Commentary for Wednesday, Oct 9, 2014 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc.………
Gold closed down $3.60 at $1221.00 in what looks like a small technical adjustment as gold held the important $1220.00 mark but failed to produce any big follow through momentum although we are up $29.00 on the week. The release of minutes from the September Federal Open Market Committee and the continued negative talk about the faltering European economy pushed all the price action.
A note to remember – the banks – the post office and the COMEX will be closed this Monday for Columbus Day – GoldDealer.com will be open regular hours.
Silver closed down $0.11 at $17.25 and the majority of action has been in this physical area and virtually all has been small to modest size buyers with little selling.
Platinum closed down $17.00 at $1261.00 and palladium was down $15.00 at $785.00. Rhodium was up $15.00 at $1230.00.
The price of gold on the short term is in the hands of the US Dollar Index (DXY). The 3 month chart shows a strengthening market which has moved from 78.91 to a high of 86.75 before selling off on FOMC fears. As of this writing we are looking at 85.49 so some of the steam in this market is coming off and this no doubt has helped gold since the index moved lower this past week.
To a lesser degree the price of oil will help pressure gold lower if the oversupply is not curbed by Saudi Arabia – but given the desperate need for cash in places like Iran it appears desperate oil sellers will remain in the game.
Still the future for oil could be changing dramatically as new sources of oil come on line. This prediction of lower oil prices seems outrageous seeing that 2014 saw highs well over $100.00 a barrel but when oversupply – new sources and conservation meet the result may well place oil in the $60.00 to $80.00 range – which will not support the price of gold. Further lower oil prices help keep a lid on already low inflation rates both here and in Europe.
If you are looking for more positive news relative to the price of gold consider Wall Street. It’s no secret financial guru Carl Icann has be warning a collapse in prices should be expected because Federal financial largess has created another bubble.
There is now a great deal of talk that stocks are overvalued. I’m not a big stock person but even to the casual observer the P/E ratios look expensive. And the DOW dropped more than 300 points Thursday on worries that the global economy was in trouble.
I would not be jumping out the window relative to stocks since the market has reached new highs but if further cracks appear – or someone shouts fire and panic selling appears the safe-haven aspect of gold would help support current prices.
And no-one is talking about things which are normally part of the gold dialogue like our Debt Ceiling and Deficit Spending. These are usually part of the physical market and important considerations which are behind what I call the “gold insurance trade”. These are the average folks who want to make gold bullion a small part of their financial planning.
Still the psychology behind the physical gold bullion market is its worst problem. The market has shown recent signs of life above $1200.00 and this is encouraging but until gold can muscle up above $1220.00 investors will remain defensive.
Such a move would easily be seen if gold regained its safe-haven status or if the big physical demand players (China and India) returned in force. But that remains to be seen.
Technically on the longer term gold remains weak – we have seen a steady decline these past 60 days from $1315.00 to under $1200.00 so the bears remain in charge.
The short-covering rally and some safe-haven buying which brought us to Friday’s close of $1221.00 does not seem to have enough follow through mojo to make traders happy – so call the short term technical picture neutral going into the weekend. Look for sideways action between $1180.00 and the overhead resistance number of $1260.00.
Precious Metal Closes for this week – Oct. 6 through Oct. 10 – 2014
Gold Silver Platinum Palladium Rhodium
Mon $1206.70 $17.18 $1248.00 $765.00 $1215.00
Tues $1211.70 $17.19 $1261.00 $787.00 $1215.00
Wed $1205.30 $17.01 $1266.00 $796.00 $1215.00
Thurs $1224.60 $17.36 $1277.00 $800.00 $1215.00
Fri $1221.00 $17.25 $1261.00 $785.00 $1230.00
Our Patented Employee and Customer Survey – Gold’s Direction Next Week?
Of course it’s not really patented but we do have some fun along the way. This is what the GoldDealer.com employees think – 6 believe gold will be higher next week – 7 think gold will be lower and 2 believe it will be unchanged.
Also consider how our customers feel about the gold market next week.
Like the employees they were given three choices – up – down – unchanged. We limited the survey to a random sampling of 100 customers – unscientific yes but worth considering because these people actually took action: 41 people thought the price of gold would increase next week – 36 believe the price of gold will decrease next week and 23 think prices will remain the same.
This from Ed Steer’s Gold & Silver Daily (www.mineweb.com) – Lawrence Williams: World top 15 gold producers – output still rising but peaking this year. – According to the latest research report from London-based precious metals analysts – Metals Focus – global mined gold output is still on the increase this year, despite the much lower gold price prevailing. This is primarily due to the build-up to full production of a number of major new gold mining operations which came on stream in 2013, while the start-ups at Kibali in the DRC, Aykem in Ghana and Tropicana in Australia added a further 21 tonnes in the first half of the current year. The increased mine production in the first half of the year, however, was at least in part countered by a continuing decline in scrap sales – indeed the consultancy is forecasting a fall in global gold supply for the full year due to a predicted double digit drop in scrap supply. Overall Metals Focus is forecasting a global gold supply figure down 2% at 139 million ounces (4,323 tonnes) for the full year, with supply and demand in predicted balance.
Looking ahead to 2015, though, there is a forecast further fall in scrap sales due to a likelihood of a continuation of low gold prices. If this is coupled with the beginnings of a decline in global mine production as the low gold price further impacts the sector with uneconomic mines no longer being able to be kept open then fundamentals may improve again. Even so, prices are seen as remaining relatively depressed, although a pick-up is seen as the year progresses.
The walk-cash trade was steady today and so were the national phones. The encouraging part of this business if you are a precious metals fan is that volume numbers have been increasing steady since the first of the month. We have seen some large sellers but the majority of action continues to represent the public buying in the small to midsize range.
The GoldDealer.com Unscientific Activity Scale is a “4” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 5) (Tuesday – 8) (Wednesday – 6) (Thursday – 6). 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 very busy and see a low number – or be very slow and see a high number. This is true because of the way our computer runs what we call the “book”. Our “activity” is better understood from a wider point of view – perhaps a week or two. If the numbers are generally increasing – it would indicate things are busier – decreasing numbers over a longer period would indicate volume is moving lower.