Gold Weaker – Bears In Charge

Gold Weaker – Bears In Charge

Commentary for Monday, June 22, 2013 – Gold was down $14.80 today closing at $1276.80 in quiet trading so the bears are still in charge as we look at 2 ½ year lows.

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Reasons gold continues weak are: (1) the market continues to unwind over the Bernanke speech which was interpreted to mean quantitative easing would taper or the $85 billion a month program would be modified lower given economic conditions warrant. This resulted in continued dollar strength and higher short-term interest rates both of which are also negative for gold. (2) It was not just the gold market which recoiled from these comments as stock markets worldwide had a small nightmare. So investment “pool” money is rethinking everything and perhaps looking for a safe harbor short term. (3) Just like the US Fed the Bank of China is waving a warning flag about possible problems in credit expansion and anything negative for China is negative for gold. LONDON (AP) – Global stock markets reeled Monday, with Shanghai’s index enduring its biggest loss in four years, after an increase in China’s commercial lending rates sparked fears about the state of the world’s second-largest economy. Analysts say the spike in the country’s interbank lending rate was part of an effort to curb the high level of off-balance-sheet lending in China that could threaten the country’s financial stability. But investors feared the move could also hurt economic growth. China’s major state-owned banks are unwilling to lend to any but their biggest clients, so the vast majority of smaller businesses must rely on informal lending.

Silver also lower down $0.40 to $19.49 so it continues to suffer from weakness in gold but the silver ETF (Exchange Traded Fund) SLV showed an increase of 2 million ounces to 323.88 million ounces so someone thinks this market may now be too cheap.

Platinum was down $40.00 to $1331.00 and palladium was off $17.00 at $657.00. As the platinum price gets closer to the price of gold the trade of one bullion product for the other makes sense and the reason you are seeing continued weakness in both platinum and palladium should tell you that the markets fear a worldwide slowdown which is not reflected as yet in stocks. This slowdown supports the notion of continued quantitative easing by banks all over the world and so supports longer term gold prices.

Walk in and phones were active but not real busy and perfectly matched to those who are not pure speculators but long term believers in both gold and silver. Like I have said before there is a big difference between these two groups the latter being the big supportive factor in recent weakness.

Also note that the herd mentality usually rules for the short term but don’t let it weigh too heavily on your choices. When stocks are strong the DOW is heading to 10,000 and when they are weak the Wall Street game is over fearing higher interest rates over Fed policy.

The same is true with metals in that when gold and silver were popular on the TV talk shows prices were always heading to the moon. When the bull market reversed itself there was no longer any room for the metals in a diversified strategy. The truth in both places is somewhere in the middle so don’t sell off all your stocks or metals…if you are worried lightening your position might be prudent but an all in or all out strategy is probably the wrong approach. 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).

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