Commentary for Tuesday, July 8, 2014 (www.golddealer.com) – Gold closed down $0.50 today at $1316.00. It was generally higher in overnight Hong Kong and London trading – a trend which continued into early domestic trading but broke down early on – moving from over $1324.00 to $1314.00 in a matter of minutes so something spooked the trade. But after the sudden drop the market rebounded to about the unchanged mark.
So typical of gold, just when you think there is not much happening the market can turn to panic mode (either higher or lower) and then settle like it was just another Tuesday walk in the park. I think the floor was worrying about higher oil prices and when these fears dissipated the market moved lower.
There is some talk that a budget to be presented by the Indian government on Thursday may contain news that would relax import restrictions that have been imposed in India. Those restrictions include a 10% tariff and a mandate to export some jewelry after fabrication. Most think the restriction number will not go away but move from 10% to say 8% but even this will not only support prices but could actually push short term demand higher.
Silver closed unchanged at $20.96.
Platinum was also unchanged at $1495.00 and palladium was higher by $4.00 at $871.00.
This from Peter Hug (Kitco) is important, especially if you are looking for a place to get in at the lower end of the trading range. Traders Bought The Dip – Gold found good support at the $1,312 level yesterday as traders continue to buy the dips. Gold should be setting up for a test of the $1,332 area and will need to break it with some energy to bring the $1,362 level into sight. The funds are beginning to re-enter the long metals trade, most likely in anticipation (although I believe this to be premature) of an inflationary event, but also as a hedge against the prospect of a serious correction in the equity markets. The trade seems to have finally awoken to the fact that global easing by the central banks is not just a cyclical policy, but an entrenched purpose. Platinum and palladium continue to be well-bid on any pullbacks, with palladium trading near the $875 level and platinum once again surging through the $1,500 mark.”
GAZA/JERUSALEM, July 8 (Reuters) – Israel bombarded the Gaza Strip on Tuesday in strikes that Palestinian officials said killed at least 11 people, stepping up what threatens to become a long-term offensive against Islamist group Hamas after scores of rockets hit Israeli towns. After the worst outbreak of violence along the Gaza frontier since an eight-day war in 2012, the Israeli military said a ground invasion of the enclave was possible, though not imminent, and urged citizens within a range of 40 km (24 miles) of the coastal territory to stay close to bomb shelters.
“We are preparing for a battle against Hamas which will not end within a few days,” Defense Minister Moshe Yaalon said in a statement. “We will not tolerate missiles being fired at Israeli towns and we are prepared to extend the operations with all means at our disposal in order to keep hitting Hamas.”
Don’t you think that with all the trouble in the Middle East that gold should have seen at least some safe haven buying? Not a peep so far which should tell you that gold’s primary asset value is not on the radar for today’s investor. That is an amazing statement when considering the massive fiat currency escalation and the “war zone” mentality now a part of everyday life. I would think gold bullion should be flying off the shelf but in fact real physical buying or selling has not been up to snuff. Sure there is quiet trading but almost completely in the background relative to financial commentary.
This has to be an American mind-set – there is Ukraine, Iraq, Egypt, and now Israeli air strikes into Gaza this morning and there is little American press coverage. I listen to the BBC and this unsettling war information is talked about and analyzed every day.
This from Allen Sykora (Kitco) – Metals Making Comeback Lately – optionsXpress – There has been a stronger tone in a number of base and precious metals lately, says Mike Zarembski, senior commodities analyst with optionsXpress. “Don’t look now but one of the least loved commodity sectors by trader and analysts to start 2014— precious metals – (is) starting to display rather bullish price moves,” he says. Palladium has led the charge on tight supplies and improving auto sales, he says. “However, some of the biggest surprises are in the performance of gold and silver of late,” he says. “Here, analysts note that gold ETF (exchange-traded-fund) purchases have increased and now stand at their highest levels since mid- April, as buyers are starting to turn once again towards gold as a diversification from equities and bonds due to rising global tensions especially in the Middle East, as well as, a potential hedge against rising inflation. Even the base-metals sector is starting to show some support, especially aluminum, zinc and copper. Traders view a potential Chinese economic rebound, which is being spurred by data showing manufacturing expanding at its fastest pace so far this year, along with continued improvement in U.S employment, which may encourage expansion in the industrial sector and in turn help support demand for industrial metals.”
Another example of more positive news coming from the metals sector. Again considering gold’s six month chart the push to higher ground since early June is encouraging. But considering the continued flattening of the curve above $1300.00 it would seem gold has lost some of its mojo and is struggling around $1320.00. And without a stronger push to the upside from here the best I could say is that at least gold is presenting options to those thinking about adding at these lower levels. And CNBC this morning once again talked about higher inflation expectations.
I would also add that we have not seen a great deal of large gold sellers even though pricing has improved. This is encouraging – but by the same token we have not seen a great deal of active physical buying. Two weeks ago momentum was stronger and we did see a big increase in gold bar sales. But since then things have cooled down – more typical of the usual summer pattern.
We run a computer program which gives us the most popular bullion products sold about every two weeks. And our number one seller is always the American Gold Eagle 1 oz. This gold bullion choice consistently makes up about 45% of our gold sales so while volume numbers are down the public still puts it at the top of their list. I mention this because many commentators are looking for a rise in Asian demand – and if you are looking for confirmation on this side of the ocean (I believe there is a positive correlation) the percentage of pure gold bar sales should be higher.
Doug Casey has been a gold advocate since I got into the metals business in the 1970’s. If you ever get the chance attend one of his seminars I guarantee an eye opening experience. This is a comment from Jeff Clark a member of the Casey Research team.
Q: Should I be worried about the silver fix disappearing? Could this happen to gold?
Jeff Clark: “The London Bullion Market Association (LBMA) decided to do away with the 117-year-old silver fix process after allegations of manipulation and Deutsche Bank’s subsequent withdrawal as one of the constituents. That left only two banks on the panel, an insufficient number if they wanted to continue the tradition. A process is thus underway to determine a new daily benchmark price, which is important since many entities need an agreed-upon price for large transactions.
There are a number of entities jostling to be the provider of this valuable service, which is supposed to be decided this month. However, it shouldn’t impact the silver price itself, and in fact will probably be good for the industry. The process should be more transparent and efficient, and it will probably be electronic instead of by phone.
A potential glitch would be if there was a delay implementing the new program. The final fix in its current form is scheduled for August 14, and the industry will want to see a viable, state-of-the-art system in place well before that date. Some analysts think there will be a scramble to meet that deadline.
One factor in determining the likelihood of gold going this route could depend on the success of the new silver fix program. Gold has two “fixing” prices per day, so it would need to be equipped to handle twice the activity. But a more modern and automated system wouldn’t be a bad thing. It could also remove some of the doubt surrounding manipulation of the price.
Whatever the new system might be for silver, and whether or not gold goes a similar route, has no bearing on the reasons to invest in precious metals or our long-term bullish outlook. Gold and silver are money and a store of value, regardless of the process used to determine a daily benchmark price. So, no, we’re not worried about this.”
I think the London gold “fix” and even the COMEX close – for the average investor – is not important in today’s world of live trading and worldwide pricing. Years ago coin dealers had to explain what then was called the “aftermarket” when pricing gold or silver. Today informed US investors understand prices are always changing (live) and so the idea of a “close” or “fixing” is interesting for the historical record but not very useful if you are buying or selling 50 Krugerrands at 4:00 PM in LA.
I also believe a “current” or “live” price for the precious metals at any time US bullion dealers are open is necessary for a transparent market. This better suits the sensibility of today’s computer generation where the world is in real time.
The walk-in cash trade was on and off today – but at times the business was steady. Buying and selling were mixed but there is a change in buying attitude. The still committed public is getting more used to the idea that the metals are struggling and seem to be willing to talk about “why” – staying in the game means something to dealers. It means that core buyers are not going away. The phone trade was also mixed today but favoring the quiet side.
The GoldDealer.com Activity Scale is a “3” for Tuesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 3) (last Thursday – 4) (Monday – 3). 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 our 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 and get cash for your transaction. When buying from us remember if you exceed $10,000 in cash (the real green kind) a Federal Form is necessary.
We would also like to thank Aaron Goggan – Fastmarkets – Head of Business Development North America – for his recent visit to the CNI Building. Aaron / Fastmarkets / Bullion Desk are responsible for a great deal of the independent pricing information we use each day. A very personable chap – Aaron took the time to provide an “inside” view of all the information he provides on a daily basis. Fastmarkets – Delivering a clear and focused understanding of the metals markets.
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