Commentary for Tuesday, June 15, 2014 (www.golddealer.com) – Gold closed down $3.20 at $1271.70 and continues to ignore Iraq in a settling move taking advantage of recent modest gains.
This small sell-off is a bit concerning in that it would have been much more technically positive if gold would have continue higher to challenge $1290.00. A sell off at that point would have been the completed cup and handle I talked about (bullish) a few days ago – but today’s action seems a bit bearish.
It’s somewhat counterintuitive but gold traded relatively flat overnight selling off into domestic market and then bouncing back – probably from short covering and a stronger dollar.
As Iraq comes more fractured politically you would think that gold safe haven buying would increase but this has not been the case even though oil has recently trended higher. Crude is trading at 30 day highs over $106.00 a barrel so tension in the entire area is creating pressure. But I think the world has come to expect trouble from this area of the world and so will underestimate the outcome.
The Consumer Price Index (CPI) came out hotter than expected – May CPI up 0.4% with expectations being up 0.02%. The April number was 0.3% – the year on year number reflects a 2.1% move in inflation. This is above the Federal Reserve target but only slightly. The Federal Open Market Committee (FOMC) is meeting today and tomorrow so we will get to hear firsthand from the boss Janet Yellen.
Most do not expect much but the Federal Reserve is trying to be more transparent and this could lead to information the markets might react to especially if the Q & A focuses on Europe.
Rachel Evans (Bloomberg) – The dollar rose after a measure of U.S. inflation accelerated in May faster than forecast as Federal Reserve policy makers meet to consider further reductions in monetary stimulus. The U.S. currency strengthened before the central bank concludes its meeting tomorrow amid forecasts its will further reduce monthly bond-buying and discuss potential interest-rate increases next year. Brazil’s real, which has benefited from U.S. stimulus, led most emerging-market currencies lower. Australia’s dollar declined the most in two weeks against its U.S. counterpart as policy makers there signaled interest rates will probably stay low for longer.
“High inflation could bring about a more hawkish bias,” said Eimear Daly, the head of market analysis at London-based broker Monex Europe Ltd. “Even though I don’t think the U.S. economy is really strong enough yet for the first rate increases, the re-emergence of inflation pressures could temper that view. If you’re looking for any kind of bias going into tomorrow’s policy decision, this is it.”
Silver closed up $0.02 at $19.72 and I see that the famous Aden Sisters claim that silver is “cheap”. The Aden Sisters are icons in the precious metals business and read worldwide so this is always good for business – especially when the summer months slow traffic in general.
Platinum closed up $4.00 at $1443.00 and palladium closed up $7.00 at $817.00.
This from Lara Jakes and Julie Pace (AOL) – Obama considers special forces to help in Iraq – The three U.S. officials all spoke on condition of anonymity because they were not authorized to publicly discuss the plans by name. An Iraqi official did not deny the possibility of U.S. special forces returning to Iraq, but would only confirm that all options are being considered. The Iraqi official spoke on condition of anonymity to discuss the sensitive diplomatic issue more candidly. Already, about 100 Marines and Army soldiers have been sent to Baghdad to help with embassy security, according to a U.S. official. Obama made the end of the war in Iraq one of his signature campaign issues, and has touted the U.S. military withdrawal in December 2011 as one of his top foreign policy successes. Over the last week, as the ramped-up insurgency has captured large swaths of territory collaring Baghdad, Obama has been caught between Iraqi officials pleading for help and his anti-war political base which is demanding that the U.S. stay out of the fight.
There is no chance the President will let himself get sucked back into a ground war in Iraq. And the American public will not go for it even if you call the Special Forces by another name. But there you have it and an imploding Iraq will threaten the entire region – send oil higher and support the price of gold.
But here is where I go off the tracks relative to other commentary. I don’t think this political mess is worth more than $50.00 one way or the other. The last “war premium” for gold came when the Russians decided to promote Ukraine mischief and it melted within a week of Putin coming to the conclusion that it was not worth the price.
You could make the case that the Iraq problem is more serious vis-à-vis their oil fields. But even here we may not have a dog in this fight because Iraq represents less than 5% of the crude imported into this country.
So the real devil in the details must be the possible outcome to the Europeans if oil spikes. This could present real problems to the EU who is struggling with deflation.
But in the end I think Iraq will not create much of a case for higher gold. And it is apparent to Americans that fighting for a “democratic” Middle East remains a loser – just consider the track record.
This from Allen Sykora (Kitco) – MKS’s Nabavi: Gold Eases On Long Liquidation In Quiet Trade – Gold has fallen back on apparent long liquidation that set in when a several-day rally stalled, says Afshin Nabavi, head of trading with MKS (Swizterland) SA. Overall, he describes activity as quiet during European hours so far. The pullback in essence began when the market could not sustain its recent rally above the $1,285 area Monday despite ongoing geopolitical concerns surrounding Iraq and Ukraine, he says. “Everyone was very positive, hoping for a breach of $1,300,” he says. And when it began to appear that was not on the short-term horizon, some longs exited positions, he explains. Now, there may not be much fireworks in the near term with the market perhaps on hold ahead of the outcome of a two-day meeting of the Federal Open Market Committee that winds up on Wednesday, Nabavi says.
The walk-in cash trade today carried the same similar pattern – quiet or maybe a better word would be unexciting but still steady in that people remain interested. The phones were the same – so ringing but no one is in a hurry. We are seeing some long-term silver liquidation – bigger players who have been with us for years. The same is true of long-term gold liquidation but the numbers are not large enough to overwhelm fairly consistent physical buyers.
The GoldDealer.com Activity Scale is a “5” for Tuesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 3) (last Thursday – 3) (last Friday – 3) (Monday – 5). The scale (1 through 10) is a reliable way to understand our volume numbers.
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The new USPS server is installed with the upgraded post office software! This system will allow you to track USPS like FedEx – provide pinpoint location – allow you to reschedule if you were not home during the delivery and even provide text updates en route. This was the word from on high 2 days ago – the techs have now informed me that an interface problem will need to be fixed – so next week still looks like the landing date.
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