Commentary for Thursday Oct 31, 2013 (www.golddealer.com) – Gold closed down $25.60 today at $1323.60 in a kind of convoluted reaction to a number of factors: dollar strength created by less than dovish FOMC talk which pushed the dollar higher and profit taking from the paper sector, gold being up more than $80.00 these past two weeks.
Silver was down $1.11 at $21.83 reacting to lower gold and also dealing with a pretty good route created when speculators decided it was time to also take profits silver being up $1.38 in the same time frame.
Platinum was down $30.00 at $1448.00 and palladium was down $12.00 at $737.00.
Jim Wychoff’s (Kitco) view of the recent FOMC minutes is interesting: “As expected, the FOMC left its very accommodative U.S. monetary policy unchanged. However, many markets deemed a bit bearish the FOMC’s remark that the U.S. economy does not have as much downside risk as that seen in previous months. Traders and investors extrapolated this to suggest the Fed could start to “taper” its monthly bond-buying program (QE) a bit earlier than many now reckon. The sense of the market place had been that the Fed would not start to cut back on its monthly bond purchases until early next year—most likely the second quarter at the earliest. Still, the latest FOMC statement, overall, does not strongly suggest a major change in that thinking by the market place.”
Reuters on the other hand attributed the weakness to profit taking Thursday morning so Wychoff’s view is not universal. I think the 16 day shutdown and sub-par real estate numbers gave the Fed pause and so the 9 to 1 vote for continued easing should be seen as dovish.
But Fed talk was interpreted as hawkish because of comments about the US economy not having much downside. So talk about what the Fed might do is back and on the front burner even though they did not do a thing to change this program given the tepid US economic recovery.
Of the two views I think Wychoff is right in that the metals sold off (over meeting news) and gold is once again moving from short-term bullish to defensive and looking over its shoulder. One way or the other the reason behind this late in the day sell-off speaks to how uncommitted the paper trade remains when it comes to gold. And sudden hiccup in gold prices will slow physical activity as real investors wait for better prices.
In Thursday’s market gold continues downward momentum off $25.40 at $1323.60. So we move once again from perhaps “a drive above the $1350.00 level is in the cards” to “I wonder if $1300.00 will hold” on interpretation. Amazing really when you consider how much evidence there is supporting continued quantitative easing as a short-term remedy to our economic woes. We may be in for another push to the downside and a generally defensive market into the holiday season.
Kramer thinks Christmas might surprise but how? Where are the strong jobs in this recovery? Bill Gross and other large fund managers see a “bubble” in equities but the ISM (Institute of Supply Management) jumped higher this morning (big) which indicates corporate profits are solid and so stocks will continue to increase.
At this point Washington is selling the idea that “things are better” but this “sizzle” approach is limited without a big improvement in jobs. And so the Fed quandary as they hope the economy will develop some kind of breakout speed despite the number of people still drowning in debt. Still the stock market is acting like the recession is over and standing in front of that momentum train is not good business so confusion is back on the front porch. Stay tuned and dust off that old Chinese platitude about living in interesting times. Like I have said before the Chinese Curse is an American idiom which my Mom seemed to use on a regular basis.
Also from reader Dave: Dear Richard, I do not believe your simplistic explanation of why China is accumulating so much gold is entirely correct. King World News, forever bullish for gold, included the following gem today: “There is no question that China and their threat to US global dominance is what has the United States and its leaders truly terrified. It is now a global game of chess and cyberwarfare, and there is no question that the Chinese are beginning to dominate the US at this key moment in world history.” As mentioned in the past I am a mushroom so do not know much, but it seems to me if KWN is correct our country is helpless to prevent the Chinese from executing any plan they might have since we have positioned ourselves for failure. Despite protests from our leaders to the contrary even a country as great as the United States simply can’t spend 50% more than it takes in and expect to avoid an accounting sooner or later. The planned appointment of the dovish Janet Yellen makes this fact even more frightening. As Daystar was fond of saying, “not good, not good at all.”
My comments yesterday were a bit tongue in cheek but there is something to be said about the nature of the Chinese relative to their gold ownership. They really do love the stuff and being a military man myself I do understand the other threats we all face.
The walk in cash trade and phone business was just average for the week the CNI Activity Scale was a big “3” today. Our new CNI Activity Scale will take into consideration volume, open and closed orders (buying and selling), the cash trade, and the hedge book: (last Friday –3) (last Monday – 4) (last Tuesday – 3) (last Wed – 3) (Thursday – 3). The scale is 1 through 10 (5 being relatively busy and this approach considers today’s business so it will be more intuitive). We believe this is a reliable way to give you an idea of what a real bullion business is doing without the sales pitch.
Phase One of our new golddealer.com website might be delayed another week (November 11th) and now I am beginning to feel like the President. It will also include Live Chat, you will be able to set up your own customer account, and you will receive automatic email confirmation on buying or selling. Look for further improvements before year end which makes accounting, shipping and tracking easier (check to see if we have your email address in the new system). We now offer the choice of USPS or FedEx Ground.
Our new flat screens within the CNI Building are up and operational and the cash trade loves this idea. The feed and graphs are live and bullion products are programmed with premium spreads so your choices are easier. There is nothing like this on the West Coast and visitors enjoy complete transparency when buying or selling. Like us on Facebook and follow us on Twitter @CNI_golddealer.
Our Daily Gold Newsletter archive has been moved and enlarged (30 days) to our Facebook page and the new website will include a direct daily newsletter. Remember our best price guarantee (call Kenny 1-800-225-7531 and save money). Thanks for reading and enjoy your evening (Halloween or not). These markets are volatile and involve risk: Please Read Before Investing
Written by California Numismatic Investments (www.golddealer.com).