Commentary for Thursday, Aug 14, 2014 (www.golddealer.com) – Gold closed up $1.10 today at $1313.90 and actually rallied as high as $1320.00 on war rumors but the rally fizzled and geopolitical issues once again move to the back burner. Also trader’s attention is more focused on the European business environment – as numbers look anemic and there is some bearish talk now courting Wall Street.
Gold has closed within an $8.00 range over the past 7 sessions – so gold remains defensive and happy holding above the $1300.00 but there is not enough “hot” information to sustain a significant rally.
Silver closed up $0.06 at $19.87 and while we remain under the important $20.00 level the usual rush to purchase (bargain hunting) has not developed. This is obvious as all dealers lower their already thin margins to virtually nothing in an attempt to “get something going”. This tactic never works because the public is not moved like it was in the old days. The internet connection has changed the price dynamic – so unless it’s really cheap they will simply wait – the strategy makes sense.
Silver question from a reader – “This question is about short term time — the last 18 months or so. Could you discuss in your newsletter the relatively large drop in the premium for 90%. If my memory is still hanging in there, it wasn’t too long ago that the premium was in the $3 dollar over area. It seems the premium has been dropping quite quickly recently. Wondering what your insight is on this. I see today you are down to 65 cents over. Is this telling us something more on a macro sense about the silver market?”
Great question and one which comes up often especially for those who watch “how much over melt” am I paying for any particular product. In most cases the premium on silver bullion stays low because manufacturers can simply produce more product as demand moves higher. This is not the case with $1000 face 90% silver bags – so when demand moves higher – premium over spot also moves higher. This customer was correct in that within the last year the price to be paid for 90% bags was outrageous ($3 over spot) – and recently the premium on 90% bags has collapsed coming in at $0.65 over melt which is cheap.
Why? The answer is in the demand function – last year there were telemarketers “promoting” 90% bags as something “special”. They are not really – just another form of silver bullion – but because silver bullion trade is generally “thin” any big promotion can cause temporary shortages and create an artificial jump in premiums. The best way protect against this “surge pricing” is to compare premiums between silver products (bags verses bars for example) and choose the cheapest.
Platinum closed unchanged at $1470.00 and palladium was up $5.00 at $886.00.
Rhodium continues to be the star performer up another $25.00 at $1450.00. It is up 12% so far in August and up 34% since late February. With much of platinum production faltering, rhodium numbers which is a by-product of platinum production has seen moving lower. Rhodium is still about half its average price over the past 10 years.
CAIRO (AP) — Israel and Hamas agreed to extend a temporary cease-fire for five days, Egyptian and Palestinian officials said Wednesday, potentially averting renewed violence and permitting the sides to continue to negotiate a substantive deal to end the war in Gaza.
Egyptian mediators had been racing to pin down a long-term cease-fire as a temporary truce was set to expire at midnight. The Israeli military said five rockets were launched at Israel in the hours leading up to the end of the cease-fire.
Egypt’s foreign ministry and the head of the Palestinian negotiating team announced the extension. A spokesman for Israel’s prime minister had no immediate comment.
The cease-fire extension is meant to grant both sides additional time to negotiate a longer-term truce and a roadmap for the coastal territory.
The fighting in Ukraine is more problematical and confusing – after Putin annexed Crimea the world was up in arms but nothing has happened save ineffective sanctions. And in the ongoing diplomatic struggle it appears Russia might end up with what it wanted in the first place – Crimea.
It would seem the notion of Russian troops on the Ukraine boarder is the driving force behind the upward pressure on gold prices. Why would Russia want to invade? Could this threat be a Putin bluff or could it develop into something more dangerous? At this point the two sides can’t even decide on how humanitarian aid is going to be delivered from the Russians.
For some reason which escapes me, the Ukraine/Russian threat seems to hold more sway over the gold trading floor so for now the “war premium” stays in place.
But who else is taking this seriously? Take another look at yesterday’s ETF figures – Gold Exchange Traded Funds: Total as of 8-06-14 was 55,422,125. That number this week (8-13-14) was 55,307,986 ounces so over the last week we dropped 114,139 ounces of gold.
So make no mistake – if things settle down there is $50.00 downside in gold – a market which has almost no gain to show for all the trouble we have seen on the news in the past 30 days. For now be suspicious of gold’s safe haven status – there will be plenty of time for that when the inflation numbers get more attention.
The walk-in cash trade today was again slow and so were the phones. Major bullion dealers continue to complain about the level of activity – but I suspect we are just back to what typically is expected during the summer months. Everyone just forgot the axiom that “summer is slow” during the 10 year bull market in the precious metals.
The GoldDealer.com Activity Scale is a “3” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Friday – 3) (Monday – 2) (Tuesday – 2) (Wednesday – 2). 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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