Gold Pressured Because of Stronger Stocks and Stronger Dollar

Gold Pressured Because of Stronger Stocks and Stronger Dollar

Commentary for Wednesday, May 21, 2014 (www.golddealer.com) – Gold closed down $6.50 at $1288.00. So consider a stronger stock market, a stronger dollar and most likely the anticipation of the FOMC (Federal Open Market Committee) information.

The actual minutes release after the close presented some surprises. The comments struck me as a bit unnerving relative to uncertainty about future action. The governors now seem concerned about normalization of policy with the large balance sheet created as a result of quantitative easing.

After the release of these minutes the gold rallied $5.00 off of the close. None of this is set in stone but the pop in prices shows how sensitive this transition is to the gold market. 

Gold began losing steam in the overnight Hong Kong and London markets which continued in domestic trading but the range was very small. And if you look at the 30 day chart you will see we are also trading within a fairly tight range ($1285.00 through $1310.00).

Now open the chart up to the 60 day view and you will find a similar pattern with gold ($1280.00 through $1330.00). I think a few months ago the physical gold establishment was privately looking for lower gold prices but lately this sentiment might be changing into what I call cautious or neutral sentiment.

So is this any big deal? The pessimists won’t think so but I am not so sure because the amount of negative sentiment is much less. Does this mean we are at a bottom? Probably not as quantitative easing continues but dips into lower territory seem less severe and the longer we hold on to gold’s upper trading range the more certain physical buyers will become and reenter the bullion market.

Also of some note is the decided pick-up in the cash Indian trade in the LA area. This is a very price sensitive market subject to weeks of absence and then surges in actual demand. Well lately they are back and I can’t say whether this is so because of lessening of Indian import restrictions or just because they perceive that prices are cheaper. I also don’t know if there is a direct link to this market relative to product smuggled into India but would assume some of the LA market does make it back across the ocean in one form or another.

Silver closed down $0.06 at $19.30 and we purchased a few “big boy” positions in silver bullion today. This is unusual as the larger sellers have been absent of late.

Platinum closed up $6.00 at $1474.00 and palladium was up $4.00 at $830.00.

The Exchange Traded Funds (ETF) we presented last Wednesday was a hit so beginning today we will widen the view and include platinum and palladium. We will also include the total of all ETF information instead of looking at just the largest ETF funds. This wider view will provide better information as to what all funds are doing as defined by total ounces – gained or lost.

All Gold Exchange Traded Funds: Total as of 5-14-14 was 54,962,322 ounces. That number this week (5-21-14) was 54,931,954 ounces so over the last week we lost 30,368 ounces of gold. 

All Silver Exchange Traded Funds: Total as of 5-14-14 was 630,160,363 ounces. That number this week (5-21-14) was 629,977,502 ounces so over the last week we lost 18,286 ounces of silver. 

All Platinum Exchange Traded Funds: Total as of 5-14-14 was 2,709,386 ounces. That number this week (5-21-14) was 2,747,004 ounces so over the last week we gained 37,618 ounces of platinum. 

All Palladium Exchange Traded Funds: Total as of 5-14-14 was 2,763,460 ounces. That number this week (5-21-14) was 2,781,805 ounces so over the last week we gained 18,345 ounces of palladium. 

Both of these posts from Debbie Carlson (Kitco) – Hopes Rise That Indian Gold Duties May Be Relaxed – With the election of the Bharatiya Janata Party in India last week, there are hopes that some of the onerous duties on gold imports will be lifted, says HSBC. Citing a story from Bloomberg, the director of the All India Gems and Jewelry Trade Federation was quoted as saying that India will probably cut the 10% tax on gold imports and relax the 80-20 rule in July. These restrictions were put on gold in 2013 to help reduce India’s current account deficit, which has fallen to 2.81% from 5.36% last year, HSBC says. “Earlier in the year, members of the BJP said that the gold trade restrictions may be put on review within three months after their victory. An easing of India’s bullion trade restrictions would be price supportive and may help stem the potential for further losses, in our view,” HSBC says. Renewal Of Central Bank Gold Agreement Deemed Positive Sign For Gold – HSBC – The European Central Bank and other central banks announced the fourth Central Bank Gold Agreement on Monday, and “bullion’s importance as part of the global monetary reserve system is reinforced,” says HSBC.  “The signatories of the fourth CBGA issued a statement that indicated gold as an important element of global monetary reserves, the signatories will continue to coordinate their gold transactions so as to avoid market disturbances, the signatories note that they do not currently have any plans to sell significant amounts of gold and the agreement will last for five years,” says HSBC. The new agreement will take effect Sept. 27, when the current agreement expires. “The fourth CBGA differed from the first three in that there was no clear defined quantitative limit to gold sales. The rationale behind this may be due to the notion that gold sales by the central banks as part of the CBGA have slowed to a trickle of less than 10 (metric tons) a year, well below the limit, compared sales during the first CBGA of 400 (metric tons) a year.” HSBC says while the CBGA is mostly symbolic in nature given the lack of gold sales by central banks – and gold purchases by emerging markets central banks – “the announcement should be viewed as an emphasis by these central banks for price stability in the bullion markets, in our view,” the firm says.

This type of commentary is often missing in today’s physical gold world. I mean writers have taken gold to the woodshed so many times that when positive news shows it does not get much press. When was the last time you heard Jim Cramer (CNBC) make any comment at all about gold? He used to talk about it on a regular basis and was even complimentary at times saying that physical gold belongs in everyone’s holdings as a kind of insurance against paper catastrophe. Today there is little in the mainstream media so commentary like Carlson posts is welcomed. Not because she is beating the drum, but because the changes she outlines are structural.

Both the walk-in cash trade and phones were just average at best today as most of the staff were more interested in what was for lunch.    

The GoldDealer.com Activity Scale is a “4” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thurs – 2) (last Friday – 3) (Monday – 3) (Tues – 2). The scale (1 through 10) is a reliable way to understand our volume numbers.

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