Commentary for Wed, Aug 27, 2014 (www.golddealer.com) – Gold closed down $1.90 at $1281.90 in continued sleepy summer trading. Gold again traded nearly flat in the overnight Hong Kong and London markets – slightly above and below the $1285.00 mark. This short trading range ($5.00) continued into the domestic market and did not seem particularly interested in the Gaza/Israeli progress.
Today’s close ($1281.90) is below gold’s 200 Day Moving Average ($1284.65) so the technicians are not happy. Gold did see some upward bias in early trading reacting to the lower dollar but these slight advances could not be maintained in light of a generally weaker oil market which has seen $108.00 per barrel in July versus $93.00 presently.
The 60 day gold chart will reveal why the public seems to be ignoring physical gold for the present. The trend has been generally soft moving from above the $1300.00 mark to some consolidation around $1280.00. This type of market does not promote physical buying because the consumer can adopt a “wait and see” attitude while sipping on their pina coladas.
Silver was also subdued and uninteresting – up $0.02 at $19.39.
Platinum closed unchanged at $1421.00 and palladium was up $5.00 at $893.00. Rhodium moved lower by $25.00 at $1325.00.
From London (Bullion Street) – ETF Securities – Weekly Report – Palladium remains in the spotlight but platinum is looking increasingly attractive. Despite some profit taking earlier in the week, palladium recovered to end the week with a year-to-date gain of 23.3%. Platinum remained under pressure though, declining 2.1% reducing the 2014 gain to 4.3%. Due to its strong relationship to the European diesel vehicle market, platinum has been under pressure recently on the back of weaker-than-expected European economic data and the weak Euro. Among the precious metals, platinum has the highest correlation to the Euro currency, near 0.58 compared to 0.40 for palladium since 2009. In the aftermath of the South African strikes and potential Russian sanctions, both markets are expected to record double-digit deficits this year, with Johnson Matthey forecasting a 14% deficit for platinum and 15% deficit for palladium.
“Although we remain favorable to both palladium and platinum, reports of mine closures in Zimbabwe and rising Chinese imports toward the end of the week, could reverse the downtrend in platinum. We believe that platinum will rise faster than palladium in coming months, allowing the metal to narrow the recent underperformance.”
Here is our usual Wednesday look at Exchange Traded Funds:
Gold Exchange Traded Funds: Total as of 8-20-14 was 55,412,344. That number this week (8-27-14) was 55,288,445 ounces so over the last week we dropped 123,899 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 8-20-14 was 629,983,308. That number this week (8-27-14) was 631,459,523 ounces so over the last week we gained 1,476,215 ounces of silver.
All Platinum Exchange Traded Funds: Total as of 8-20-14 was 2,841,672 ounces. That number this week (8-27-14) was 2,841,672 ounces so over the last week we dropped 75,677 ounces of platinum.
All Palladium Exchange Traded Funds: Total as of 8-20-14 was 3,078,802 ounces. That number this week (8-27-14) was 2,957,712 ounces so over the last week we dropped 121,090 ounces of palladium.
This from the Wall Street Journal (Biman Mukherji) – India’s Appetite for Gold Improves –
“Still, demand remains tepid in China, the world’s biggest buyer, and sales in the rest of the world are sluggish despite a number of geopolitical risks that normally increase demand for the safe-haven metal. India and China together account for about 70% of the world’s gold market and sales usually peak near the end of the year because of buying ahead of Hindu festivals including Diwali, and Lunar New Year in China.
“Demand is picking up every day. Festival season sales have started,” said Rahul Gupta, managing director of P.P. Jewellers, a large Indian jewelry chain.
Demand has risen as buyers have dived in after a heavy fall in prices over the past week, Mr. Gupta said. The rupee has also strengthened against the dollar, pushing domestic gold prices below 28,000 rupees ($463) per 10 grams.
India will celebrate the birthday of the elephant-headed god of wisdom Ganesha on Friday, a major festive occasion in the western region. Gold sales in India usually rise during religious festivals as it is considered auspicious to buy gold ornaments. During Diwali, the Hindu festival of lights that is celebrated on Oct. 23, people also typically invest in gold coins and bars.
It has been an unusual roller-coaster ride for gold premiums in India because of uncertainty over policies, elections and monsoon rains. Gold premiums were at $100 in February, but fell to $60 in May after the government allowed private trading companies to import bullion and plunged to zero in July, when demand for gold is usually weak because of a lack of festivals.
Prithviraj Kothari, vice president of Indian Bullion and Jewellers Association, said gold imports in August will likely total 40 metric tons but are expected to rebound to June’s level of around 70 tons in September.
“Everybody was fearing that a bad monsoon will hit the festival demand. Fortunately, the monsoon has picked up and it is not so bad,” he said. The majority of India’s gold demand comes from rural areas and therefore, the monsoon plays a big part in purchases.
In China, demand is expected to pick up around the end of the year, coinciding with wedding season demand and extending to Lunar New Year festivities in late-February. Shanghai gold has been trading at a premium of $3-$7 an ounce over London prices in the past month, indicating moderate to weak demand.
“People are still holding a lot of gold inventory [in China],” said Wallace Ng, a senior precious metals trader based in Beijing. “I don’t see [domestic] demand improving in the short term. We are waiting for the old inventory to diminish.”
Demand for gold in China will likely surge ahead of Lunar New Year, Mr. Ng said.”
The AP Survey: Fed’s Outlook Correct but not Solution (Christopher S. Rugaber – AP Economics Writer) – Economists appear to be of two minds about the Federal Reserve.
They agree with the Fed that the job market still isn’t healthy. Yet the latest Associated Press survey of economists finds that most fear the Fed will wait too long to raise interest rates and thereby risk stoking inflation or creating asset bubbles.
The duality of their views underscores the perils of the Fed’s policymaking. Most economists accept that there’s still “significant” slack in the job market. By that they mean that millions of people — the unemployed as well as part-time workers and people who’ve stopped looking for work and aren’t counted as unemployed — would likely take jobs or work more hours if they could. Still, they’re concerned that Janet Yellen’s Fed won’t raise rates soon enough.
“I agree with her diagnosis; I even like what she has in mind,” said Mark Zandi, chief economist at Moody’s Analytics. “But I’m skeptical that she’ll be able to pull it off.”
The AP surveyed three dozen private, corporate and academic economists from Aug. 13 to19. In follow-up interviews, several said they feared that by waiting too long to raise rates, the Fed could ignite inflation or may already be feeding speculative bubbles in assets such as stocks or high-yield bonds.
“Yellen’s much more concerned about the Fed’s employment mandate than inflation,” said David Shulman, an economist at UCLA’s Anderson School of Management, referring to the Fed’s drive to lower unemployment. “They’ll risk financial bubbles.”
Lynn Reaser, a professor at Point Loma Nazarene University, agrees with Yellen that if the economy were nearing full health, workers’ pay would be rising faster, fewer people would be unemployed for more than six months and many part-timers who want full-time jobs would manage to find them.
But “by the time we hit that situation, there may already be pressures on the inflation front or significant bubbles in various asset markets,” Reaser said. “To play catch-up at that point may require large increases in interest rates, which could be very damaging to the economy.”
Strikingly, while the economists worry that the Fed won’t get out of the way of the strengthening U.S. recovery soon enough, they fear the opposite about Europe: That its economy may have entered a “lost decade” similar to Japan’s long-standing stagnation.
Some, like Allen Sinai, chief global economist at Decision Economics, think the European Central Bank has been too cautious and should launch a bond-buying program akin to what the Fed had done. The idea would be to keep rates low, boost stock prices and shrink the euro’s value, which would make European exports more affordable.
“The sooner they do that, the better the chance that Europe can get out of the lost decade before it turns into two decades,” Sinai said.
ECB President Mario Draghi hinted last week that the central bank could take such a move in coming months.
Among the economists’ other consensus views:
— The Fed’s low-rate policies have already inflated a bubble in at least one asset group. Most of the economists who see a bubble think one exists in high-yield corporate bonds, often called “junk” bonds, and in emerging-market debt. Others detect bubbles in small social-media or biotechnology companies or in the stock market as a whole. On Monday, the leading stock-market averages set record highs.
— Inflation will remain generally below the Fed’s long-term target rate of 2 percent this year but will consistently exceed that rate next year. Only if inflation were to reach or top 3 percent do the economists think the Fed should immediately raise rates regardless of how the economy was faring.
— Sluggish wage growth is slowing the U.S. economy. The most commonly cited factor is that too many people still lack jobs — including many who aren’t being counted as unemployed because they’ve stopped looking for work. And pay growth won’t start to significantly exceed inflation until next year at the earliest. Flat wages are “a limiting factor for consumer spending growth and a major restraint for the housing recovery,” said Scott Brown, chief economist at financial services firm Raymond James.
Zandi said his concerns about the Fed’s interest-rate policy stem in part from the Fed’s own outlook. The Fed forecasts that the unemployment rate will fall to between 5.1 percent and 5.5 percent by the end of 2016 from the current 6.2 percent. The Fed thinks unemployment at that level would likely enable workers to demand higher pay and therefore lift inflation above the Fed’s long-range target. Yet Fed officials expect the interest rate it controls to remain below historical norms until a year later.
That suggests that Yellen is willing to risk letting inflation run above the Fed’s 2 percent target to try to boost growth and hiring, Zandi said.
Though inflation won’t likely get out of hand, Zandi said, the approach carries risks. If bond investors concluded that inflation would remain above the Fed’s target for an extended period, they would likely demand higher interest rates. That would raise borrowing costs throughout the economy, including for mortgages and auto and business loans.
In a speech Friday at the Fed’s annual conference in Jackson Hole, Wyoming, Yellen stressed that the Great Recession upended traditional measures of the job market, such as the unemployment rate and wage gains. Policymakers must now consider a wider variety of gauges to determine when to raise rates, she said.
That complexity also makes economists nervous. Many noted that the Fed has kept its short-term benchmark rate near zero for six years and has bought trillions in Treasurys to lower longer-term rates. Neither action had ever before been taken by the Fed. And it’s not clear when the Fed will start to unwind all that stimulus.
“It was uncharted waters on the way in; it’s going to be uncharted waters on the way out,” said Richard Moody, chief economist at Regions Financial.
The walk-in cash trade was really boring today with little action and the phones were less than average. I can say without hesitation that these markets are suffering from a great lack of interest as the summer draws to its traditional end – Labor Day – which brings me to a point our employees will be interested in – this Monday (September 1st) we will be closed for Labor Day. Given the recent jobs information I remain hopeful there is still something to celebrate.
The GoldDealer.com Unscientific Activity Scale is a “2” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Tuesday – 3) (last Wed – 4) (last Thursday – 4) (last Friday – 3) (Monday – 2) (Tuesday – 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.
Todays popular product was the Platinum Eagle 1/4oz
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