Commentary for Tuesday, Feb 4, 2014 (www.golddealer.com) – Gold closed down $8.70 today at $1251.00 on a round of profit taking the notion that US stocks are settling after early loses these past several sessions. Factory orders indicate continued economic slowing down 1.5% from November’s 1.5% increase. All indications from the Fed however is that tapering will continue despite mixed economic metrics of late. So the Federal Reserve is clearly concerned about its huge $4 trillion balance sheet.
The Federal stimulus slowdown or tapering has been problematic in many areas of the world. US equities have lost about 5% and the Japanese markets are down about 15%. The currencies of emerging market countries have also reacted negatively. But gold has moved significantly its off the end of year lows in what some technical folks might call a minor uptrend in a technically challenged market. If you watch resistance areas keep an eye on gold’s 100 day moving average ($1275.00) as a break above this point would be very encouraging.
Silver closed almost unchanged up $0.01 at $19.40 in very quiet paper trading. But the physical market is alive and well and especially in demand are 90% bags, silver 1 oz rounds and American Silver Eagles in that order.
Platinum was down $13.00 at $1373.00 and palladium was off $2.00 at $700.00. Platinum still seems like a big surprise of late with no benefit in price from the strike in South Africa.
The slump in stocks presents the worst beginning of the year numbers since 1933 according to CNBC. But remember stocks are up big year over year (30%) and some viewed the poor economic numbers yesterday as weather related. Important employment numbers will be released this week so patience is required but some see trouble brewing: Chuck Butler (EverBank World Markets): “Well, the U.S. stock market and the global stock markets for that matter, got snowed on yesterday. Suddenly, as if this just appeared out of nowhere, investors, traders and hedge fund junkies are questioning the strength of the U.S. economy. It’s as if these problems that have shown up again last week and again yesterday just “popped up”. Ahem. They’ve been there all the time, and I’ve pointed them out, but only you, dear reader, me, and some other astute people have paid attention! The data that dragged down the stock market yesterday was the U.S. PMI, (manufacturing Index) for January. The data dropped like a rock in January, from an index number of 56.5 to 51.3. WOW! Of course the spin doctors were out immediately, and talking about how the weather in the U.S. was the cause of the manufacturing slowdown. I guess it snowed on their machines! Don’t forget that last week we saw New Homes Sales drop like a rock, along with Durable Goods Orders, which were for December, so no weather excuse here.”
Peter Hug believes that if stocks continue in their correction it will not necessarily prove a plus for gold as it could move lower following equities. I disagree in that if the stock market is technically damaged and continues lower I would expect this to support gold especially if the Pacific Rim and perhaps even Europe continue to wobble. This is exactly the kind of fear rhetoric gold thrives on and note the word rhetoric.
Unless the correction is very large (more than 20%) the talk of higher gold prices on the short is a tempest in a teapot. The short players are waiting quietly on the sidelines and the Fed continues to talk about reduction in their bond buying program. Until these two factors are removed expect sideways actions between the established limits ($1200.00 to $1400.00). A break either below or higher would require further thought but for now expect back and for forth action.
I thought this from the BBC News Business (Bob Howard, Money Box) was worth noting: Some HSBC customers have been prevented from withdrawing large amounts of cash because they could not provide evidence of why they wanted it, the BBC has learnt. Listeners have told Radio 4’s Money Box they were stopped from withdrawing amounts ranging from £5,000 to £10,000. HSBC admitted it has not informed customers of the change in policy, which was implemented in November. The bank says it has now changed its guidance to staff. New rules – Stephen Cotton went to his local HSBC branch this month to withdraw £7,000 from his instant access savings account to pay back a loan from his mother. A year before, he had withdrawn a larger sum in cash from HSBC without a problem. But this time it was different, as he told Money Box: “When we presented them with the withdrawal slip, they declined to give us the money because we could not provide them with a satisfactory explanation for what the money was for. They wanted a letter from the person involved.” Mr Cotton says the staff refused to tell him how much he could have: “So I wrote out a few slips. I said, ‘Can I have £5,000?’ They said no. I said, ‘Can I have £4,000?’ They said no. And then I wrote one out for £3,000 and they said, ‘OK, we’ll give you that.’ He asked if he could return later that day to withdraw another £3,000, but he was told he could not do the same thing twice in one day. He wrote to complain to HSBC about the new rules and also that he had not been informed of any change. The bank said it did not have to tell him. “As this was not a change to the Terms and Conditions of your bank account, we had no need to pre-notify customers of the change,” HSBC wrote. Mr Cotton cannot understand HSBC’s attitude: “I’ve been banking in that bank for 28 years. They all know me in there. You shouldn’t have to explain to your bank why you want that money. It’s not theirs, it’s yours.” Peter from Wiltshire, who wanted his surname withheld, had a similar experience. He wanted to take out £10 000 cash from HSBC, some to pay to his sons and some to fund his long-haul travel plans. Peter phoned up the day before to give HSBC notice and everything seemed to be fine. The next day he got a call from his local branch asking him to pay his sons via a bank payment and to provide booking receipts for his holidays. Peter did not have any booking receipts to show. The following day he spoke to HSBC again and this time, having examined his account, it said he could withdraw the £10,000. Belinda Bell is another customer who was initially denied her cash, in her case to pay her builder. She told Money Box she had to provide the builder’s quote. HSBC has said that following customer feedback, it was changing its policy: “We ask our customers about the purpose of large cash withdrawals when they are unusual and out of keeping with the normal running of their account. Since last November, in some instances we may have also asked these customers to show us evidence of what the cash is required for.” “The reason being we have an obligation to protect our customers, and to minimise the opportunity for financial crime. However, following feedback, we are immediately updating guidance to our customer facing staff to reiterate that it is not mandatory for customers to provide documentary evidence for large cash withdrawals, and on its own, failure to show evidence is not a reason to refuse a withdrawal. We are writing to apologise to any customer who has been given incorrect information and inconvenienced.” In a sense your money becomes pocket money and the bank becomes your parent” Money Box asked other banks what their policy is on large cash withdrawals. They all said they reserved the right to ask questions about large cash withdrawals. But none of them said they would require evidence of what the money was being used for before paying out. Douglas Carswell, the Conservative MP for Clacton, is alarmed by the new HSBC policy: “All these regulations which have been imposed on banks allow enormous interpretation. It basically infantilises the customer. In a sense your money becomes pocket money and the bank becomes your parent.” But Eric Leenders, head of retail at the British Bankers Association, said banks were sensible to ask questions of their customers: “I can understand it’s frustrating for customers. But if you are making the occasional large cash withdrawal, the bank wants to make sure it’s the right way to make the payment.”
Both the walk-in cash trade and the phones were average today with periods of busy but not hectic. We picked up after 12 noon in the store which is usual and for the most part the public seems to like better pricing but at this point is not getting too excited.
The GoldDealer.com Activity Scale is a “7” for Tuesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 5) (last Thursday – 6) (last Friday – 6) (last Monday – 6) (Tuesday – 7). The scale is 1 through 10 and we believe this is a reliable way to “sense” real bullion business.
On the new GoldDealer.com site: Comex closing prices are posted (upper right hand corner of the home page) and are included on individual landing pages. Live pricing and the change function works: you can now compare the Comex close with live product pricing for a true value picture. The All Bullion Products link lists all products and includes all Bid (red) and Ask (green) prices. For some reason visitors overlook the heading All Bullion Products and move to the sub-categories under it like Gold, Silver, Platinum and Palladium. We are reworking All Bullion Products so when you hover over it with your cursor the text is highlighted.
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