Commentary for Wednesday, Jan 15, 2014 (www.golddealer.com) – Gold closed down $7.10 at $1238.10 and if you were looking for buying interest above the 50 day moving average you are in the wrong place. Today PPI (Producer Price Index) was announced up 0.4% in December which is the biggest move since June and could be the first stirrings of higher inflation numbers.
Remember when everyone was worried about inflation? Year on year the Producer Price Index was up 1.2% and if the 0.4% per month figure remains steady it would translate into a nearly 5% yearly inflation rate. I appreciate the “inflation story” is missing in action and that is why the metals are defensive but like all things related to gold the scenery changes quickly.
The issue now however centers on the bearish question because follow through at these higher levels was also missing in action. Will we retest lows if the economic picture continues to improve? It may seem like an intuitive “yes” but like I said yesterday the tea leaves are not that clear. Why? Because real physical demand for gold is now a wildcard down 28% last year.
Tomorrow we consider the Consumer Price Index so economic numbers continue but gold at the present is definitely missing any real buzz.
Silver was down $0.15 at $20.10 and like gold remains quiet. The mint reported an 89% sellout of the initial offering of 3.58 million American Silver Eagles. These are the first Silver Eagles sold since the December 9th US Mint shutdown. We continue to take orders on 2014 Silver Eagles and will begin delivery next week. We have earlier dated Silver Eagles ready for immediate delivery.
Platinum closed down $5.00 at $1428.00 and palladium closed up $5.00 at $743.00. Publicity on both platinum and palladium continues positive and perhaps even favors palladium.
Think about this quote from Reuters: “The Fed took a first formal step toward restricting the role of Wall Street banks in trading physical commodities, citing fears that a multibillion-dollar disaster could bring down a bank and imperil the stability of the financial system.”
How in the world can the Federal Reserve worry about banks trading physical commodities? The commodity market is small potatoes compared with the cloaked derivative trade. If memory serves Matt Taibbi called the derivative trade a weapon of mass financial destruction. Derivatives are basically casino action in which banks take or give action based on the probable outcome of complicated financial arrangements – a kind of insurance. And derivative trading could amount to 40% of today’s banking bottom line.
So are they dangerous? The reason the banks get a pass on this subject is that they “hedge” the risk with other like institutions. In other words the largest banks gamble with other large banks about probable outcome meaning both are naked or uncovered. Commodities in my mind are real tangible stuff not theoretical derivatives and so balancing the books and staying hedged is not complicated.
I think this is a great example of why the real world financial system remains perilous even after the financial meltdown in 2008 promised systemic reform. For the Fed to worry about commodity hedging at this stage while ignoring areas of real financial peril, makes me feel like they missed the point which led to the “too big to fail” policy.
This approach should create a nagging feeling the government is more worried about what the money dam looks like than those several large cracks in the base.
The walk-in cash trade was busy all day and there were large silver bullion deals. About 75% were big buyers and about 25% were big sellers. The phones were steady but not hurried.
The GoldDealer.com Activity Scale is a “4” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 3) (last Friday – 4) (last Monday – 4) (last Tuesday – 5) (Wednesday – 4). 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. The Bullion link displays products with bid and ask prices included: buy and sell premiums are on the product landing page. Live Chat is doing well and new customers like setting up their own encrypted accounts.
There are many new improvements which will be added in the 1st quarter of 2014.
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