Commentary for Wednesday Oct 9, 2013 (www.golddealer.com) – Gold closed off $17.50 today at $1306.90 so weaker but still holding above the $1300.00 level after moving as low as $1295.00 before reversing direction. Gold does not act like it is worried about the debt problem but keep in mind this is the 72ndtime since 1962 that the debt ceiling had to be raised.
Silver was also weaker today down $0.44 at $21.85 in quiet trading. Platinum was down $20.00 at $1382.00 and palladium was off $10.00 at $704.00.
Janet Yellen appears to have the best chance now to replace retiring Fed Chairman Ben Bernanke. Both of these people believe the Fed can drive economic recovery and so both are big supporters of quantitative easing as a way of greasing the economic skids. But at a time when gold should be pushed higher because of Yellan’s dovish nature in moves in the opposite direction because Europe is fearful that the US money stall from Congress will hurt the still fragile economic recovery. Also realize that the dollar is moving higher, oil is moving lower and the technical picture is against gold at the moment.
But look at it this way: what is the downside at this point? Consider that if Yellen gets the appointment the stage is set for continued monetary easing and expectation of inflation created by unlimited fiat currency. Ultimately this will support gold and eventually we will see new highs as the world realizes government intervention in the money supply is no substitute for real hard work and jobs creation. But Yellen will eventually face the same “taper” questions posed to Chairman Bernanke and eventually this program designed to bolster the economy will be modified. When? Watch the job creation numbers but be less optimistic because “improvement” means some have used all benefits and dropped out of the process (permanently unemployed). I am not a big Jimmy Carter fan but respect his social work immensely and his comment that today’s middle class are what used to be called “poor” in his administration is disturbing.
But don’t have your head in the sand like some precious metals dealers banging on about “no taper”. According to Greg Robb (MarketWatch): Most on Fed still see taper this year: minutes – “Most members of the Federal Reserve still thought that it would be appropriate to scale back its stimulus program this year, even as the central bankers decided to hole off moving in mid-September, according to the minutes of the meeting released Wednesday. A majority of Fed officials arrived at the September meeting still thinking that it would be appropriate to begin tapering the $85 billion bond purchase program this year and end it completely by the middle of 2014, the minutes showed.”
This from David Franklin (Market Strategist, Sprott Asset Management) is very interesting for you silver fans: India Will Dominate the Silver Market in 2013 – “Precious metals have surged back in the last few days as the gravity of the situation in Washington hit investors. Equity market participants who seemed so sure a compromise was at hand on Friday afternoon, were disappointed Monday that no deal had been achieved. With the S&P at post-shutdown lows, it seems precious metals have caught a bid. Since the start of the shutdown gold is up almost 3% and silver has appreciated by nearly 6% as investors have ruminated on the implications of a default by the US Government. With silver falling by 26% so far this calendar year, even factoring in the recent surge, you’d be excused for presuming there were negative fundamentals developing in the market for the white metal. Indeed the fundamentals have been changing, but they all favor the price of silver. Unfortunately for investors, this has not yet been reflected in the price. The most recent import data from the Indian government confirms reports that Indians are importing significant quantities of silver. The latest data, provided to us by Nikos Kavalis from Metals Focus Ltd., shows that India imported US$1.78 billion worth of silver during Q2 – a 311% increase over the same period last year. This equates to 3,015 tonnes of silver in the first half of 2013, putting Indians on track to import more than 6,030 tonnes of silver this year. If this trend continues through the rest of 2013, we would see the highest silver imports in the past five years. As we examined the Indian import data in more detail we saw that silver is coming to India from all corners of the earth to satiate demand. The most notable sources have been the UK, Switzerland and China. Many countries that had not previously shipped the metal to India are also making their first shipments this year. The Indians have become an enormous new buyer of silver, sopping up bullion supply from around the world. Putting these numbers into perspective, according to the Silver Institute, the world produced 24,478 tonnes of silver in 2012, meaning the Indians are currently on track to import 25% of the world’s mined silver supply. And, believe it or not, this number could increase given the forecasts for monsoon season. According to Robert Prior-Wandesforde, head of regional economics at Credit Suisse, this year looks like it will be a bumper year for crops. On average, in the year following a drought year (such as 2012), output has risen by more than 11%. This figure is thought to reflect not just higher-than-normal rainfall but also additional government support in the form of fertilizer, etc. Prior-Wandesforde estimates that an 8% rise in output this season would add 1.1% to gross domestic product growth. “This is unlikely to represent the total effect,” he said, noting that agriculture still accounts for more than 50% of India’s total employment. “One would expect the associated rise in incomes and profits to feed through to stronger consumer and investment spending. Also, a sharp increase in the food supply should help bring down inflation, boosting real purchasing power and influencing the central bank.”1 Given the Indian consumer’s predilection for storing savings in gold and silver jewelry or bullion, we can expect a favourable monsoon season to drive precious metal demand, especially silver. From looking at the chart of silver prices you would never know that such a fundamental change in demand has taken place in the silver market. We wonder what it will take to wake the market up to the opportunity in silver. Clearly it has already responded to the shutdown and the potential of a default by the US Government, however this belies the strength in underlying demand for the metal as a store of value for Indians who will dominate the market for silver this year consuming as much as quarter of world mine supply. We expect the price to catch up to this reality shortly.”
Walk in cash business was fairly busy today mostly buying and the phones were steady to quiet also mostly on the buy side. My almost famous LA Physical Business Number is as follows (note the change to a running weekly tally): Mon: 6 / Tues: 6 / Wed: 2 / Thurs: _ / Fri: _ This scale is based on combined computer volume numbers and anything over “5” is relatively busy.
Phase One of our new golddealer.com web site will soon be complete and includes a new look along with live pricing. It will also include Live Chat, you will be able to set up your own customer account, and you will receive automatic email confirmation on buying or selling. Look for further interface improvements before year end which makes accounting, shipping and tracking easier (check to see if we have your email in the new system). We now offer the choice of USPS or FedEx Ground.
If you visit CNI in person look for the new flat screens with live feed and graphs (gold, silver, platinum and palladium). This will drive all our bullion products and we have programmed the premium spreads on each line to make your choices easier. As usual cash is always available. There is nothing like this on the West Coast and offers visitors complete transparency before purchase or sale. Like us on Facebook and follow us on Twitter @CNI_golddealer. Notice our Daily Gold Newsletter archive has been moved and enlarged (30 days) to our Facebook page. For those asking the new website will also include a direct daily newsletter. 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).