Commentary for Friday, July 5, 2013 – Gold closed down $39.20 at $1212.90 today reacting to a stronger dollar being pushed by the unfolding mess in Egypt, and what was interpreted to be better jobs news (not by me) which added fuel to the “tapering will begin in October” rumor.
The monetary tapering argument remains big medicine but I am beginning to believe that by the time the Fed actually reduces its monthly $85 billion dollar program gold will have already factored this change into its daily pricing.
Dollar strength today was king as the ECB and Bank of England announced that they will keep interest rates low for a long time which weakened the pound and the euro which moved the Dollar Index up 0.8% (84.43) which is the highest close in 3 years.
Silver followed gold down $0.95 to $18.73 and while sales were active they were not overwhelming and we are seeing virtually no big silver bullion sellers at these lower levels.
Platinum moved down $20.00 at $1326.00 and palladium was also weaker down $8.00 at $676.00.
(Kitco News) – Analysts and traders who take part in the weekly Kitco Gold Survey are mixed on their expectations for price direction next week. Participation was slightly lighter than normal in this week’s survey as traders took off on the Friday after the U.S. Fourth of July holiday on Thursday, turning it into a four-day weekend. Eighteen participants took part in this week’s survey, with seven seeing prices up, seven seeing prices down and four looking for sideways consolidation. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts. Many of those looking for further weakness cited continuing expectations for tapering of the Federal Reserve’s bond-buying program known as quantitative easing, along with further selling and/or liquidation by funds. “I expect the funds to make one last effort to drive down the paper gold price and liberate some cash from ETFs (exchange-traded funds) for equity bubble investment,” said Bill Goldman of 3GF Corp. “The commercials will probably absorb some of those sales on their way to slowly taking a net-long position on their contracts.” Ultimately, however, he suggested the Fed may only trim bond purchases by a “sliver.” Treasury yields have been rising. Eventually, higher interest rates and falling exports may mean “the Fed will revert to more QE because monetizing debt is all they can do unless they join the hard money chorus of ‘austerity,’ which is fraught with political consequences.” Those looking for sideways to higher trade suggest the market has already factored in much of expected FOMC tapering and may be overextended to the downside, at least in the short term. “I look for a wide range but think…we continue to consolidate,” said Darin Newsom, DTN senior analyst. “Last week, we had the August (Comex gold) contract in an oversold situation. This rally in the U.S. dollar index could run out of gas and come to an end. That could provide some support to gold. I think last week’s low will hold, but we could certainly drift down toward that low.”
The walk-in trade was again crazy mostly buyers and phones were active today but not overly so which is curious because I would have expected more business considering the drop in the markets. I heard a reliable rumor of a very large gold kilo purchase in New York. Also keep in mind that because of the 4th holiday many US traders left Wednesday and will not be back at work until Monday. Thanks for reading and enjoy your weekend. These markets are volatile and involve risk: Please Read Before Investing
Written by California Numismatic Investments (www.golddealer.com).