Commentary for Friday, April 11, 2014 – Gold closed down $1.40 today ending the week at $1318.70 in subdued trading. And the overnight trading range was rather flat so this market still looks defensive. As the European Central Bank has mostly talked the US has mostly inflated so this has pushed the euro higher relative to the dollar which supports gold on the short term. Gold still holds ground above $1300.00 so safe-haven buying and a weaker dollar support current pricing. If your interested in gold the Pamp Suess Gold Bar Kilo has a very low premium.
The back-burner issues remain the Russian/Ukraine problem and now the continued weakness in stocks. The latter should be watched because while a real crack in equities is not likely – should one occur because of either high multiples – too many IPO’s – or simply profit taking this could help gold stay above $1300.00 until something more substantial presents itself. For now gold looks good technically but must develop more forward strength before a serious run at old highs will be in the works.
Supporting my comments on inflation yesterday consider the following by Neils Christensen (Kitco) – “Producer prices for finished goods rose significantly by a seasonally adjusted 0.5% in the U.S. during March, the Labor Department said Friday. On an unadjusted basis, the index for final demand moved up 1.4% for the 12 months as of the end of March. The report said the jump was “the largest 12-month advance since a 1.7% increase in August 2013.” The core index for PPI excluding the volatile food and energy sectors increased 0.6%. The data follows February’s surprise drop of 0.1% in the headline figure and 0.2% in the core data. The report said the index for final demand services, which increased 0.7% in March was the biggest contributing factor to the surprise increase. Andrew Grantham, senior economist at CIBC World Markets, said that the surprise rise in producer prices might not have a major impact on markets because it is still unclear how well correlated the “revamped” report will be with the consumer price index report coming out next week. “The early consensus for next week’s CPI is for matching 0.1% increases in both core and headline, although the higher-than-expected PPI figures today and early import price data could imply a bit of upside risk,” he said. Adam Button currency analyst at Forexlive.com, said that although markets aren’t focused on inflation at the momentum, “this could get markets a bit scared about rising prices.” According to media reports, heading into the data, economists were expecting an increase of 0.1% in the headline figure. Consensus forecasts were also calling for the core rate to be up 0.2%.”
Silver closed down $0.14 at $19.93 and seems happy on both sides of $20.00 but not happy enough to push higher prices anytime soon. Silver is still cheap relative to old highs and it seems like we are in the middle of another accumulation phase. The recent move above $20.00 for silver may have taken away the “bargain” feeling needed to produce action in the physical market. Keep in mind however that at current levels a move to $30.00 would represent a 50% increase in price so we remain in deeply discounted territory as silver saw $48.00 at 2011. The American Silver Eagle 1 oz and the Canadian Silver Maple Leaf 1 oz were popular today.
Platinum closed up $2.00 at $1461.00 and palladium closed up $14.00 at $806.00. The South African mining strike is now in its 12th week and nobody cares.
And now the famous survey and for some inexplicable reason they still have not called us for our opinion. (Kitco News) – Gold prices are expected to rise next week as a majority of participants in the weekly Kitco News Gold Survey forecast the yellow metal will build on the gains established in early April. Out of 33 participants, 22 responded this week. Fourteen see prices up, while four see prices down and four see prices sideways or unchanged. Market participants include bullion dealers, investment banks, futures traders and technical chart analysts. Last week, a majority of the survey participants said they looked for prices to rise this week. As of 11:45 a.m. EDT Friday, Comex gold for June delivery was up $16 for the week. Several bullish survey participants, such as Bob Tebbutt of Armour Asset Risk Management, said the weakening U.S. dollar should continue to give gold a boost. Safe-haven factors, such as simmering tensions between Russia and the Ukraine, plus continued uncertainty over global economic growth may also support gold, said Jeffrey Nichols, managing director, American Precious Metals Advisors. He also points to the equity markets as another potential support. There is “shifting sentiment on Wall Street with regard to equities versus gold. Last year, to an important extent, gold-price weakness reflected hedge funds and other institutional investors switching from gold, especially gold ETFs (exchange-traded funds), into equities, especially the tech stocks. Now, the momentum is reversing — causing some investors to reallocate, this time reducing their stock-market exposure once again in favor of gold,” Nichols said. A few participants see weaker prices, saying that gold is bumping into technical chart resistance between the areas of $1,325 and $1,330 and is unlikely to move above there in the short term. Several participants are neutral on gold for next week and Jordan Eliseo, chief economist for Australian Bullion Company, is one of them. “Continued weakness in equity markets, alongside falling bond yields, could see bullion supported, but stabilization in risk assets and a calming of tensions in the Ukraine could see some money flow out of the sector. Technically gold looks solid, but there is no immediate bullish catalyst,” he said.
Still not much follow through on the physical side. The walk in cash trade was below average but not completely dead and the national phones were exactly the same. Considering the last few days of weakness in stocks I’m surprised we have not seen a big uptick in physical sales especially into the weekend. Perhaps the baseball season holds more promise for fun and entertainment.
The GoldDealer.com Activity Scale is a “3” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 6) (Tuesday – 3) (Wednesday – 4) (Thursday – 3). The scale (1 through 10) is a reliable way to understand our volume numbers.
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