Commentary for Tuesday, April 22, 2014 – Gold closed down $7.40 today at $1280.60 so we continue to test support with lows on the day being $1279.00.
Traders will now watch gold’s 100 day moving average ($1277.00) for short-term clues but it might be a mistake to think that recent weakness is a trend or will even continue as gold might now be entering the “over-sold” range given the tight trading pattern.
Working in gold’s favor are the usual suspects: higher oil, higher potential inflation numbers (PPI and CPI), recent economic growth supporting continued tapering and a weaker dollar.
I appreciate some of these numbers are tenuous and the continued “none-buzz” trading atmosphere might suggest continued side-ways to lower price patterns. Still a small pop in physical demand and we could be off to the races once again.
According to Gallup Economy (Lydia Saad) – Gold Still Americans’ Top Pick Among Long-Term Investments – Percentage saying gold is best long-term investment down slightly since last summer – PRINCETON, NJ — Gold leads four other types of investments in Americans’ perceptions of which is “the best long-term investment,” although the 28% choosing it today is down slightly from 34% in August. Traditional savings accounts or CDs have gained in support over this time, rising to tie stocks/mutual funds and real estate as the next-most-valued investments. Bonds rank a distant fifth.
Silver closed up $0.01 at $19.35 in very quiet trading. It is trading well below its 100 day moving average ($20.17) and its 200 day moving average ($20.85) which could suggest it might want to test late January lows of $19.10. Still physical activity remains solid so the public seems to like cheaper prices.
According to Paul Gilkes (Coin World) the Citizens Advisory Committee (CAC) recommended a change in the design of the American Silver Eagle. This committee is appointed by the US Mint and their recommendations are not set in stone but they do carry significance. The possible change is interesting because it may set up a possible two-tier pricing system: one for old design silver Eagles and one for new design silver Eagles. Will let you know if this new idea develops further and possible outcomes.
Platinum closed unchanged at $1400.00 and palladium closed up $5.00 at $782.00. If your interested in platinum and palladium the Palladium Maple Leaf 1 oz is very popular.
Under the “real and unusual” a customer brought in currency from Zimbabwe. This note (50 billion dollars) actually is stamped with an expiration date (spend on or before 31st December 2008). The notion of hyperinflation is of course popular among gold enthusiasts but very over-rated in my opinion. So I asked the usual question which is “this note is from Zimbabwe so how typical could it be?” He then shows me another dozen hyper-inflated currencies and cites the Cato Institute which claims similar results in more than 50 countries over the last 70 years.
A look at the 30 day gold chart will tell you a great deal about this current trading range. Gold saw the range low of $1280.00 in early April when the technical picture began to improve and the bulls were happy. That run from $1280.00 to almost $1330.00 was ended in mid-April. Then the bears ruled, pushing gold below the important $1300.00 level. Given the economic and political data we have seen this past month it is curious that gold is not doing better and perhaps will once again push into lower territory testing recent lows ($1280.00).
Should this happen the next stop looks like $1250.00 perhaps supported at that point by real physical demand? The price of oil remains above $100.00 which should also support gold but according to CNBC this morning the oil surplus could be as much as 7% higher than typical for this time of the year so a dip in oil prices below $100.00 would not help gold.
At any rate we are once again stuck in a narrow trading range ($50.00) between $1280.00 and say $1320.00. This is not too exciting but considering gold is still in a long consolidation pattern the news could be worse. Again the market lacks buzz which is always a negative and leads to mischief. Watch for paper trading ploys in this market (either up or down) and stick with a long-term plan for accumulation.
Watching this type of market daily is like watching the grass grow and does not help your financial planning. It is always good advice to develop a plan based on incremental buying and take advantage of weakness.
Ignore the typical telemarketing ploy which states there is a fortune to be made if only you could find the right combination of products. This is always nonsense so diversify into things like silver, platinum, palladium and rhodium bullion. All of which are in short supply and cheap, avoid certified bullion products and stick with weight.
Walk-in cash trade was busy most of the day with fairly good size action with both buying and selling. The national phones were like a light switch, on and very busy or off and very quiet.
The GoldDealer.com Activity Scale is a “5” for Tuesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 9) (last Thursday – 4) (last Friday – 4) (Monday – 5). The scale (1 through 10) is a reliable way to understand our volume numbers.
Live pricing on the site moves all bullion products up or down during the day. The Bullion Products link on the home page now includes our Bid (blue) and Ask (green) prices. Premium quotes vary with product and look like this – “spot plus $15.00” or “spot plus $50.00” and bullion products list them under the live prices on their respective landing pages.
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