reading from your friends at GoldDealer.com and enjoy your evening.

Disclaimer – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisers. The precious metals and rare coin market is random and highly volatile so it may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.

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