Commentary for Wed, July 17, 2013 – Gold closed down $12.90 today at $1277.90 so the threat to move above $1300.00 has vanished and the expected profit taking is now figured into the deal. The Chairman’s comments walked the line nicely between hawkish and dovish as he asserted his view that there is no preset timetable for the expected taper and only economic data will dictate a course of action.
Gold bullion action at the CNI Building was typical for the week even after the Chairman’s assessment: it continues slow and the market feels like “no one is really listening” so either investors have lost interest or they are enjoying the summer months.
Paulson’s comment today was interesting as he claimed a huge gold bull was saying there is a future for inflationary problems but for now those problems are far away. A gold exchange traded fund (GLD) is still moving lower (937 tons).
Silver was down $0.51 at $19.41 and here we saw some action with a pickup in our selling of silver bullion products across the board.
Platinum was down $14.00 at $1411.00 and palladium was down $1.00 at $734.00 as both of these metals also seem quiet in the physical trade.
This comment from Chuck Butler (EverBank) is worth noting: “However, just like Ricky used to say to Lucy, “you’ve got some explainin’ to do” I think that Big Ben will leave us hanging, and wanting more explanation on how he intends to taper QE, but keep his ZIRP in place. For you see, if the economy is strong enough to walk away from QE, then why isn’t it strong enough to see interest rate hikes? Remember, that the Fed Heads have indicated that ZIRP won’t end until the Unemployment Rate goes well past 6.5% (it’s currently 7.6%, but for those of us who don’t believe the BLS’s numbers, the unemployment rate is really 23%) , and most people believe that we won’t see that happen until 2015. So, the Fed Heads believe that the economy is strong, but not that strong to warrant rate hikes. Sounds to me as though they are opening the door to inflation, which I’m sure they have signed up for Paul Krugman’s theory of the U.S. needing more inflation, and once the Fed Heads begin to see inflation, it will be too late, they’ll be behind the inflation 8-ball.”
Butler points to an inconsistency which makes the trading markets crazy: if things are good enough to walk away from further quantitative easing where are the jobs and the usual stuff that goes with economic recovery? And further once the inflation genie is out of the bottle it is much harder to control than taking appropriate steps before the problem occurs. This conundrum argues in favor of holding a defensive gold bullion position regardless of whether you believe there is a short term profit at hand or we will continue within a defined trading range.
Walk in and phone business continues slow and typical of summer conditions. And with Chairman Bernanke talking I would have expected more action but my call yesterday of a small gold market sell-off made sense if for no other reason than paper profit taking.
Both walk in and phone trade was quiet today which is interesting because with Chairman Bernanke speaking I would have expected more of a reaction (one way or the other). Perhaps these markets are tired and looking for a safe harbor during this transition from large QE to small QE whenever that happens. 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).