Commentary for Fri, June 13, 2014 – Gold closed virtually unchanged today up $0.10 at $1273.70 and overnight trading in Hong Kong and London were also flat as a pancake so the worsening situation in Iraq does not seem to hold much sway with gold.
Oil prices are firmer – supporting gold – but most believe movement by Muslim extremists into the south, where the oilfields are – is unlikely. On the week gold was up $21.00.
The Producer Price Index (a wholesale inflation indicator) is down 0.2% which is a surprise as previous months advances of 0.6% and 0.5% offset the deflationary tilt of the May number. Year on year movement of the PPI is 2%. So subdued but still grinding away at the bottom line.
Silver closed up $0.12 at $19.63 and this morning there was fresh money coming into the physical market at GoldDealer.com but by the afternoon things had slowed down considerably. Silver on the week was up $0.67.
Platinum continued lower down $6.00 at $1435.00 and palladium was also down $6.00 at $813.00. The premium of platinum over gold is moving lower so I expect sales of both platinum and palladium to move higher.
Platinum and palladium were lower on the week by $22.00 and $31.00 as a result of the tentative deal reached between mining companies and the miners in South Africa. We are still facing big new demand for PGM’s and it remains to be seen when workers will come back.
As usual Peter Hug (Kitco) zeros in on what is really important with gold – Backfill Trade Completed Overnight – The producer price index for May came in with a drop of 0.2%, again confirming inflation is not “yet” an issue, which may give the Fed pause. From a technical perspective, the gold market backfilled to the $1,277 level but now requires a push through, with momentum, before I see an attempt of the $1,300 target. The geopolitical risks associated with Iraq have created some safe haven buying, but certainly not as much as one would have expected. However, it has had an effect on the equity markets as a “surge” oil price brings back into question the viability of an ongoing global recovery. We suggest the market will not be aggressively short into the weekend and traders should buy intra-day weakness, in the $1,267 level for gold and the $19.44 level for silver.
As a trader Hug understands that the problem in Iraq may create higher prices for gold but until there is price confirmation he does not want to get too excited. The 30 day chart for gold is now critical short-term. Without that extra $20.00 push to the upside this “bowl-like” like pattern really just turns into “wondering to range-bound”. So if you are considering adding to your physical position a confirmation of higher prices short term should be in place if gold moves above the $1300.00 level and if that happens the technical folks will say the short term momentum belongs to the bulls.
I would also discount the upward pressure Iraq may have on the price of gold. It’s good for $50.00 but after that the American people won’t stand for any more blood and treasure commitment to this part of the world. Any President who continues to be aggressive will not be seen in a good light and everyone is tired of war and misery.
And as far as gold long term is concerned rely on the notion that government will not change its approach anytime soon – the latest from Ambrose Evens-Prichard (The Telegraph) – Japan to keep printing money for years to come, so learn to enjoy it.
I appreciate that this “government fiat money” mantra may get tiring – and it has been fodder for the anti-gold lobby ever since gold failed to confirm the above $1800.00 mark in the summer of 2011. But all will soon understand that you can’t defy financial gravity indefinitely.
For weeks there has been talk that the political change in India would lead to a relaxing of restrictions on gold imports into that country. I think this will create an immediate and positive change in gold sentiment. But to support this view I watch carefully the American based India physical trade. In the last two weeks this niche sector has been buying heavily.
(Kitco News) – Gold prices may drift higher next week, the majority of participants in the Kitco News Gold Survey said, based on rising geopolitical tensions in the Middle East.
Out of 33 participants, 24 responded this week. Of those, 16 see prices higher, three see prices lower and five see prices trading sideways or are neutral. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts.
Last week, survey participants were bearish for this week. As of 11:30 a.m. EDT, Comex August gold was up about $21 for the week.
Those participants who see higher prices said the news out of Iraq, that insurgents seized Mosul, a town near one of Iraq’s biggest oil pipelines, underpins gold prices for the time being. However, most participants who see higher prices, such as Adam Klopfenstein, market strategist with Archer Financial Services, said they’re not seeing sizable gains next week because values are bumping into technical chart resistance. That ceiling starts around $1,280 an ounce.
“I’m mildly bullish,” Klopfenstein said.
Those who see weaker prices next week said gold’s strength based on geopolitical factors can be fleeting, especially if events change and the insurgency loses momentum. Additionally, there is the Federal Open Market Committee meeting next week and that may reinforce ideas that the U.S. economy is slowly strengthening.
“I think the Iraq situation shook everybody up. Oil rallied sharply and we were able to push gold higher…. But I’m not convinced that we won’t see more downside. I think you can cautiously sell rallies if we get to $1,280.
Thirteen hundred is the big resistance. If we don’t find any more news then we’ll probably go back to $1,240. There’s the FOMC next week; that’s worth watching. That could change things quickly. And it’s another reason why I would sell rallies,” said Afshin Nabavi, head of trading at trading house MKS (Switzerland) SA in Geneva.
A few survey participants said they see gold holding in a trading range as the geopolitical news isn’t enough to push it above current resistance levels between $1,280 and $1,300, while the FOMC meeting isn’t likely to be enough to push gold under support between $1,250 and $1,240.
The walk-in cash trade today was just moderate and typical for a summer day. And national phones were steady but again typical for the summer months. We had seen some big action when gold and silver broke lower a couple of weeks ago but that has now slowed.
The GoldDealer.com Activity Scale is a “3” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 4) (Tuesday – 4) (Wednesday – 3) (Thursday – 3). The scale (1 through 10) is a reliable way to understand our volume numbers.
Live pricing on the site moves all bullion products up or down during the day. The Bullion Products link on the home page now includes our Bid (blue) and Ask (green) prices. 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 simple and GoldDealer.com is the only precious metal site on the internet with this transparency. Live Chat is doing well and new customers like setting up their own encrypted accounts. We recommend upgrading old browsers to Google Chrome (free/secure) especially as our site becomes more advanced.
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.
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The new USPS server is installed with the upgraded post office software! This system will allow you to track USPS like Fed Ex – provide pinpoint location – allow you to reschedule if you were not home during the delivery and even provide text updates en route. This was the word from on high yesterday – the techs have now informed me that an interface problem will need to be fixed – so next week looks like the landing date.
Our four flat screens downstairs with live independent pricing (BullionDesk.com) are a big hit with the cash trade. This live stream moves all buy/sell prices so the cash buying or selling public can see the markets move on a real time basis. Our site uses the same pricing model so no more guessing and we guarantee your satisfaction.
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