Commentary for Wednesday Sept 11, 2013 – Gold closed up a quiet $0.20 today at $1363.90 in thin summer like trading conditions waiting for fresh news which might push prices one way or the other.
Traders are now focused on September 18th because most believe the Federal Reserve will have something to say about its quantitative easing program. The trading jury is still out on this call regardless of the rhetoric. Some believe a small taper is already cooked into the cake and some believing the real numbers do not warrant change. If nothing is done expect a relief bounce in the price of gold but in any event remember this market is still consolidating.
It is difficult to imagine 12 years has passed since Sept 11th and on this anniversary a salute to those who died in this tragedy. Gold on that fateful day moved from $275.00 to $285.00 and silver from $4.20 to $4.50.
Silver closed today up $0.16 at $23.12 also in quiet trading.
Platinum closed today unchanged at $1475.00 and palladium was off $2.00 at $690.00.
Frank Holmes (US Global Investors/Kitco) wrote an interesting article about actual physical buying of gold. He breaks buyers up into two groups: (1) The Fear Trade and (2) The Love Trade. It is no secret that my interests are in the latter because when all is said gold’s most satisfying price will be the result of its intrinsic protection to those who do not completely trust paper money. At any rate Frank’s pie chart is definitely worth mentioning. He poses this question in a survey to 1000 Indian and 1000 Chinese consumers: “Over the next five years, what will happen to the price of gold? Results in May of 2013 ($1461.00) 62% believe it will increase in value, 20% believe it will remain stable, 13% believe it will decrease and 5% don’t know. Same question posed in July 2013 ($1235.00) 66% believe it will increase, 19% believe it will remain stable, 11% believe it will decrease, and 4% don’t know.
So what you might say because the sampling was between Chinese and Indian consumers. If the same question was asked of the American public the results would probably be a large yawn because most belong to the Fear Trade. But this has been my exact point these past few months regarding the price of gold. And the very reason you will continue to see a large portion of this very fine hedge product move overseas.
There are however dedicated physical buyers right here in the good old USA. This from a reader is typical of my email lately: “IN GOLD I TRUST, NOT PAPER. The problem with gold is MENTAL, NOT FUNDAMENTAL. Who, with more than one brain cell could possibly conclude that The Fed has performed an economic miracle by creating lasting wealth and prosperity from trillions of printed money and debt? And that now is a great time to trade all your gold (and other precious metals) for worthless pieces of green or black-inked paper?”
The general mood of CNI customers remains quiet so lower prices are not attracting much attention. When the market was trending higher the action was solid but now that we seem to be drifting the intensity is moving in the opposite direction. If gold continues lower say into the $1320.00 / $1360.00 range a head and shoulders pattern will be complete and perhaps signal bearish bad news.
So while the technical momentum still belongs to the bulls this could quickly change and with the possibility of tapering and a continued strong stock market. Don’t look for a big change in the taper as most of those in the know expect something small ($85 billion to $70 billion perhaps). This might support marginally higher interest rates and create head wind for gold especially in the short term.
Walk in cash business at the CNI Building was steady today but the phones were on and off again. Being in California does present some challenges to East Coast buyers because of the time difference but remember this also works to your advantage in that we are open when the New York dealers are closed.
The CNI computers place my almost famous LA Physical Trade Business Number at another ho-hum “3”. For those who have asked this scale is actually based on combined volume numbers and anything over “5” would be busy…a “7” would be back to the old days. Like us on Facebook and follow us on Twitter @CNI_golddealer. Thanks for reading and enjoy your evening. These markets are volatile and involve risk: Please Read Before Investing
Written by California Numismatic Investments (www.golddealer.com).