Commentary for Tuesday January 27th, 2015 (www.golddealer.com)

richard schwary thumb Gold Market Newsletter : Gold Closes Lower as the Dollar Strengthens

By Ken Edwards and Richard Schwary of California Numismatic Investments Inc.………

Gold on the Comex closed up $12.30 at $1291.70 as the dollar lost value over disappointing durable goods numbers released today – and the aftermarket continued higher by about $3.00.

This was actually a big turnaround as gold pulled back in overnight trading – reaching a low around $1275.00. Then the market stabilized around $1280.00 and progressed higher moving over $1290.00 before the traders went home.

All of this was created out of whole cloth as the dollar weakened by 1% because sentiment early in the day was negative and gold was looking at another round of profit taking. US equities set the stage down nearly 400 points before cutting this loss in half on the close.

There were some believers that the Federal Reserve would not raise interest rates given the sketchy jobs number. That group is now growing – remember it was not too long ago that the blessed believers were sure the government would raise interest rates by summer. Another day like this and we will be talking about raising rates in 2016 – which is good for gold.

Silver closed up $0.10 at $18.06. This market remains quiet but the US Mint is producing Silver Eagles like crazy and selling everything they manufacture. For the record they began selling again on Jan 12 th and have sold 4 million coins to date. Silver Eagles are of course big sellers but older 90% silver coins minted before 1965 are still much cheaper at $1.70 over spot.

gold_platinumThis is interesting from Koos Jansen (Bullionstar Blogs) – India Silver Import 2014 at 7,063 Tonnes, Up 15 % – India’s customs department, the Directorate General of Commercial Intelligence & Statistics (DGCIS), just released the QUICK ESTIMATES FOR SELECTED MAJOR COMMODITIES for December 2014. According to DGCIS the figures for December are provisional and subject to change, however, I’ve been tracking these quick estimates for months and they are reasonably accurate – compared to the official numbers that lag a few months .

In December India imported $182.31 million in silver; divided by an average price of $16.30 an ounce this accounts for 11,188,095 ounces, or 348 tonnes, down 72 % from 1,254 tonnes in November. The total gross amount of silver imported in 2014 accounted for a whopping 7,063 tonnes, up 15 % from the shocking 6,125 tonnes in 2013. As far as my data goes back (2009) net silver import 2014, 7,055 tonnes, is a record.

Platinum closed up $10.00 at $1265.00 and palladium closed unchanged at $782.00. I have been beating the drum for weeks now about the price of platinum ($1265.00) versus the price of gold ($1291.00. Not often do you see this kind of discount – but this market remained overlooked. Until the last few days – the public finally decided to pull the trigger. The US Platinum Eagle, Canadian Platinum Maple and Perth Mint Koala are all now in short supply.

As quarterly earning disappointed today stocks headed south and some might infer this helped the gold market. A drop of 300 points during the trading day has been shown to be no big deal these days especially with the mountain of money now held by banks and big corporations.

To see why gold moved higher a look at the dollar might be a good idea. The weak durable goods orders did slam stocks but this number also caused the Dollar Index to move from yesterday’s close (94.93) into today’s lower trading range (94.10). WTI crude oil also remains steady around $46.00 a barrel which helps both stocks and gold on the shorter term.

Still I would not make too much of these day to day hiccups in the price of gold. Downbeat durable goods or a half point swing in the Dollar Index really turns out to be background noise. The bigger picture here is Europe and the European Union – not short term but how their monetary play will work over the next several years.

The US has dodged the bullet with its excessive QE programs for years but the new euro program might be a horse of a different color. At any rate this should be the bigger focus and the time frame should be something like 2015/2016. This will give everyone time enough to plan – no need to hurry here but the clock is ticking.

I have made this point before but want to restate the case because it appears gold’s recent surge has turned choppy and so expect the usual anti-gold rhetoric to get louder. And as long as gold cannot show strength above $1350.00 it has not regained its deserved anti-fiat money status. But these Keynesian monetary tricks in the US or Europe cannot last forever and so your physical gold barometer is not broken it has just lost its way on the shorter term.

To steady your nerves you don’t need spirits just a 1 year gold chart. The price of gold began around $1250.00 and moved within a $100.00 range above and below that middle ground for 12 months. Today we are very close to unchanged versus Jan of 2014.

Now look at oil during that same 12 month period – we have moved from around $90.00 a barrel up to $100.00 during the summer months of 2014 and then saw an amazing downward trend which has taken us to the $47.00 range. Consider the big plus for the American consumer, putting more money into their pockets and thus helping our recovery and providing a virtual guarantee that inflation will not be an increasing problem in 2015. The last two factors do nothing to encourage physical safe haven buying in the United States.

Finally consider the mighty dollar. During the last 12 months the Dollar Index has ranged from a low of 78.00 to a high of 95.00 (the most recent number being 94.91) so we are at yearly highs – with no reason to believe it will sell off anytime soon. This crazy surge was created as the US recovery caught traction and at the same time the European Union began to devalue the euro with quantitative easing talk and then action.

There are some problems with how the Germans are embracing this new QE approach. When the European Union created the euro they assured everyone that no such fiat currency program would be considered let alone adopted.

So to say our German friends are nervous would be an understatement – they are because they have experienced runaway inflation. I am not suggesting this is the current case but the prescient is worth remembering. And this discussion from a visiting German friend has already happened over a beer and bratwurst in Munich.

So back to my gold pricing beginning – during all of these challenging circumstances we are about unchanged during these past 12 months. I’m not saying we are out of the woods – a bottom may not yet be in place. Especially with potential higher interest rates right around the corner – but all things considered, we could be doing much worse.

The walk-in cash trade was on the slow side today and so were the phones. Also the weather on the East Coast is slowing precious metals deliveries from the big depositories.

The GoldDealer.com Unscientific Activity Scale is a ” 3” for Tuesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 3) (last Thursday – 4) (last Friday – 3) (Monday – 4). The scale (1 through 10) is a reliable way to understand our volume numbers. The Activity Scale is weighted and is not necessarily real time – meaning we could be busy and see a low number – or be slow and see a high number. This is true because of the way our computer runs what we call the “book”.

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