Commentary for Thursday, June 19, 2014 (www.golddealer.com) – Gold moved significantly higher today up $41.30 at $1313.70 recapturing the important $1300.00 level and waking everyone up – after yesterday’s QE taper of $10 billion dollars.
Some expected a weaker gold price today but Yellan’s comments were dovish – meaning traders can continue to expect plenty of loose money policy as interest rates remain low. Gold did drift higher in overnight markets ($1280.00) but the real push higher happened on the New York trading floor in early action.
Gold quickly moved above its 50 day moving average ($1284.00) and continued through its 200 day moving average ($1290.00) and 100 day moving average ($1297.00). It stalled a bit at $1300.00 but finally broke through that important level closing at its highest level since mid-March.
The rise in the price of gold is indicative of several factors: (1) the market was already in a short-covering mode and Yellan’s comments encouraged floor traders. (2) In the larger view gold has been relatively cheap selling at the lower end of its range. (3) Within the last year we have put in two solid bottoms at $1200.00 – and while this double bottom was overshadowed by continued tapering by the Federal Reserve – it was enough to encourage a safe haven backdrop. (4) It serves as a reminder that even when the trading mood is negative – floor traders watch the Federal Reserve carefully – and continued loose money policy will support gold. (5) I also think this type of price action points to an undercurrent which is always there but only rises to the surface from time to time. When people are not happy or are uncertain with government – either with monetary policy or foreign affairs – they look to hedge with gold.
Also keep in mind that just because gold has moved above $1300.00 there is significant overhead resistance in the trading band between $1300.00 and $1350.00 so the next few days should be watched carefully.
Silver was also hot today up $0.88 at $20.64 and while sub $19.00 seems very cheap today remember we are still trading at significant discounts from old highs.
Platinum closed up $25.00 at $1475.00 and palladium closed up $16.00 at $839.00. In my opinion this market (including rhodium) has plenty of upside potential.
From Peter Hug (Kitco) – Textbook – “The Fed did as expected yesterday, first announcing another $10 billion reduction in its bond buying program and following that up with a continued pledge to remain accommodative. A first grade student can work out the mathematical average that U.S. growth will come in below the Fed’s projections from the beginning of the year when the first quarter numbers were released, but Yellen still felt it appropriate to mention it. The metals also behaved as expected. Gold’s first reaction on the tapering news saw the yellow metal give up $10, but, in what seemed like a heartbeat, recovered the loss and ended up strongly. It continues to show legs this morning, easily breaking through $1,278 overnight. This time silver is reinforcing the move, approaching the $20 handle; an impressive 9% bounce from its recent lows. If $1,278 holds, $1,292 will be gold’s first objective.”
Gold’s strength today and the push above $1300.00 is a continuation of the relatively strong technical picture gold has presented over the past 30 days when lows touched $1245.00.
So the technical picture is improving but gold must show strength above $1300.00 before the bulls are in charge. It is significant that gold broke through the $1285.00 overhead resistance easily – taking out a lot of paper stops along the way.
Still this could be just another relief rally in that prices got too cheap and safe haven buying came into play. There are still a number of unresolved issues like Ukraine, Iraq, possible pop in inflation numbers and higher oil prices.
But the most important thing that needs changing is attitude. The gold market has lacked buzz for some time because the press is negative and stocks are doing well. If gold struggles at these newer highs it is because the public still does not perceive it as cheap. Both gold and silver are cheap relative to old highs but the average guy on the street still thinks this market is either confused or is moving lower. And until that negative specter is dispelled we will have to settle for this rather “up and down” performance. In the meantime let’s enjoy higher prices and more positive commentary.
This from Ed Steer / Gold & Silver Daily / MineWeb / Place of gold in a perilous world
With numerous conflict flashpoints around the world and the possibility of market collapses there has never been a better time to hold some gold as insurance.
The world is a dangerous place. One only has to look at the rise in extremism, rogue regimes, overthrown governments attempting to regain power, ethnic and religious factions fanatically opposed to one another, and other violent conflicts to see this. Indeed one could say that the populace of Western democracies are perhaps more in peril now than at the peak of the Cold War when the threat of mutually assured nuclear destruction kept most serious conflicts from ever starting.
Back then there would have been a state to target should conflict arise. Nowadays the threat tends to come from small disparate fanatical groups which have no easily identifiable physical power base and with leadership by individuals who may be located almost anywhere. But the weapons available to these groups and rogue states are often the most sophisticated money can buy, and the illegal arms trade can supply, and their awareness of the high tech means by which their leaders might be located makes them increasingly difficult to track down and sanction. Even if the leadership is destroyed in say a drone strike, it tends to be like the Hydra’s head – cut them off and more grow in its place and often these are more extreme than the originals. Should some of these more extreme groups gain access to nuclear and biological weapons we could be closer to at least partial Armageddon than at any time in global history.
The past week has seen worrying activity almost globally – with ISIS making huge unexpected incursions into the heart of Iraq, more terrorist activity claiming lives and hostages in Africa and the Ukraine insurgency continuing to escalate – and, as a result, the gold price has been picking up again as safe haven investment starts to return. But whether this is enough on its own to kickstart a really significant gold price rise remains to be seen. In particular the American populace as a whole will likely remain unconcerned about activities on the other side of the world, but it should be aware that Al Qaeda and the even more extreme ISIS could perhaps pose even more of a major threat to people on the American continent than Russia has in the past or could in the future. And in Europe, which is closer geographically to most of the really serious global flashpoints, people are beginning to feel more vulnerable.
Consider the successful ISIS move on Mosul, Iraq’s second largest city with a population of around 1.8 million. There some 500,000 are reported to have fled the city – mostly to Kurdish territory to the east, while many more have been killed by the insurgents. Those who fled have had to leave their houses and possessions behind, escaping with what they can carry with them. Those who own gold will at least have a portion of their wealth with them which may stand them in good stead in the months, perhaps years, of tribulation ahead and help them establish a new life.
Such is the nature of conflict. And when extremists like the ISIS groups – or Al Shahab in East Africa and Boko Haram in West Africa – attack, people would rather leave their homes and major possessions than stay and face a dangerous future – not only from the insurgent groups, but from potential city destroying conflict as the supposedly ruling government tries to take back the territory lost. Syria comes to mind as well, with a huge flood of refugees into neighbouring Turkey and Lebanon. Those who have put their trust in gold at least have something with which they can at least start a semblance of a new life. Those who survived such conflicts in Bosnia and Croatia through flight during the sectarian civil war which engulfed those countries in the 1990s will be well aware of this and one suspects many will nowadays be retaining an emergency reserve of easily transportable wealth – of which gold is the most easily tradeable in an emergency – in case conflict should spring up again, however unlikely.
In Eastern Ukraine, much of the population in the apparently insurgent controlled Donbass region will be fearful of a heavy handed, and possibly indiscriminate, response by the Ukrainian army, particularly following the downing of one of its transport planes with heavy loss of life. People may choose to join the flood of refugees into Russia which they see at least as a way of preserving their lives, if not their property and if they have gold they have something they can trade to re-establish themselves in the event they are unable to return for whatever reason.
Small wonder therefore that gold buying is making something of a comeback in many parts of the world. The Middle East, for example, is seeing major gold purchasing while in the perhaps more politically stable, but traditional gold buying areas like India, where gold has stood the test of time in terms of an inflation hedge, demand remains strong despite the government’s attempts to rein it in to protect the nation’s balance of payments. So too across virtually all of Southeast Asia, some areas of which have a recent history of conflict, but virtually all of which have seen periods of out of control inflation. Even China – now the biggest gold buying nation of all – has seen citizens flooding to protect their wealth largely through inflation fears, but also for historical reasons.
But it is the U.S. which seems currently to control the gold price, perhaps through the machinations of the major bullion banks who can make vast profits through manipulating the price up and down by utilizing the futures markets, and these historic reasons for owning gold are not really present. Conflict is unlikely, bar some horrendous terrorist atrocity, which cannot be ruled out given the fanatical nature of some of the anti-U.S. political groups elsewhere in the world. Meantime inflation has been kept under reasonable control for many years. The Wall Street crash of 1929 is mostly outside living memory, but a repeat cannot be dismissed and some savvy investors will be holding gold just in case. A terrorist attack on the scale of 9/11 could well bring markets crashing down. It may be as well at least to hold some proportion of one’s wealth in gold as insurance.
In Europe, the rise of far right and far left leaning political parties is a cause for concern in terms of political stability, while Ukraine is close geographically to the continent’s center. Russia under Putin seems to be seeking to regain some of its past powers and no-one knows how this may pan out. It will leave those in some of the former Soviet controlled Eastern European nations worried that the Bear may be flexing its claws in order to regain its influence – perhaps as much by destabilisation as by actual conflict.
The global banking system too remains stretched and bank collapses could leave people heavily exposed – just ask Greek Cypriots!
It is indeed an uncertain and perilous world we live in and holding gold as a wealth protector seems as important now as it ever has been – not necessarily for making huge gains as a result of a rising price, but as a protector against heavy losses should banks collapse and markets crash. It is a prudent policy to hedge one’s bets.
The walk-in cash trade was solid from mid-morning on with plenty of buying and not much selling. The phones were active all day with mostly buying although there were a few mid-size sellers and price anxiety grew larger towards the end of the day.
This is typical – when prices are moving down no one cares but get a one day pop and everyone is concerned they might miss something. Be patient – what you want during this entire gold price unwinding is a simple accumulation plan based on the notion that government monetary expansion will work in your favor.
Buy dips in both gold and silver – balance with a little platinum and wait for the Federal Reserve to continue pumping fiat money into the system – all you need is a 10 year plan.
The GoldDealer.com Activity Scale is a “5” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Friday – 3) (Monday – 5) (Tuesday – 5) (Wednesday – 6). The scale (1 through 10) is a reliable way to understand our volume numbers.
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