Commentary for Wednesday, Feb 5, 2014 (www.golddealer.com) – Gold closed up $5.60 at $1257.30 after testing recent highs ($1273.00) so trading continues relatively nervous and cautious. ADP payroll numbers showed 175,000 new jobs last month which was less than the expected 189,000.
Talk continues about reducing the Federal taper as the economic numbers wobble but I think this is a long-shot. Today’s advance in gold might be more a fear factor from the worries over the Puerto Rican bond downgrade (junk status) which adds to other problems in the foreign currency area. This is the ongoing emerging markets saga which gold bugs like to describe as worldwide financial instability. Again a bit overplayed in my book especially when compared to where we were in 2008. Also of some note is that China remains closed (literally) for their New Year celebration so they are big players which are absent. Everyone will still be interested in the Jobs Report Friday and what the ECB will do with interest rates on Thursday so the short-term future of gold remains dicey.
Silver closed up $0.38 at $19.78 and while the paper market remains sluggish the physical market is engaged. Most large dealers are selling what they have in inventory and silver bullion deliveries this week to GoldDealer.com are lagging by about 20% for normal. This should not be misinterpreted because there is plenty of bullion inventory, so long delay stories are suspect.
Platinum closed up $6.00 at $1379.00 and palladium closed up $7.00 at $707.00. The strike continues in South Africa but large supplies have kept prices of PGM’s (platinum group metals, platinum, palladium, rhodium) from rising.
From Allen Sykora (Kitco): INTL FCStone: Gold Likely To ‘Do Well’ In February; PGMs ‘Vulnerable’ – Gold may fare well in February but platinum group metals could be “vulnerable,” says INTL FCStone in a monthly outlook. “We think gold will likely continue to do well over the course of February, as we do not think that the correction in the equity markets is over just yet,” the firm says. “Once the dust settles and equities start to stabilize, we could see a renewed assault on the precious metal, but this will likely not take place until later in the month. Platinum and palladium look somewhat vulnerable to us given that they do not seem to be responding to the ongoing South African mine strikes. In fact, once these actions are over — the various sides have resumed negotiations this week — both complexes could sell off some more from here.” For gold, the firm sees a February range of $1,210 to $1,285 an ounce.
Take a look again at the quoted range: $1210.00 to $1285.00 which is significant to me in that downside is limited and should gold reach the top end of the range traders would consider this a break to the upside. I find this unlikely this month because I think the stock market blow-off is over played but you never know these days with the derivative trade and massive government intervention. The China rumor resists and the minor foreign currency situation while stabilizing short term has no good future. Again wait and see seems like the right trade but remember the longer gold remains in this small uptrend the better for a shot at the important $1300.00 mark.
At last rumors from a reliable source: Casey Research (Metals and Mining Monday / Louis James) Crisis Brewing in the Gold Market – Germany claims to hold 3,390.6 tonnes of gold, about half of which is held by foreign central banks. Over a year ago, they announced a plan to repatriate 674 tonnes of gold from France and the United States. The US said it would comply, but told the German government that it would have to wait seven years for all the gold to be delivered. The news out last week was that after a year, Germany had only obtained 37 tonnes of its gold—and only five of them were from the US. That is a trivial amount (only 160,000 ounces). So why can’t Germany get its gold? Explanations of having to melt down existing gold and recast it just don’t make sense. The most logical conclusion, and the one I’ve come to, is that the United States simply doesn’t have the gold it says it has—neither Germany’s nor its own. Of course, the US government isn’t going to admit that there’s a problem, but I say there is. More evidence: JPMorgan’s COMEX warehouse contained 3.0 million ounces of gold in 2012, but that had dropped to 0.5 million ounces by mid-2013. Its registered inventories are a razor-thin 87,000 ounces. These kinds of swings are indicative of shortages and instability. Further, JPMorgan sold its gold vault in New York City—located next to the Federal Reserve’s vault—to the Chinese. The banking giant also just announced the sale of its commodities trading business (although it may not have sold the precious metals part of that business). Perhaps they were concerned about new regulations of banks with deposit insurance from the government. In another relevant development, Deutsche Bank recently surprised the gold community by quitting its position on the committee that sets the London a.m. and p.m. fixings. This came a few weeks after a German regulatory body called BaFin started investigating how these prices were set. BaFin also gave an indication that the process appeared worse than the LIBOR fixing scandal, which resulted in billions in fines.
The walk-in cash trade today was active and so were the phones. We saw little in the way of large selling, nor has there been an increase in large buying, even with the recent advance in prices.
The GoldDealer.com Activity Scale is a “4” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 6) (last Friday – 6) (last Monday – 6) (last Tuesday – 7) (Wednesday – 4). The scale is 1 through 10 and we believe this is a reliable way to “sense” real bullion business.
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