Commentary for Thursday, April 24, 2014 (www.golddealer.com) – Gold finally moved higher by $6.30 today closing at $1290.50. In early trading however the market was volatile as short paper traders pushed support lower at one point trading as low as $1268.00.
The only reason gold would move between a low of $1268.00 and a trading high of $1297.00 in such a short time is short-covering caused either by the escalating Ukraine problem or perhaps the ECB Draghi’s comments about quantitative easing in Europe.
Of some importance is that this is the second day gold has been slammed and it managed to recover before the end of the trading session.
Silver closed at $19.68 today up $0.25 in a similar trading pattern recovering from early weakness trading as much as $0.48 off Wednesday’s close. The early weakness happened quickly and the public did not seem to miss a beat, our best sellers were again American Silver Eagle 1 oz Monster Boxes and 1 oz silver round.
Platinum closed up $5.00 at $1408.00 and palladium was up $16.00 at $802.00.
Even with fire breathing talk of the dollar’s demise the 3 month US Dollar Index (DXY) is stable enough with highs at above 81 and lows above 79. Today it looks like 79.81 which is flat for the day and relatively flat for the week and while the 3 month trend is lower we are seeing a narrowing of the trading range and the curse is flattening.
Ultimately the dollar must move lower in value relative to the amount of money the Federal Reserve creates but in the short to medium term it looks like the dollar will remain stable but at the lower end of its trading range and under 80. This will support gold but there will be no real fireworks unless the dollar moves significantly lower.
From Debbie Carlson (Kitco) – Gold Volatility Index Holding at Historically Low Levels – HSBC Volatility in the foreign exchange markets is falling and HSBC notes similar low volatility in the gold market, despite geopolitical tensions between Russia and Ukraine, concerns of a Chinese economic slowdown and talks of Federal Reserve interest rate hikes. HSBC says the CBOE Gold ETF Volatility Index, known as the gold VIX, is at 15.7, below the year-to-date average of 16.9 and the 2013 average of 20.7. “A low VIX reading typically indicates that the market expects prices to remain relatively sticky compared to a relatively higher reading. A declining gold VIX reinforces our view that prices may remain stuck in a tight $200 (an ounce) trading range within $1,200-1,400/oz for at least the medium term,” HSBC says.
Carlson’s commentary fits nicely into the “range-bound” theory I have been talking about since last year. The reason you don’t see much about this aspect of gold among writers is because it does not sell pancakes.
The problem with physical gold writers these days is that they are too concerned about making a living in a market which is shrinking in size. So many are compelled to write something which creates buzz in the hopes it will increase sales. The story that we are stuck between $1200.00 and $1400.00 does not bring new customers in the door.
This from Chuck Butler (EverBank) is worth the read – Well, since I came in this morning, Gold has dropped another $5 to $1,278.00. That’s just not right folks. But it is what it is. There’s nothing I can do about it, and I learned a few years ago that I can rant and rant about something, but it doesn’t change it, and only gets my blood pressure boiling, which isn’t a good thing! If all things were equal, and there was no such thing as price manipulators, I would say that this current level for Gold looked to be a good opportunity to buy it cheap. Long ago, and far away, I first began to tell you all how I viewed China’s hoarding of Gold as essential to their plan to either 1. Back their currency with a percentage of Gold when they decide to float it or 2. Have enough Gold to make the rules when everything goes to hell in a hand basket, and countries sit down to see who has the Gold. I lean heavily on the 1st of those two options, and have for some time now. I’ve always thought that China would be the 1st to back their currency with Gold again. Then last year, I started telling you about how Russia was also hoarding Gold. Well, a recent article on Russia, states that “The Central Bank of Russia has made a subtle, yet serious threat against the lynchpin of the American Economy, the U.S. dollar. According to Russian media, The Central Bank just released a new logo, which is a Gold ruble.” So, is Russia planning on moving ahead of China in this race to have a Gold backed currency? Sounds like it, but. I would still think that China is more prepared to do this than Russia. However, having said that, the urgency to back the ruble with Gold seems to be fueled by Russian President, “Putin, who has made it quite clear that any attacks on the Russian economy will be answered with retaliations of their own.” I think that we should be taking this treat seriously folks. I know that symbolism is huge to Putin. So, now we have two large countries, heading toward backing their currency with Gold. The tide is changing on the dollar’s hold as reserve currency folks. When will everyone else wake up and smell the coffee?
The walk-in cash trade was fairly busy today and the phones were about busy. Still no buzz and the trading feels more like summer than anything else but the Russian situation is getting serious so there is some tension in the air.
The GoldDealer.com Activity Scale is a “6” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Friday – 4) (Monday – 5) (Tuesday – 5) (Wed – 7). The scale (1 through 10) is a reliable way to understand our volume numbers.
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