Gold Pushed Higher Over Fed Stimulus Comments and Technical Trading

Gold Pushed Higher Over Fed Stimulus Comments and Technical Trading

Commentary for Wednesday, Feb 12, 2014 – Gold closed up $5.00 today at $1295.30 continuing to benefit from Yellen’s Congressional testimonial on Tuesday. This is the 6th day in a row we have seen strength in gold prices aided by short-covering and renewed physical demand from China. Gold now seems to be looking at its formidable 200 day average ($1317.00) but I think a better description of the trading floor is that they remain cautious. This gradual sloping upward in gold prices has not been ushered in with any great fanfare so general sentiment is lacking especially with the apparent recovery of stock prices and the great enthusiasm coming from Wall Street. Some suspected a problem with the coming debt ceiling talks but the House yesterday passed a bill to suspend the debt ceiling until March of 2015 and virtually no one cared one way or the other.

The 5 day US Dollar Index (DXY) has been weaker but perhaps has bottomed at 80.50 showing some recovery which is pushing against gold. But look at oil as WTI Crude moves from about $92 in early January to over $100/barrel in early February supporting gold’s gradual rise in price.

This is interesting from Allen Sykora (Kitco): HSBC: Indian Deficit Raised Optimism about Reducing Gold Restrictions – India’s trade deficit narrowed, raising optimism that authorities may relax bullion-import restrictions, which would be supportive for gold, says HSBC. India’s trade deficit narrowed to $9.92 billion in January from $10.15 billion in December. The ministry said that the combination of a 77% drop in the import of gold and silver and an increase in exports helped improve the outlook for the country’s current-account balance. “India’s gold imports have been lackluster since the Reserve Bank of India tightened its restriction to bullion trade, citing gold as the cause for the country’s ballooning current account deficit,” HSBC says. “In mid-2013, the RBI announced the 80-20 rule which required importers to set aside 20% of imported gold for the purpose of exports in the form of jewelry. According to Reuters, the trade ministry has recommended an easing of the curbs placed on gold imports given the rosier trade balance. If the authorities are less concerned with the economic ramification of a lower trade and current-account deficit, then it is possible that India’s trade restrictions on gold imports will eventually be tempered or the tariff reduced, (and) then the increase in demand would be bullish for gold, in our view.”

Silver closed up $0.16 at $20.33 and suddenly this physical market has become quiet: difficult to conclude much from this as world mints continue to produce a huge variety of silver bullion products all of which are sold quickly. But let’s be careful out there because it is now common practice for the telemarketer trade to partner with the British Royal Mint and “create” a special edition silver coin which is “rare” and sold to the uniformed for a very large premium. This scheme always ends badly because you cannot create real rarity so when buying silver stick with the plain Jane products with low premiums. 

Platinum closed up $20.00 at $1407.00 and palladium closed up $12.00 at $729.00. The South Africa union claims they "will bring mining to a standstill" unless they get what they want. The strike continues for the third week.

We have not seen a big increase in platinum prices in light of the strike because there is a South African ETF which holds 900,000 ounces of platinum. Investors are mostly South African pension funds. As a result of the falling Rand the fund is up 14% this year when underlying platinum is unchanged. This created a profit opportunity trade of 16,000 oz of platinum sold last week.

Peter Hug (Kitco) once again offers sage advice: Slow Grind – “At the beginning of the year we suggested that “if” this market were to have a higher bias throughout 2014, after last year’s dismal performance, it would be a grinding move. Each resistance level for gold has created a pause, pull-back, pause, pull-back and finally a breach. The $1,292 level has now been touched twice, but must be breached for the technicians to engage in further buying with the $1,278 level as the Maginot Line for the bears. Fundamentally, the strength in equities and the stabilizing U.S. dollar overnight should create a headwind for this upside breach, but a quiet pause would signal the move higher is not yet over. Conviction remains weak and physical off take outside of Asia is waning, but, volatility continues to usher a percentage of capital flows into the metals.”

The walk-in cash trade today was pretty quiet and so were the phones. Not dead but the entire day lacked any buzz if you know what I mean.

The GoldDealer.com Activity Scale is a “4” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 4) (last Friday – 4) (last Monday – 5) (last Tuesday – 4) (Wednesday – 4). The scale is 1 through 10 and a reliable way to understand our volume numbers.

 

On the new GoldDealer.com site: Comex closing prices are posted on the home page and individual product landing pages. Live pricing on the site moves all bullion products up or down during the day. The change number included next to the live pricing uses yesterday’s Comex closing prices as a reference. So if the change number is green and shows up $3.00 this is in reference to yesterday’s close.  

The All Bullion Products link on the home page lists all products and includes our Bid (blue) and Ask (green) prices. Visitors overlook the All Bullion Products so we reworked the link. When you hover over it with your cursor the text is highlighted.

Premium quotes vary with product and look like this – “spot plus $15.00” or “spot plus $50.00” and bullion products list them under the live prices on their respective landing pages. This makes product comparison easy and GoldDealer.com is the only site on the net with this transparency. For example click on the link American Silver Eagle and under Our Live Buy Price and Our Live Sell Price you will see: our Buy Premium Spot + $2.00 and our Sell Premium Spot + $3.20 – Easy.  

 

American-Silver-Eagle

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The four flat screens downstairs with live independent pricing (BullionDesk.com) is a big hit with the cash trade. This live stream moves all the buy/sell prices on each product so the cash buying public can see the markets move on a real time basis. The site uses the same pricing model so no more guessing.

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Thanks for reading and enjoy your evening. 

On the floor today we sold a lot of 10 oz Silver Bars

10-oz-Silver-Bar

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