Commentary for Mon, Aug 4, 2014 (www.golddealer.com) – Gold closed down $5.90 at $1287.70 and some informed commentators claim this further pull-back is the result of stocks regaining their footing but I’m not so sure. This really looks like some minor profit taking from Friday’s jump in prices coupled with a technical adjustment in a psychologically weak market.
Gold looked relatively flat in the overnight Hong Kong market but seems content holding the line with support showing up in the $1280.00 range.
Gold was supported Friday when July non-farm payrolls came in under expectation.
And the Gaza and Ukraine tension remains an important part of holding this narrow trading pattern in place.
There are negatives relating to gold like the less than robust physical market in China and India. Also Consumer Confidence scored the best number since 2007 and the economy continues to generate jobs – given at a rate that was somewhat off expectations.
The 30 day gold chart has a negative bias moving down from $1330.00 to the current $1290.00 region so the bears are in charge but if this latest test to the downside holds up we might have put in a bullish short term triple bottom.
For gold to remain in this defensive position it must maintain its 200 day moving average ($1284.00). If this does not occur a test of the $1240.00 support is in order.
The Dollar Index has been very strong last week but showed some weakness Friday – which followed though Monday – so this pause in dollar strength may support gold on the short term.
AP reports on Sunday that the Portuguese are providing more than $6 billion dollars to prevent the collapse of Banco Espirito Santo. This will quiet Euro Zone worries for now but many believe this will be just another short-term fix as Europe continues to battle deflation.
Silver closed down $0.14 at $20.19.
We have not talked about the famous US Silver Eagle 1 oz for some time so consider the following. From 1986 through 2012 the US Mint produced 337,562,676 regular production American Silver Eagle 1 oz coins. In 2013 the US Mint produced slightly more than 40 million coins.
The 2014 production as of July is as follows: Jan (4,775,000) Feb (3,750,000) March (5,354,000) April (3,569,000) May (3,988,500) June (2,692,000) July (1,975,000).
These Silver Eagle Monster Boxes are not held by the US Mint but distributed through a network of dealers in very large quantities and the dealers have to buy whether they want the inventory or not – distribution is contractual.
The dealers then sell the US Silver Eagle to consumers using very tight margins because trade competition is fierce. The longer the distributing dealer holds his allotment the more it costs him in terms of insurance; storage and hedging (remember good bullion dealers live for the hedge – anything less will end in tears).
And there is an old adage in the trade that goes like this – “This place is not a museum – what does he want to pay?”
So there is a mandate to move the new product before the cost of ownership destroys potential profit margin.
Let’s take another look at the Mint’s production figures for US Silver Eagles. The first thing you should conclude is that the US Mint strikes these coins in very large quantities so they are not rare in any sense.
They are a silver commodity only – keep this straight in your mind if you are considering paying a high premium over melt because the telemarketer told you it was a never to be repeated “deal of a lifetime”.
The second thing you should conclude is that the massive supply of these silver bullion coins minted between 1986 and 2013 (377 million) have been successfully distributed worldwide.
Now even for a coin dealer that is a whole lot of silver coins and makes the perfect case that demand is worldwide and very stable. Most large dealers only repurchase a fraction of what they sell so all this material is in very strong hands.
The last piece of information which is watched carefully but not really talked about much is the most current distribution year (2014).
Again the 2014 production as of July is as follows: Jan (4,775,000) Feb (3,750,000) March (5,354,000) April (3,569,000) May (3,988,500) June (2,692,000) July (1,975,000).
Distribution in the first three months (Jan, Feb and March) seem normal enough in the 4 to 5 million coin range but look carefully beginning in April of 2014 the numbers begin to trend lower. By June we are down to less than 3 million coins coming out of the US Mint and last month’s number (July) comes in at less than 2 million coins, the lowest number by far in the 7 months we have of production figures.
The US Mint does not arbitrarily lower or raise production numbers – this is a business to them and they adjust to supply and demand just like every well run business in the US. The only conclusion then is that the public is buying less US Silver Eagles (1 oz) which is pretty much in line with what we hear from other American bullion dealers.
This small look at the popular American Silver Eagle 1 oz was not meant to sell you one way or the other about its place in the most popular silver bullion products.
I am convinced that the silver bullion industry does itself an injustice be claiming year in and year out that shortages will soon appear and the price of silver will double and then double again – it may but this selling story has never really worked well.
Silver bullion on the other hand is a wonderful lifetime insurance policy against crazy governments and potentates of every stripe. And watching the production figures from the US Mint might help determine if your fellow investor is doubling down or has decided to go fishing – it is summertime after all.
Platinum closed up $3.00 at $1466.00 and palladium was down $9.00 at $855.00.
This from Doug Short (dshort.com) – Consumer Confidence Surges; Highest Since the 2007 Market Peak – “The Latest Conference Board Consumer Confidence Index was released this morning based on data collected through July 17. The headline number of 90.9 was an improvement over the revised June final reading of 86.4, an upward revision from 85.2. Today’s number dramatically beat the Investing.com forecast of 85.3. The current level is the highest since October 2007, the month the S&P 500 peaked prior to the Great Recession. Here is an excerpt from the Conference Board press release.
Says Lynn Franco, Director of Economic Indicators at The Conference Board: “Consumer confidence increased for the third consecutive month and is now at its highest level since October 2007 (95.2). Strong job growth helped boost consumers’ assessment of current conditions, while brighter short-term outlooks for the economy and jobs, and to a lesser extent personal income, drove the gain in expectations. Recent improvements in consumer confidence, in particular expectations, suggest the recent strengthening in growth is likely to continue into the second half of this year.”
I hate to throw water on the party but as consumer confidence improves (the most positive since 2007) the “fear” factor relative to gold moves lower. After all it was the fear factor that bought in all the spec money in the first place.
Let’s drag out the handy 10 year gold chart: from 2004 to the beginning of 2008 gold moved from $400.00 to around $900.00 so the market was moving considerable higher before the 2008 financial blow-up.
But as the real estate market cratered and the Wall Street meltdown made the front page – speculative money pushed the price of gold considerable higher between 2008 and 2011 – reaching its all-time high (over $1800.00) that summer.
Now “fear” is a funny motivator in that it comes and goes regularly. The next big thing however could be anything from inflation to another bubble in the making but in the meantime a “less fear” environment does contribute to lower prices making gold a better deal for those looking at long term insurance.
The walk-in cash trade put in another quiet day and the national phones were no better.
The GoldDealer.com Activity Scale is a “2” for Monday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Tuesday – 2) (last Wednesday – 2) (last Thursday – 2) (last Friday – 2). 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.
When you buy or sell please check to see if we have your current email on file and that your computer will accept our email (no spam).
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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 the 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 to the store and walk away with cash. When buying from us remember if you exceed $10,000 in cash (the real green kind) a Federal Form is necessary.
In addition to our freshly ground organic coffee offered visitors throughout the day we have added cold bottled water, cokes and Snapple. Beginning today we have also added fresh fruit in a transparent attempt to disguise our regular junk food habits – which seem to grow when things get this quiet.
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