Commentary for Friday, Jan 3, 2014 – Gold closed up $13.50 at $1238.40 so some follow through from yesterday’s gain and further attention. Metals eased into higher territory and moved steadily higher all day long. It was like a burst of short covering but with two days of advances mounting to $36.00 all those aggressive shorts have to be getting nervous.
One of the Fed’s inflation hawks, Mr. Plosser was out talking about the fact that aggressive increases in interest rates might be needed if banks release money and fuel inflation. I don’t know what might have prompted that comment but maybe Mr. Plosser has received some early inflation news. The immediate verdict on market direction is of course still not clear but buyers here are getting the best deal in couple of years.
Silver closed up $0.08 at $20.16 and this market remains quiet with little fireworks into the New Year. It is interesting however that many foreign mints have a new group of modern silver bullion coins coming on line and like I said a few days ago these folks don’t mint unless there is an audience.
American Silver Eagle sales hit record levels in 2013 at 42.6 million ounces. That surpasses 2012 level of 33.7 million ounces. Silver Eagles are live and in stock for delivery right now despite the mint shutdown since early December (its usual course). The 2014 American Silver Eagles should be available for delivery on January 23rd.
Platinum closed up $10.00 at $1414.00 and palladium was up $1.00 at $731.00.
In the Kitco News Gold Survey, out of 34 participants, 17 responded this week. This was less than normal, with many still away from their desks for an extended New Year’s holiday. Ten see prices up, while six see prices down and one is neutral. Market participants include bullion dealers, investment banks, futures traders and technical-chart analysts. Last week, survey participants were bullish. As of 11:30 a.m. EST, Comex February gold had gained $21 an ounce for the week. Those who see higher prices said gold acted well after testing last year’s lows in the $1,180 area and rebounding. “Longs enter at a very important support level and the shorts – who expected a breach of the $1,180’s – cover positions. There is some fund buying and bargain hunting as traders take advantage of an oversold market. Physical buying remains strong … and should continue to support this market on the dips, but volume is lacking and we will need to see more participation to continue this move. I believe gold will continue this advance next week,” said Frank Lesh, broker and futures analyst with FuturePath Trading. Others said gold’s early 2014 rally may be a harbinger of things to come. “I strongly am expecting that inflation will be the concern (for) the market over the next year and if that is the case, precious metals should lead the way so today’s strong market on the first day of a new year trading may be turning from their weakness over the past year to telling us a new story,” said Bob Tebbutt, of ARMOUR Asset Risk Management. However, those who see weaker prices said they see this rally in gold faltering as it runs into resistance. “Gold’s small rally should be met with overhead resistance near $1,240/oz because current fundamental factors such as an improving economy and continued tapering will resurface,” said Phillip Streible, senior commodities broker at RJO Futures.
This from the Wall Street Journal (Tatyana Shumsky): “The first day of the new year brought a flurry of investors to the precious-metal market as portfolio managers allocated cash across the spectrum of different assets, said Graham Leighton, a precious-metals broker with Marex Spectron in New York. Mr. Leighton said markets often see increased activity at the start of a month, but “at the start of the year there tends to be more money coming in than any other month.” The rebalancing and re-weighting of Standard & Poor’s Goldman Sachs Commodities Index and the Dow Jones UBS Commodities Index also provided support to gold and silver. The indexes each raised their allocations to gold and silver for 2014 from 2013, and funds that track these indexes must recalibrate to the new allocations in January. “This rebalancing is going to create some buying for the first week or so, or at least support the market,” Mr. Leighton said. Roughly 1.5 million to 1.8 million ounces of gold and about 50 million ounces of silver will be bought as a result of the index shifts, he said.”
The great thing about gold investment is that everyone and their brother (whether they like the trade or not) keep a sharp eye on prices. And while the price of gold as a pure number might discourage some its value relative to other financial assets can attract attention. The above activity curiously came out of no-where and caught most by surprise. The follow up logic was “well maybe the price of gold represents value relative to other much better performing assets and we are now looking at a value play”. This undervalued versus overvalued is a classic contrarian investment notion and one which is very familiar in the physical gold business. The corollary is of course buying weakness until the market pays off but few have the sand. A better approach is dollar cost averaging for the investor interested in a small gold hedge against a fiat dollar. I would not say that the longer term weakness in gold is finished but recent news is encouraging – if for no other reason than those looking out the second story window might now reconsider. Markets have a way of turning around in the midst of the worst news (another contrarian notion) so let’s hope gold puts in a solid bottom in 2014. After that we can all worry about holding higher ground against another index fueled by an over/under computer somewhere in the world.
The walk-in cash trade was busy but the telephone action was hit or miss. I am actually surprised we did not see more action one way or the other – this might indicate the public is still not convinced.
The GoldDealer.com Activity Scale being “3” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Monday – 5) (Closed last Tuesday and Wednesday) (last Thursday – 4) (Friday – 3). The scale is 1 through 10 and we believe this is a reliable way to “sense” real bullion business.
Website Updates: Comex closing prices are working and posted (upper right hand corner of the home page). Live pricing works and the change function should be in place Monday or Tuesday. The Bullion link (upper left hand corner of the site) has been modified with the traditional sort everyone wants from the old site (all gold, all silver, all platinum and all palladium). Next week an All button will be added so you can see all products for comparison. Finally both our buy and sell prices will be included (similar to the old bullion page). This site is a work in progress and some of the improvements are pushing the envelope so your patience is appreciated. We have added our old buy and sell premiums to each bullion product. The new system still requires a live person for pricing confirmation. Live Chat is doing well and new customers can set up their own encrypted accounts. The automatic email confirmation (buying or selling) should be working next week. Thanks for your patience and if you have other ideas your email is appreciated. Sign up for our daily Gold Newsletter on the Gold Newsletter page if you are so inclined and remember this is now live for you too so why not sound off?
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Today the popular item is the Pamp Suisse Gold Bar Kilo
