Commentary for Wed, July 23, 2014 – Gold closed down $1.60 at $1304.50 in another uneventful trading session. The overnight markets in gold were completely flat – Hong Kong and London trading in a $5.00 range which continued into our domestic market.
This even with the news that two Ukrainian fighter planes were shot down so while the Israeli and Ukraine conflicts continue to underpin these markets it does not appear safe-haven buying will appear unless there is further escalation.
So gold remains sleepy and holding a tight range showing overhead resistance at the 50% Fibonacci retracement number ($1308.00) and its 21 day moving average ($1317.00).
Support seems strong at the 100 day moving average ($1303.00) and the Dollar Index is stronger (80.81) as violence continues in the Middle East.
Our State Department claims there is no direct evidence tying Russia to the downing of the Malaysian commercial flight – which makes sense. Still they are supporting Russian separatists so there is some culpability but little will be done. Sanctions are ineffective and Europe’s economic ties to Russia are strong and include the need for natural gas in eastern Europe and French construction of Russian warships.
According to the World Gold Council China imported 19% less gold in the first half of 2014 than during the same period in 2013. Her imports were 569.5 tons versus a record 1176 tons last year which was helped by a 28% drop in prices.
Also of note is that China is the world’s largest gold producer accounting for some 420 tons in 2013. And the World Gold Council estimates that gold demand will grow by 25% in the next five years – the result of bigger and wealthier populations.
Silver closed down $0.01 at 20.95. Not much action here either – silver has given up the sweet spot below $20.00 and cannot manage a big push to higher ground which would certainly create more physical buyers here in the US.
This from Ian Walker (FastMarkets) – London 23/07/2014 – Research firm Metals Focus said it expects strong gains in primary silver mine supply during the first half of this year, despite a near 25 percent reduction in average prices.
Although complete second quarter results have yet to surface, reports have indicated that versus the same period last year, average production in primary silver has increased by five per cent year-on-year, supplying an extra 2.8 million ounces to date.
Gains were driven by a two percent rise in the average grade of ore processed and a similar lift in the average rate of silver recovery from the process plant, the firm said. Trends are expected to continue into the second half of this year and could help propel primary output – which does not include silver mine production as a by-product – to around 250 million ounces in 2014.
“As a whole, a large part of the primary sector’s resilience to lower metal prices has been down to cost cutting,” Metals Focus said.
Spot silver was last at $20.93/20.98 per ounce, down a cent on yesterday’s close. The company added that in the first quarter of 2013, average production costs fell by about 20 percent year-on-year to an estimated $8.50 per ounce on a total cash basis, and to $15.50 on an all-in sustaining basis. “Primary silver producers have outperformed their gold counterparts in this department,” the firm added. “That said, this has in part been driven by necessity given that silver’s price decline over this period was more pronounced than gold, and the fact that less than a third of global silver mine supply is derived from primary operations, meaning producers have less protection from the industry cost curve.
Metals Focus said that in spite of modest price projections, primary silver is expected to grow by around three percent in 2014. The firm said that about 10 percent of the first quarter cost curve was loss making, on an all-in sustaining basis, further cost cutting and the addition of some new lower cost mines should see this share fall. Most notably, production increases at Escobal in Guatemala and the Cerro de Pasco oxide project in Peru will create positive trends in the market. Furthermore, Saucito II in Mexico and Inmaculada in Peru are expected to enter production before year-end.
Platinum closed down $3.00 at $1485.00 and palladium was down $1.00 at $873.00.
All Gold Exchange Traded Funds: Total as of 7-16-14 was 55,496,611. That number this week (7-23-14) was 55,410,455 ounces so over the last week we dropped 86,156 ounces of gold.
It might also be interesting to note that in 2013 the record high holdings 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 7-16-14 was 625,902,322. That number this week (7-23-14) was 624,906,059 ounces so over the last week we gained 996,263 ounces of silver.
All Platinum Exchange Traded Funds: Total as of 7-16 was 2,850,329 ounces. That number this week (7-23-14) was 2,874,109 ounces so over the last week we gained 23,780 ounces of platinum.
All Palladium Exchange Traded Funds: Total as of 7-16-14 was 3,066,470 ounces. That number this week (7-23-14) was 3,064,551 ounces so over the last week we dropped 1,919 ounces of palladium.
This from Mike Myer (EverBank World Markets) – “The currency market saw some life injected into it after we had a sizeable increase in the US data department. We first had a look at June’s Consumer Price Index (CPI) which gave us another increase.
As it suggests, CPI gauges inflation experienced by consumers as measured by changes in the price level of a market basket of goods and services. The point of contention that many have with this report, of which I share, is just what goods or services are taken into account and how the results are calculated. We’ve hit on this many times in the past, but inflation pressures experienced by most consumers appears to be much higher than these government reports suggest.
Chuck has mentioned this quite a few times as well, but inflation is personal and can vary widely from person to person. For example, someone who has children in college will be directly impacted by a rise in tuition costs whereas those who have no children won’t feel the pain of those higher costs. Since everyone needs to eat, my opinion is that food prices should always be taken into account when talking about inflation. Please note that core inflation strips out both food and energy prices, so it just doesn’t paint an accurate picture when it comes to measuring inflation on main street, as far as I’m concerned. I get why core inflation can be a useful measure, but just not as it applies to real life.
Food prices have increased for six straight months so I would say we can call this a trend, although the upward pace has eased a bit. It was close to being a push as dairy, cereals, and produce prices all declined in June while the price for meats, fish, and eggs increased. At the end of the day, food prices in June inched up 0.1% and was the smallest move since January. Anyway, the elevated CPI figure was primarily due to higher gasoline prices. Janet Yellen and others are fairly confident these recent pressures are temporary in nature, but if the geopolitical issues escalate in the slightest bit, we could see oil prices rise and remain sticky.
I just realized that I’ve talked about everything except the actual data. Headline inflation increased 2.1% on an annual basis in June, which matched May’s figure. The report also indicated the 3.3% rise in gas prices accounted for about 2/3 of the increase. Core inflation came in a bit lower at 1.9% as lower prices for new cars is being attributed to the declaration from 2%. One of the bigger issues affecting consumers is the fact that hourly earnings haven’t been outpacing inflation. On one hand, we have Yellen downplaying inflation expectations and then on the other hand, we have James Bullard from the St. Louis Fed warning that inflation could take off if employment improves.”
The walk-in cash trade today was just average and the phones were on the quiet side. There has been however some rather large bullion activity going into IRA Accounts.
The GoldDealer.com Activity Scale is a “5” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 2) (last Thursday – 4) (last Friday – 4) (Monday – 4) (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 and cokes. No popcorn machine as yet and I am working on the In and Out burger plan again.
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