Gold Only Mildly Interested in the Russian Incursion or Yellen’s Comments

Gold Only Mildly Interested in the Russian Incursion or Yellen’s Comments

Commentary for Friday, Aug 22, 2014 (www.golddealer.com) – Gold closed up $4.90 today at $1278.60 so the Russian “invasion” or Fed Chair Yellen’s comments failed to really move the gold needle – an unexpected reaction really – most thought either one of these events would move gold much higher by the end of the trading day.

But this was not the case – the Russian threat created confusion – nothing more – and the Fed threat of “interest rates will go higher” was discounted because of our stymied recovery.

Considering the strong dollar 82.54 on the Dollar Index – we are near 11 month highs against the euro – gold has held up pretty well but not a stellar performance considering we are moving into the weekend and the geopolitical situation is very fluid.

Gold was basically flat overnight in Hong Kong and London – weakened slightly on early Yellen comments – and slept through the Russian invasion. This might pose an interesting “tired” scenario in the physical trade:  real enthusiasm is lacking as many European traders are on vacation and because gold is trading at the lower end of its current range those interested in selling have already taken action.

This does not change the reality – gold is weak psychologically – but there may be less downside than you might imagine because of this contrarian notion. Also consider the short trade may be either tired – satisfied with recent profit – or simply scared of short positions.

The Russian move into Ukraine today may not have produced any big “pop” in the price of gold but it did get everyone’s attention. This move introduces uncertainty onto the trading floor not because anyone believes this is the prelude to war in Europe – but because no one can figure out what Putin is up to considering the world was ready to give him Crimea to go away. At any rate this entire surprise is not enough to push the metals higher in the short term but the short contingent is finished for now.

Let me also comment that the “shallow” downside in gold is supported by historical premiums. When market sentiment is negative the physical market dries up overnight but there is always a market. And even though the action seems “dead” (a trade euphemism) – a close look at premiums will reveal something often overlooked by the public: The “premium” or amount charged over spot for commonly traded bullion products like the American Gold Eagle – between large commercial sellers or buyers remains virtually constant. The US Mint has produced millions of these coins and you would think that when things are slow (like now) the premium would adjust lower pushed by the supply and demand equation.

Silver closed down $0.03 at $19.36. This from Chuck Butler (Everbank) – Well, Ed Steer says in his morning letter today that there could very well be an industrial shortage in silver. In fact, Ed quotes Ted Butler, (no relation) the silver guru, so let’s listen in: "It’s hard to see how intense investment buying wouldn’t trip off industrial user attempted inventory stockpiling, or vice versa, and it doesn’t matter which comes first." Interesting don’t you think?

So just what will it take for the physical silver market to develop some pop? The biggest thing silver has going for it is not shortages – this kind of talk just does not have legs today. And it’s not any developing chart pattern which might turn the technical freaks bullish. Silver’s long term technical chart looks like it needs a vacation. And it’s not continued talk about price manipulation – that story too is getting tiresome.

There are three big reasons which are virtually never talked about in silver today but should be the most logical postulate for higher prices.

The first reason is simply that physical silver investment is not widely practiced. This might seem funny to you the reader because you are interested in the subject – but most people live their lives nicely without considering silver investment. In fact if there was ever widespread interest in silver the prices would go through the roof because there is not enough to make everyone happy.

The second reason is the massive and ongoing publicity provided by all the world mints – pictures, publicity and new tooling (expensive) for an endless array of new products – virtually all available to the new consumer cheap.

The third reason is silver’s scalability – not everyone can afford gold but virtually anyone can put away a few ounces of silver.

I am not a big fan of the “silver will soon be $100.00 an ounce” argument. I am also skeptical of the notion that somehow silver will be reintroduced into the money supply and act as real legal tender replacing the clad coinage of today.

I think the fate of silver will be much like it has always been – a slow and sometimes torturous grind to the upside – with any number of “fits and starts”.

I can’t tell you how many customers sold their core silver position at $10.00 claiming it was finished – only to face agonizing reappraisal. Today silver is twice that price and at some time in the future it will be twice what it now fetches. But in the meantime learn to develop a great deal of patience or look elsewhere.

Platinum closed up $1.00 at $1420.00 and palladium was also higher by $7.00 at $887.00. Again my favorite PGM – rhodium – continues to get hammered down $40.00 at $1375.00.   

  Precious Metal Closes for this week – Aug 18 through Aug 22 – 2014

            Gold                Silver              Platinum         Palladium

Mon    $1297.70         $19.60             $1444.00         $894.00

Tues    $1295.10         $19.38             $1438.00         $879.00

Wed    $1293.50         $19.47             $1428.00         $868.00

Thurs  $1297.70         $19.60             $1444.00         $894.00

Fri       $1278.60         $19.36             $1420.00         $887.00

So which way is gold going next week? This is what the GoldDealer.com employees think – 8 believe gold will be higher next week – 3 think gold will be lower and 2 believe it will be unchanged.

To this we are added a real survey on what our customers think about the gold market next week.

Like the employees they were given three choices – up – down – unchanged. We limited the survey to a random sampling of 100 customers – unscientific yes but worth considering because these people actually took action: 45 people thought the price of gold would increase next week – 37 believe the price of gold will decrease next week and 18 think prices will remain the same.

This from Fortune (Laura Lorenzetti) – Fed Chair Yellen says the job market “has yet to fully recover”. Yellen discusses the job market and the ongoing role of Fed policy at Jackson Hole gathering. There’s no simple recipe for success, especially when it comes to getting the economy back on track, according to Federal Reserve Chairman Janet Yellen.

The Federal Reserve Bank of Kansas City’s annual meeting in Jackson Hole, Wyo., kicked off Friday with a talk from Yellen about the job market and the status of the U.S. economy.

Her speech offered very little about the direction of monetary policy, as some had hoped. Many investors expect the Fed to begin raising interest rates next year, though Yellen’s remarks question the timing of rate hikes given the uncertainty of improvements in the labor market.

Yellen called out the “considerable progress” the economy has made since the end of the Great Recession. More jobs have been added during the recovery than initially lost in the downturn, the unemployment rate has fallen to 6.2% from a high of 10% in 2009 and job gains this year have averaged 230,000 per month.

“These developments are encouraging,” Yellen said. “But it speaks to the depth of the damage that, five years after the end of the recession, the labor market has yet to fully recover.”

She noted that the Fed is getting closer to its goals for the U.S. economic recovery, but there is still a ways to go as the jobless rate overstates the progress.

Figuring out how much labor “slack” still lingers in the economy is difficult. The Fed is looking beyond the simple unemployment rate to consider the labor force participation rate, the extent of part-time employment and the pace of hires and quits.

Previously, the Fed said it would keep interest rates near zero while unemployment remains above 6.5%. As unemployment hovers below that threshold, Yellen said the Fed will take into account a more holistic version of the labor market as it considers its future course of action and works to meet the agency’s dual mandate of maximum employment and low inflation.

Yellen’s comments reflect on the conference’s theme of labor market dynamics, which she considers “central to the conduct of monetary policy.”

Later Friday, European Central Bank President Mario Draghi is due to speak at the Jackson Hole conference.

Neither the walk-in cash trade nor national phones sales were the least bit affected by either the Russian/Ukraine problem or any of Yellen’s comments – we are still trading in subdued – summer conditions. The public remains interested but not overly concerned with either cheap silver bullion prices or discounted gold “safe-haven” buying. I think things could change next week if the Russian “threat” develops or if there is continued escalation in Gaza.

The GoldDealer.com Unscientific Activity Scale is a “3” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 3) (Tuesday – 3) (Wed – 4) (Thursday – 4). 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.

In addition to our freshly ground organic coffee offered visitors throughout the day we have added cold bottled water, cokes and Snapple. We have also added fresh fruit in a transparent attempt to disguise our regular junk food habits – which seem to grow when things get this quiet. And it does not help that the world famous Randy’s Donuts is just down the street. 

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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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