Commentary for Wednesday, Jan 22, 2014 – Gold closed on the Comex down $3.30 at $1239.00 so holding above the important $1200.00 level but not showing much interest in committing to higher levels. Obviously gold is being held in check because speculative interest is looking elsewhere in this range-bound market but judging from a few stock market hiccups this morning equities may be flattening out. And by the way this is the time of year that the grading services (PCGS and NGC) get pallets of new (2014) bullion gold and silver eagles for certification. Each year new buyers pay ridiculous premiums for graded bullion junk only to realize there is no premium paid on the secondary market so let’s not throw our money away. Only bullion is bullion and certified bullion is still bullion if you get my drift.
Judging from recent emails it would seem some physical gold holders are becoming tired of waiting for inflation to push gold prices higher. And as long as the Federal Reserve keeps the books inflation numbers will be adjusted accordingly. That does not mean however that inflation should be ignored. Japan is a good example of aggressive monetary policy with no inflation. The BOJ is pumping money into her economy to beat the band but Japan has been basically deflationary for years so for the present no inflation. Same with Europe – not exactly deflationary but heading in that direction. But just to show inflation is not a relic of past economic consequence, consider Australia – Consumer Price Index this morning was 2.7%. While the current economic scale is tipped toward deflation as a handover from the 2008 housing debacle I think the banks will soon be lending hand over fist and loose monetary policy worldwide will come home to roost. When is hard to say but things economically are picking up so the cycle will once again tip towards inflation and that will support gold.
Silver closed virtually unchanged off $0.03 at $19.80 also in quiet trading.
Platinum closed up $9.00 at $1462.00 and palladium finished up $1.00 at $749.00. Both platinum and palladium continue to get action in the physical market.
Recent from Reuters: “Traders said signs of a better U.S. economy and expected Fed stimulus trimming will weigh on gold’s investment appeal as a hedge against inflation. “I am confident that the Fed is going to continue its tapering approach. There’s been sustained improvement in the global economic recovery, and that should continue to dampen safe-haven asset demand,” said Phillip Streible, senior commodities broker at brokerage RJ O’Brien. A report in the Wall Street Journal on Monday said the Fedis on track to trim its bond-buying program for the second time in six weeks as a lackluster December jobs report failed to diminish the Fed’s expectations for solid U.S. economic growth this year. The U.S. central bank’s next meeting is scheduled for Jan. 28-29.”
There are stories which dampen gold’s appeal like the China or India slowdown syndrome which should be ignored because it repeats on a regular basis but never happens.
But continued Federal Reserve tapering is not going to go away or morph into something which is positive to gold’s short term pricing. Fortunately or unfortunately the monster which pushed gold to record highs is now going to be modified into submission. To speculate on how much (increments of $10 billion or whatever) really does little good and in fact you might find less damage if they just got on with the program.
There are two camps as to possible outcomes. (1) The Armageddon group which sees gold coming to rest under $1000.00. (2) The less extreme folks who believe much of the decline in gold has already happened. And we are within a hundred dollars of gold representing true future value. I have gone full circle on an answer as to which camp is more appealing.
Regardless of the camp you like each will react to the continued unwinding of Federal Reserve monetary easing. From a physical dealer’s standpoint I would like to get on with the show and stop belaboring the issue. Believe me it would be better for coin dealers around the US if they knew one way or the other because they could plan for future business.
I appreciate Uncle Sam does not give a hoot about us coin dealers but he also does not give a hoot about my readers for the most part or he would not create a fiat money system which creates monetary tension. So in the meantime time as the Federal Reserve ponders reductions most folks are left hanging around wondering about how safe their money will be over time. Good decisions as to how much hedging in gold are pretty much left to chance in a world trying to stand up after the 2008 financial collapse. This tapering drama is a joke but I hope it does not turn out to be a Greek tragedy.
The walk-in cash trade was steady with no really big players. The national phone business was steady but underwhelming considering the discount from old highs. This would lead me to think buyers are probably old timers and believers although of late there has been an increase in new accounts.
The GoldDealer.com Activity Scale is a “6” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 3) (last Friday – 4) (last Tuesday – 5) (Wednesday – 6). The scale is 1 through 10 and we believe this is a reliable way to “sense” real bullion business.
On the New GoldDealer.com site: Comex closing prices are posted (upper right hand corner of the home page) and are included on individual landing pages. Live pricing and the change function works: you can now compare the Comex close with live product pricing for a true value picture.
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