Commentary for Monday Oct 7, 2013 (www.golddealer.com) – Gold closed up $15.10 at $1324.80 in reaction to the money stalemate in Congress but is still below its 100 day moving average ($1337.00) so no party hats as yet but a few larger gold buyers have surfaced. And no apparent agreement between the warring factions but in a strictly American way there must be some form of compromise even though further steam seems to be leaking from the Wall Street boat.
Silver really just followed gold higher up $0.63 at $22.33 and this physical market remains quiet even though this close was the highest in 12 sessions.
For the drum bangers I made my usual phone calls to the biggest physical dealers in the country and everyone is quiet so even though gold is higher there is little in the way of physical conversion because there is little in the way of panic.
Platinum was higher by $14.00 at $1401.00 and palladium was up $3.00 at $705.00.
Everyone and their brother will tell you that if Congress can’t get together on raising the debt ceiling the dollar will move lower and gold will move higher. Further if tapering talk once again enters the Halls of Wall Street gold will move lower. For now let’s say perhaps to both and consider a few facts seldom mentioned relative to the price of gold: (1) the advent of extreme party polarization (the Tea Party) versus moderate progressives has taken away the civility of compromise. Certain factions of both the Republicans and Democrats simply will not compromise and are willing to go with the ship over principles. Fair enough for that is what made America great but it also creates instability in government and so the impasse in various forms will become more frequent and support gold prices in the bargain. (2) This new form of political warfare will also support monetary easing so look for talk of tapering to be thrown overboard until 2014: which will make the gold bulls happy. (3) Expect Syria to continue on a line of destruction as the world ignores 100,000 civilians dead and continued mass exodus. This and the troubles in Egypt and Iran will boil over again regardless of our President’s positive overture because the Middle East does not understand how our government works and we share the same problem with their government. Tension will support the price of gold regardless of the so-called quieting down of the area because of diplomatic intervention. (4) Look for real physical demand to once again pick up both in China and India as gold advocates rally and bargain hunters step in to support prices. Could this market present even cheaper prices? Perhaps but real buyers are already looking for that “bottoming pattern” at the lower end of a whopping $500.00 sell off. So if you are in for the longer term why not take advantage as the market continues to settle?
This from Allen Sykora (Kitfo): Sharps Pixley: Central Banks Hanging Onto Their Gold Central banks are hanging onto their gold despite weaker sentiment on the part of some investors, says Sharps Pixley. As of a research note from the U.K. bullion dealer, gold futures were down 1.55% for the week although had bounced from the low and were back above $1,300. The most recent data from the International Monetary Fund, released in late September, showed central banks remained net buyers in August. “Although the gold prices are holding above $1,300 in light of the uncertainty surrounding the U.S. budget and debt limit, the gold-backed ETP (exchange-traded-product) holdings have dropped another five metric tons in October after falling 25 metric tons in September and 708 metric tons year-to-date,” Sharps Pixley says. “The continuous decline in holdings reflects a further weakening in gold sentiment despite the uncertainty in the U.S. When gold prices dropped almost 5% in September, the gold premium in China also did not rise as high as expected. The ones who beg to differ are the central bankers who have either held on or added to their gold reserves this year, viewing gold as an important diversifier.”
This is interesting because the ultimate real holder of physical gold will be the Central Banks. And the trend even for the smaller central banks has been an increase in their core gold holdings. Why? Well of course they do not buy the “print at will” approach of most large governments and so want a big hedge bet. And if banks want a hedge bet you should also join the small but growing crowd.
Lately I have been talking about the ability to increase physical gold holdings in a negative market with decreasing prices. This important tactic is not easy but I keep banging away at the idea because it is important. It’s important because there is no way of knowing how cheap gold might become before the big push to higher ground. Most traders who believe in monetary damage think we have seen the worst of this decline, and are looking for a turnaround but are wary. Technically gold has improved but honest long-time physical traders are still looking for that lost mojo. Just because gold has failed to mount an attack on the $1400.00 level does not mean that opportunity is not right around the corner. The biggest asset a physical investor can have when the tea leaves are mixed is enthusiasm for the basic idea that watered down paper money must eventually buy less. It is really that simple and that profound.
Look for opportunity in this declining market and you will be successful, sleep better at night, and develop an attitude that with gold and silver bullion you are the commander of your own ship whether the government figures a way out of this financial morass or not. This is the thinking of most Central Banks and the reason they continue to accumulate gold regardless of world politics, financial disaster, compromised recoveries, nuclear threat, the price of oil, or the direction of the dollar.
I was having my first cup of coffee Friday morning when an early customer asked me what I thought of the idea that there was not enough real physical gold available to cover all of the promised positions. This is not a new idea and in fact has been proffered back and forth for years but this was the second time in a few days I had heard the question. If you have read this missive for long it should be apparent that I am not a big fan of gold conspiracy stories and believe in most cases these stories are invented to sell gold or silver bullion facsimiles for too much money.
Still he did not appear to be a heretic so I explained I am not much of a fan because there has never been a real short squeeze in physical gold. He was polite and said he appreciated the input but persisted: suppose the theory were true? I really could not come up with a sensible answer to his question but thought about the possible outcomes for the rest of the day. Most people who have an interest in physical gold soon realize that there really is not as much available as most non-gold financial people believe. So with that in mind let me pose the same question to you: suppose you woke up one day and found there was a physical short squeeze in gold meaning that there was simply not enough real gold to fulfill all paper requirements? All answers are appreciated.
Both walk-in cash business and national phone sales are uninspiring. It is not that nothing is going on but considering October 17 is closing in fast either Congress has a hidden plan or both parties are ready to sink the ship.
My almost famous LA Physical Business Number is as follows (note the change to a running weekly tally): (Mon: 6 – Tues: _ – Wed: _ – Thurs: _ – Fri: _ ). For those who have asked this scale is based on combined volume numbers and anything over “5” is relatively busy. Phase One of our new golddealer.com web site will soon be complete and includes a new look along with live pricing.
It will also include Live Chat and you will be able to set up your own customer account. Look for further interface improvements before year end which makes accounting, shipping and tracking easier (check to see if we have your email in the new system) and we now offer the choice of USPS or FedEx Ground. If you visit CNI in person look for the new flat screens with live feed and graphs (gold, silver, platinum and palladium). This will drive all our bullion products and we have programmed the premium spreads on each line to make your choices easier. As usual cash is always available. There is nothing like this on the West Coast and offers visitors complete transparency before purchase or sale. Like us on Facebook and follow us on Twitter @CNI_golddealer.
Notice our Daily Gold Newsletter archive has been moved and enlarged (30 days) to our Facebook page. For those asking the new website will offer a direct daily newsletter option with a simple email. Thanks for reading and enjoy your evening. These markets are volatile and involve risk: Please Read Before Investing
Written by California Numismatic Investments (www.golddealer.com).