Commentary for Thursday, Dec 19, 2013 – So gold finally reacted to the taper announcement in a big way off $41.10 at $1195.00. The sell-off began in the overnight Hong Kong market with London being relatively flat and further weakness seen in the domestic gold market.
Today’s close ($1195.00) is the lowest price we have seen for gold since 2010 and further evidence investors are moving money into stocks. Keep in mind however that the Fed now has a $4 trillion balance sheet and continues to print to the tune of $900 billion per year. And it has guaranteed everyone that interest rates will remain low for the foreseeable future so where this experiment takes us is difficult to imagine.
Silver followed gold lower down $0.87 at $19.14 and activity remains steady under $20.00 with premiums on US Silver Eagles continuing to shift as the Mint retools for the new 2014 coins. I would not get too excited over paying big premiums for the US Silver Eagles and this includes the “extra” for banded boxes and earlier years as this bullion coin is minted in the millions and believe the “big buyer” premiums have a way of melting when the bullion market is defensive (like now). Stick with weight and low premiums and you will win the race. This approach lacks all the fancy fluff but is usually on the right side of the trade over time.
Platinum was down $25.00 at $1319.00 and palladium was off $3.00 at $697.00. I don’t think you will see much weakness in the PGM metals relative to gold because this market has already been hammered and mining supply is hampered.
The new site experienced a technical problem today which made it unresponsive at times. Sorry for the inconvenience and the techs are working the problem.
The Jim Wyckoff (Kitco) is worth noting: “The highly anticipated U.S. Federal Reserve Open Market Committee (FOMC) meeting, statement and press conference by outgoing Fed Chairman Ben Bernanke are over, and in the aftermath it looks like, at least for the near term, the winners are the U.S. stock market and the U.S. dollar. The loser is the gold market. While investors, traders and market watchers had pretty much factored into most markets’ prices Wednesday’s FOMC news, the surprise to many was that the stock market rallied sharply. The argument from the stock market bulls is that the FOMC statement “threaded the needle” and was not too hawkish and not too dovish. Or in other words the U.S. economy is growing to the point of not being a big worry to the market place any more, yet the Fed is in no hurry to tap the brakes too hard on its still-very-easy monetary policy. The gold market and other raw commodity markets are seeing two significant negatives on the morning after the Fed tapering announcement: 1. a stronger U.S. dollar index. 2. money flows that see more funds moving into equities, at the expense of all other investment asset classes. I am still in the camp that sees the major bull run in the stock market at the tail end of its life. The fact that even more market watchers have turned stock-market-bullish after the FOMC statement makes me even more convinced the bull run in stocks sees its days numbered. While there still may (or may not) be more upside in the U.S. stock indexes in the near term, the vast majority of the energy has already been expended by the bulls, as they have pushed the major stock indexes to record or multi-year highs. Once the money starts to flow out of the stock market, other asset classes, including gold, will then quickly benefit.”
So what to make of this continue weakness? Before you jump out the window consider what I have been saying for a long time: look at the 1 year gold chart and the number $1200.00 is big. Do the same for the 5 year chart and you have to go back to June of 2010 to see the $1200.00 support for gold. During that time the world of quantitative easing was completely redefined and the results of this largess still remain to be seen.
I am not saying we are through with weakness in the gold market because inflation is still not a problem but value investors should be looking carefully at the $1200.00 level; we are talking about a 37% retracement from all time highs.
If you are still nervous look for support from the Asian physical trade and smaller Central Bank acquisitions which have never failed to buy further weakness. As an interesting side note even with a big blowout in the price of gold we have seen virtually no whale sales perhaps meaning those still in are in for the long haul because they now see the gold market as too cheap.
With all the price activity and news excitement you would expect the market to be very active but nothing really happened until after 12 Noon (California). The walk in cash trade exploded to the point we had people waiting in their cars in our parking lot because it is raining in LA. The phone business was less busy but still active and with both the walk in trade and phones virtually everyone was buying. The GoldDealer Activity Scale being a “5” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Friday – 4) (last Monday – 3) (last Tuesday – 4) (Wednesday – 3) (Thursday – 5). The scale is 1 through 10 and we believe this is a reliable way to “sense” real bullion business.
GoldDealer site now posts live prices for buying precious metals and selling precious metals. The system however requires that you call and talk with a live person to confirm and receive an order number. It includes Live Chat and new customers can set up their own encrypted accounts. The automatic email confirmation (buying or selling) is spotty and the techs claim a fix is right around the corner.
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The CNI Holiday Schedule: We will be closed Tuesday, Wednesday and Thursday (Dec 24th, 25th and 26th) for Christmas. For New Year’s we will be closed Tuesday and Wednesday (Dec 31st and Jan 1st): a reminder that shipping during the holiday season slows so your patience is appreciated. Thanks for reading and enjoy your evening.
Today was a busy day with lots of sales on the Australian Gold Kangaroo and the American Gold Eagle