Commentary for Thursday, June 26, 2014 – Gold closed down $6.10 today at $1316.10 in quiet trading. The gold market was tested by the short players overnight in both Hong Kong and London reaching at one point about $1305.00 but bounced back in the domestic trade almost $10.00 before the close. This might show that the market does have a short bias (or thin trading conditions) but fundamentally safe haven buying is providing some support.
Personal Consumption Expenditures (PCE) was up 0.2% in May and that follows a 0.2% increase for April. This is the measure that the Fed watches closely for signs of inflation. The 0.2% number amounts to a 2.4% inflation rate which is higher than the accepted Federal Reserve target but here we go off the tracks. For some reason inflationary fears have been totally washed out of this market and in fact some (especially in Europe) are talking about deflation.
The idea of deflation seems counterintuitive because governments worldwide are printing in a race to the bottom for the cheapest currency. But there is a whiff of this in the air and I believe this supports the European printing machine – which weakens the euro and supports the price of gold on the longer term.
This from Allen Sykora (Kitco) – Deutsche Bank Looks For Good Demand On Pullbacks In Gold – Deutsche Bank looks for gold buying to pick up again should the metal retreat to the $1,298 and $1,285 areas. The metal advanced Tuesday to just shy of its $1,329 target before consolidation set in. “However, we’re still convinced that this hurdle will be challenged on the next upside attempt,” the bank says. “Beyond, we would look for a bullish extension to $1,355 and even higher prices — $1,388 — can already be envisaged within a broader recovery. In the meantime, small dips will not be problematic for our bullish view as good demand is expected to await pullbacks at $1,298 and at $1,285. The latter now marks the tightened risk limit.”
With gold continuing to tread water this comment is crucial in resolving the matter of whether gold’s recent “big jump” was technical or something bigger. I still believe professional traders favor the short side because the follow through was tepid but there is a great deal happening on the relative sidelines which offer a favorable outcome. The last Yellen commentary must have had some inkling that the GDP number might disappoint but said nothing – and this disappointment will encourage the bulls.
If Deutsche Bank is right about physical demand coming into play on any pullback this would add more wood to the fire relative to the inflation/quantitative easing argument. Still I don’t see big demand either from the ETF’s or bullion dealers within the US. Business is steady as usual but lacks the buzz to push gold above $1325.00 overhead resistance.
The next few days should be interesting and if gold pulls back and physical demand picks up it would be bullish short term. In the meantime the bulls are in control but the push to higher ground has lost some momentum. The really good part of this push above $1300.00 is that is has quieted the naysayers at least for now.
This from the Huffington Post – Obamacare is going to have to return its hero’s cape, and we’re all going to have to learn to think twice before we over-react to shaky economic data. Two months ago, President Barack Obama’s signature health-care reform law was widely credited with saving the U.S. economy from shrinking in the first quarter by giving a huge jolt to health-care spending. On Wednesday, we found out that it had all been a mirage. Using more-solid data than it had two months ago, the U.S. Bureau of Economic Analysis found that health spending actually shrank in the first quarter, weakening overall consumer spending and contributing to a terrible quarter for the broader economy. Gross domestic product shrank at a 2.9 percent annualized rate in the quarter, the worst since the depths of the Great Recession, with health spending alone shaving 0.16 percentage points from growth. What a difference from two months ago, when the BEA first guesstimated that health spending soared at a 9.9 percent rate in the quarter, helping to keep the economy out of the dumpster.
I don’t want to comment on Obamacare and only post this piece because it shows how reliance on government statistics can lead everyone down the wrong road. I am not saying that all government work is junk science – we have a great system for a democracy and one which is responsible for our solid standard of living.
But relying completely on the government is where all countries are now heading. And this reliance can lead to trouble. Independent ownership of real gold and silver bullion is the only completely independent way to protect your future. Especially now as my generation is the last which can remember real gold and silver coins in actual circulation. What will future generations have as a reference point? Cyber credit – computer controlled debts and credits – Bitcoins or some other Frankenstein money substitute?
There was a mistake on yesterday’s ETF totals – the following will correct that error:
Our Exchange Traded Fund Totals are presented each Wednesday and include platinum and palladium. What all ETF’s are doing as defined by total ounces – gained or lost will provide an independent idea of market thinking on the short to medium term.
All Gold Exchange Traded Funds: Total as of 6-18-14 was 54,792,077. That number this week (6-25-14) was 54,802,124 ounces so over the last week we gained 10,047 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 54,799,910 ounces.
All Silver Exchange Traded Funds: Total as of 6-18-14 was 629,283,935. That number this week (6-25-14) was 626,744,082 ounces so over the last week we lost 2,539,853 ounces of silver.
All Platinum Exchange Traded Funds: Total as of 6-18-14 was 2,815,203 ounces. That number this week (6-25-14) was 2,844,731 ounces so over the last week we gained 29,528 of platinum.
All Palladium Exchange Traded Funds: Total as of 6-18-14 was 2,951,992 ounces. That number this week (6-25-14) was 2,980,096 ounces so over the last week we gained 28,104 ounces of palladium.
The walk-in cash trade has hit a low this week as far as action and the phones seem average to subdued. This is clearly seen in our Activity Scale for today (2) and might mean that a minus $6.10 in the price of gold is not enough to create interest.
The GoldDealer.com Activity Scale is a “2” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Friday – 4) (Monday – 5) (Tuesday – 2) (Wednesday – 3). The scale (1 through 10) is a reliable way to understand our volume numbers.
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Everyone really liked the French Franc today!
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