Commentary for Monday, Sept 22, 2014 (www.golddealer.com) – Gold closed up $1.50 at $1216.80 after a dip in the overnight Hong Kong market and some last minute weak short covering in the domestic market.
The general trend for gold over the past 30 days has been down so the bears remain in charge although short traders now have about a $70.00 profit position – so I expected a stronger short covering rally as this morning’s action indicates some consolidation around Friday’s close.
The continued pressure on gold is the combination of a stronger dollar and the notion that the Federal Reserve may raise interest rates earlier than expected because of the perception that the US economy is improving.
Also of note is that the European Union is working on its own quantitative easing program to support the still sagging European economy. This will push the euro lower and encourage the dollar safe haven status in the near term.
New record highs in stocks Friday attracts speculative money which might otherwise move into gold – and gold’s apparent disconnect from the geopolitical scene keeps traders defensive.
This according to Reuters – Investor interest has dipped as seen in recent flows of SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund. The ETF’s holdings fell 7.78 tonnes to 776.44 tonnes on Friday – its lowest since December 2008. Hedge funds and money managers also decreased their bullish futures and option bets in gold, and they switched silver into a net short position for the first time since mid-June, the Commodity Futures Trading Commission said on Sunday.
Most commentators are waiting for improved physical demand from both China and India to come into play because of seasonality and recent discounts.
This according to The Economic Times – India’s monthly gold imports are set to rise by as much 50 percent from current levels while premiums could almost double as the country gears up for a surge in demand ahead of the year-end festivities and wedding season, industry sources said.
Silver closed down $0.08 at $17.70 and this physical market is beginning to heat up.
Platinum closed down $7.00 at $1330.00 and palladium closed down $9.00 at $803.00.
Consider the following. Like I said gold has moved from $1300.00 with some bullish feeling to testing $1200.00 – and the bears in control. This downward momentum is murder so during that time there was a lack of interest in physical buying across the GoldDealer.com counter.
Oh there are the occasional buys made by the initiated and long term players averaging down – and there are the occasional 100 ounce gold sellers when someone decides real estate might be a better deal. Generally however – as the market moves lower gold sentiment remains bearish and the doom and gloom boys are out in force.
And about all you can say is that the market is cheap relative to old highs – but most of the general public remains on the fence. All of this however should be understood in the general context of gold being real money – then you don’t have to visit your doctor.
Still there was something not right – where are the buyers which showed up in previous runs to lower prices? I am not talking about the Chinese or India physical trade – I am talking about good old home town folks looking to buy cheap.
Further in this generally down market there was no “give-up” or “exhaustion” trade which must eventually happen to finally wash out remaining weak hands. This is the imaginary number which is hard to figure – the price of gold which – when it occurs even die hard investors believe gold has no future and sell everything in the cupboard.
When I published Friday’s newsletter around 2:00 PM – the above was true. Complete quite.
Then bam – the roof fell in – not literally of course but around 3:00 PM the phones came to life – then exploded and the physical trade downstairs moved from not much happening to 3 deep at the counter and a line forming at the back door!
Virtually no sellers showed but buyers appeared out of nowhere and the store was crowded until we closed. The guards actually had to count people in the store and limit occupancy. This has not happened one time in the last 12 months – so I got on the internet and looked for something which might have pointed to bullish news for gold.
No news which might indicate the bearish market is over – even the Scottish vote was a bust for gold – actually I believed a “yes” vote might prove bullish and it would have been great theater trying to figure how to split up what is left of the British gold reserves.
So what happened to fill the store up with people waving money around?
I don’t have a clue and public demand is impossible to guess especially in a sideways market. But this missing physical demand is what everyone is looking for – granted on a bigger international scale but I would argue that the micro business – over the counter buying and selling which happens in coin stores across America carries some sway.
When the public decides the price is right is impossible to figure – even if the market is cheap – and I am not saying this late in the day buying rush is the bottom of the market.
But it clearly shows that if the public thinks the price is right they will bring big financial commitments – perhaps even back up the truck. This is obviously missing from today’s gold bullion scenario but it is assuring that those eager buyers seen during the decade of higher prices are still waiting and watching the price of gold.
The walk-in cash business was busy today – especially with silver bullion buyers. It looks like we finally have a sweet spot in the under $18.00 area – pricing being pretty straightforward for the long termer in that it costs $20.00 to dig the stuff out of the ground. Phones were also steady – not hurried but enough action to indicate the buying public has taken notice.
The GoldDealer.com Unscientific Activity Scale is a “4” for Monday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Tuesday – 4) (last Wednesday – 3) (last Thursday – 3) (last Friday – 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.
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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.
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