Commentary for Wednesday, March 12, 2014 – Gold closed up $23.80 at $1370.30 and the highest price level seen in 6 months. Reasons for this strength include Russian troops in Crimea, the first Chinese corporate default leading to worries about China’s growth and finally a weaker dollar. Gold has now moved up about 14% this year in spite of bad press, continued tapering and no inflation. Technically the gold bulls are in charge and if this market runs to highs seen in the summer of 2011 ($1888.00) it would mean another 38% advance. I don’t think this likely in the shorter term but instead suggest that if the technical picture remains positive we should see a more gradual rise in prices with the usual push-pull action common today.
Silver closed up $0.54 at $21.32 in steady but lackluster physical trading.
Platinum closed up $11.00 at $1476.00 and palladium closed up $6.00 at $776.00. (Reuters) – Platinum holdings in physically backed exchange-traded funds have hit a record high after fresh inflows into funds listed in London and Johannesburg, and are set to rise further as a strike in major producer South Africa grinds on. The world’s largest platinum-backed ETF, NewPlat ETF reported an inflow of around 4,000 ounces on Monday, taking its holdings to a near seven-week high at 908,811 ounces. On the same day, London-based ETFS Physical Platinum reported an inflow of 4,505 ounces, taking its holdings to just under 325,000 ounces. Platinum ETFs, popular investment vehicles which issue securities backed by physical metal, now hold a record 2.215 million ounces, equivalent to around seven months of supply. The white metal, used in catalytic converters for automobiles, has attracted investors as a strike over wages in the South African platinum belt edges towards a seventh week, analysts said. “In terms of ETFs, you’ve got to think that the longer the strike goes on, and as above-ground stocks are consumed, it’s got to be positive,” Citi analyst David Wilson said. “People must be thinking that prices are going to rise.”
From Debbie Carlson (Kitco) – Gold Seeks New Catalysts – UBS – Gold is consolidating the sharp move witnessed in the first quarter, UBS says, and is currently seeking new catalysts. “There is a reluctance to aggressively push the market higher here considering the recent upside surprise in U.S. data and the lack of significant fresh news flow on the Ukraine crisis. In addition, positioning has continued to expand, and is now starting to look overly stretched at 15.3 (million ounces), the highest level in a year. It is understandable that investors would hesitate at these heights, but there is also no strong appetite to liquidate recent longs or re-establish shorts yet given continuing uncertainty in Ukraine and Russia. There are lots of headline risks ahead and choppy price action is likely to continue. But with the Fed (Federal Reserve) due to meet next week, gold could well remain in no-man’s land until then. From a technical perspective, gold needs to take out resistance at $1,362 to stay northbound,” the firm says.
I don’t want to dismiss today’s sharp rise in gold but most believe this rise in price is not the continuation of a recovering market but a pop caused by a unique event. But the Carlson quote nicely illustrates the thinking of today’s physical gold buyer relative to our across the counter and internet business. Most of them are repeat buyers or sellers who have been doing business for years, not safe-haven buyers. There has been some up-tick in new business but this is modest and the old guard knows pretty much what they want and when they feel comfortable with pricing. They remain interested but not overly optimistic and I think this is reflective across a wide swath of real bullion dealers in the United States. There is plenty of time for large dealers to talk with one another (the good ones do this all the time) meaning they compare notes, balance positions and have plenty of time to talk about the latest in sports.
This is reflective of a market still in transition; the public is interested but not obsessed. And my commentary reflects this reality so I receive the following question all the time: Are you bullish or bearish? Dealers, if they are honest (some stick to the bullish script because they believe it’s good for business) will admit that things are slow. And all real bullion dealers are all pushing for a competitive edge which is why bullion premiums are moving lower. So you might say I am semi-bullish in that I think the worst is behind us but will remain defensive until the gold bullion market finally shakes off the consequence of further tapering by the Federal Reserve.
This may sound like the old rhetoric but is actually good for the physical market because the public should now understand that gold is not the slam-dunk of yesteryear regardless of the Russian incursion or unfolding Chinese problems. For regular repeat business customers this mind set works because they were the folks that bought $400.00 gold when it was also out of favor. Real gold bullion buyers are just that way, they understand that fast-money speculators come and go but in the long term they will do just fine because the amount of gold bullion is relatively fixed when compared to the avalanche of fiat currency in circulation. And sooner or later, forgetting for the moment about periods of political stress this imbalance will work toward guaranteeing their financial future.
Both the walk-in cash trade and phones continue at a pace which is less than average so the physical buying public is still not too impressed with higher prices. This type of “market creep” to the upside usually ends in one of two ways: we all wake up one day and the market sells off big time or before we can open the store there is a line in the parking lot and everyone is throwing money in the pot. There never seems to be an in-between so we will have to wait and see how all of this plays out.
The GoldDealer.com Activity Scale is a “3” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 3) (last Thursday – 3) (last Friday – 3) (Monday – 5) (Tuesday – 5). The scale (1 through 10) is a reliable way to understand our volume numbers.
On the new GoldDealer.com site: Comex closing prices are posted on the home page and individual product landing pages. Live pricing on the site moves all bullion products up or down during the day. We reworked the All Bullion Products link on the home page. It 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 net 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. Sign up for our daily Gold Newsletter on the Gold Newsletter page if you are so inclined.
Email confirmation when buying or selling is functional. We are still working on the PDF file which will create an invoice on your computer which is the same as if you did the transaction in person.
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.
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