Commentary for Wed, Aug 6, 2014 (www.golddealer.com) – Gold closed up $22.70 today at $1306.70 which is amazing considering the dollar reached a 9 month high against the euro.
Today gold was up big on the possibility of retaliation by the Russians over sanctions. I guess the idea being that such economic moves could present dangers to Europe which in turn could push further quantitative easing worldwide as Central Banks move to help struggling economies.
An alternate scenario might be that Europe was never out of trouble and only deferred its debt and lack of economic growth. The US stock market was overbought and due for a correction and the Russian Ukraine issue was just the fuse.
Look at gold’s moving averages – 50 day moving average ($1295.00) – 100 day moving average (1296.00) and 200 day moving average ($1284.00) relative to today’s close ($1306.70). This is all technically very bullish as the market not only held its 200 day moving average yesterday but today moved above all three averages. So for now the bulls hold the cards.
But let’s not get too excited – a more reasonable conclusion from today’s action is that gold is being pulled in a number of directions so for now throw short-term trends out the window.
Even today’s move to the upside – which is always good for business on the short-term is suspect because many believe gold is oversold.
The dollar did pause but continues strong as the Dollar Index remains above 81 – so a negative for gold. WTI crude oil on the other hand has moved down from $103.00/barrel to $98.00 over the last 30 days – a trend which also does not support gold prices short term.
And the physical market especially relative to China and India seems to be sleepy these summer months.
On the other hand the stock market both here and in Europe is rattled over new escalation between Ukraine and Russia – usually a big plus for gold – and while the Israeli/Gaza battle seems to be improving – if there is such a word under these conditions – any ultimate political agreement seems impossible.
From AP – The Federal Reserve said slack in the labor market persists even as the economy is picking up, and it continued to trim monthly asset purchases that have pumped up its balance sheet to a record $4.41 trillion.
“A range of labor-market indicators suggests that there remains significant underutilization of labor resources,” the Federal Open Market Committee said Wednesday in a statement in Washington. “The likelihood of inflation running persistently below 2 percent has diminished somewhat.”
This is what pool hustlers call a “u pick-um” match meaning players are evenly matched.
So is it negative for gold because this “slack” means no push on wages which equates to good inflation news? Or is the now 4.1 trillion dollar balance sheet a sure sign that quantitative easing continues in the form of low interest rates which supports gold over the longer term?
See what I mean? There are plenty of negatives which suggest gold should move lower especially in the short term but there are many wild cards out there – and recent tests to the downside have just ended in short-covering rallies.
Silver closed up $0.19 at $19.88 in quiet trading and while the physical market got excited yesterday – today things have settled down.
Platinum closed up $9.00 at $1465.00 and palladium closed unchanged at $848.00
Here is our usual Wednesday report on the movement of all physical Exchange Traded Funds –
Gold Exchange Traded Funds: Total as of 7-30-14 was 55,422,591. That number this week (8-06-14) was 55,422,125 ounces so over the last week we dropped 466 ounces of gold.
It might also be interesting to note that in 2013 the record high for all gold ETF’s was 85,112,855 ounces. In 2014 the record low was 54,773,273 ounces.
All Silver Exchange Traded Funds: Total as of 7-30-14 was 624,894,751. That number this week (8-06-14) was 624,533,508 ounces so over the last week we dropped 361,243 ounces of silver.
All Platinum Exchange Traded Funds: Total as of 7-30-14 was 2,873,569 ounces. That number this week (8-06-14) was 2,864,157 ounces so over the last week we dropped 9,412 ounces of platinum.
All Palladium Exchange Traded Funds: Total as of 7-30-14 was 3,063,891 ounces. That number this week (8-06-14) was 3,090,827 ounces so over the last week we gained 26,936 ounces of palladium.
From the Scrap Register Shanghai Metals Market – Bank of America Merrill Lynch revises up its 2014 gold price forecasts – NEW YORK (Scrap Register): Bank of America Merrill Lynch has revised up its this year gold price forecasts, suggesting the worst may be behind after the sell-off in prices last year.
According to Bank of America, prices have stabilized so far in 2014. A market with reduced investor interest but steady offtake from emerging-market nations. Put differently, as investors put less ounces onto the market, purchases from countries including China and India were sufficient to absorb mine and scrap supply.
Bank of America believes that physical demand from emerging markets will gain further clout in the medium-term as countries get more affluent, suggesting the worst may be behind the gold market.
The bank lists a third-quarter average forecast of $1,300 an ounce, then $1,350 in each of the next two quarters.
For now, however, BAMl says “the unfolding normalization of the global macro economy and the implications this has for rates/ inflation should continue to provide some headwinds for gold.”
The connection between the Chinese gold trade and the ultimate price of gold is talked about almost daily but is still not really understood by Western investors. And I think the consistent information stream not only takes away from the message it contributes to investor complacency. I am not suggesting this constant reassessment is not useful but it contributes to a kind of information overload when it comes to the average physical gold bullion buyer considering what is happening in his corner of the world.
At any rate the following should be noted as just another piece of the Chinese gold machine which is being built – not for tomorrow but for the next 100 years – a time frame more appreciated by the Asian mind.
Shanghai Metals Market Launches China Precious Metals Price Index – SHANGHAI, Aug. 1 (SMM) – Shanghai Metals Market will launch its China Precious Metals Price Index from August 1 on its both Chinese website (www.smm.cn) and English website (www.metal.com).
The index, compiled by SMM and Zhejiang Gongshang University, is to reflect precious metal prices in China’s domestic spot market based on prices of gold , silver , platinum and palladium. Trade value of the four accounted for 99.16% of the total in domestic precious metals market in 2012.
“After over eight months of development and trial run, we are delighted to launch the index from August 1”, said Tong Leshen, SMM’s General Manager. “The launch of the index gets overwhelming support from market participants, and will serve as a reliable tool for operation, investment, research and supervision in China’s domestic precious metals market”, added Tong.
Zhang Minxiang, head of Shanghai Nonferrous Metals Trade Association, highly spoke of SMM’s launch of the index following the launch of SMMI and SMM Yangshan Copper Premiums.
The launch is in response to China’s growing influence in the international precious metals market and to gain influence over the pricing. China is now world’s biggest consumer of gold, platinum and palladium, and China is also world’s second largest processing country of silver.
Surprisingly the walk-in cash trade today was quieter than yesterday even with the pop in gold prices. There was some decent silver bullion action and another large gold seller but all in all I would have bet the volume numbers would have been much larger. The phones were also curiously quiet most of the day.
The GoldDealer.com Activity Scale is a “4” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 2) (last Friday – 2) (Monday – 2) (Tuesday – 3). 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.
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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. Beginning today 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.
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