Commentary for Wednesday April 22nd , 2015 (www.golddealer.com
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc….
Gold closed down $16.00 at $1186.90 on solid home sales data indicating the economy may be back on track after some data setbacks created by the winter cold snap.
So we are now trading significantly below the $1200.00 level and the technical picture has turned dark as gold trades at levels not seen since the end of March. The Dollar Index has been relatively steady these past 5 days holding around 98.00. The DOW is holding steady today around 18,000 – an important mark to watch. Any hiccup here could help or hurt gold.
Gold flattens out in the after-market around $1185.00 which is also important. It’s not time to jump out the window just yet – looks at the 30 day chart and you will see a great deal of support in this range. And while the technical picture belongs to the bears remember since October of last year gold has put in a solid double bottom at $1150.00.
All of this as Greek worries are, once again ignored as few expect Greece to default on money owed to the European Union. They are looking for another $7 billion euros but are holding tight to new political desires to limit austerity. This all has to end terribly.
And expected solid physical demand for gold in India may turn out to be weak. (Reuters) – Gold purchases in India started slowly on Tuesday, a festival day, despite a fall in local prices, as hard times in rural areas have hit demand and many buyers are holding back because they expect prices to fall even further.
Indians are the world’s biggest consumers of bullion and Akshay Tritiya celebrated on Tuesday is usually one of the busiest gold-buying festivals along with Diwali and Dhanteras. Gold imports more than doubled in March to 125 tonnes from 60 tonnes a year before as traders anticipated healthy demand.
Those hopes looked misplaced early in the day, with most salesmen at shops in Mumbai’s Zaveri Bazaar hanging around talking to each other rather than trying to agree prices with would-be customers.
“I have sold just five gold coins so far but I expect sales to improve by the evening. Footfall was much higher last year compared to this year,” said Vrishank Jain, third-generation owner of Umedmal Tilokchand Zaveri at the bazaar.
Silver closed down $0.21 at $15.79 – cheap enough but no cigar as sales over the net and across the counter slump. The public is getting very good at showing patience on these dips into lower territory with silver. Unless they perceive prices are really cheap they are reluctant to add to their positions. This resolve will stay in place until the price of silver makes a sustained turnaround and higher prices are once again seen relative to old highs. Today prices are more related to recent lows and so the public remains cautious.
Platinum closed down $22.00 at $1130.00 and palladium closed down $19.00 at $755.00. A small group of American Platinum Eagles 1 oz just sold for $190.00 over spot – remember these coins are not being produced and the US Mint claims future production unlikely because according to them demand does not justify another run. We are selling the Canadian Platinum Maple Leafs 1 oz and the platinum Platypus 1 oz for about $80.00 over spot delivered. Supplies of both of these platinum bullion coins remain thin but available.
This from Reuters – Home sales vault to 18-month high as supply improves – U.S. home resales surged to their highest level in 18 months in March as more homes came on the market, a sign of strength in housing ahead of the spring selling season.
The fairly upbeat report from the National Association of Realtors on Wednesday implied the economy was regaining some momentum after hitting a speed bump at the start of the year.
But tepid retail sales and weak factory data suggested the growth rebound will probably be insufficient to convince the Federal Reserve to raise interest rates in June.
“It’s consistent with strong growth in the second quarter. We should have a solid spring selling season and should see the housing market continuing to improve through 2015,” said Gus Faucher, senior economist at PNC Financial Services Group in Pittsburgh.
Existing home sales increased 6.1 percent to an annual rate of 5.19 million units in March, the highest level since September 2013. The percent rise was the largest since December 2010. Last month’s sales outpaced economists’ expectations for a 5.03 million-unit rate.
The outlook for the spring selling season, which runs from April through August, was also boosted by a separate report from the Mortgage Bankers Association showing applications for loans to purchase homes jumped 5 percent last week to the highest level since June 2013.
It was the fourth time in five weeks that purchase applications rose and economists attributed this to moves by the government to ease credit conditions for first-time buyers.
Home sales have been constrained by a shortage of properties on the market, which has pushed up home prices and limited choice for potential buyers. Fewer homeowners are defaulting on their mortgages, meaning fewer foreclosed properties in the pipeline to boost supply.
As such, builders would have to break more ground on new housing units to boost inventories. D.R. Horton Inc (NYSE:DHI.N), the largest U.S. homebuilder, on Wednesday reported a 30 percent jump in orders.
Despite the sturdy home resales report, the housing index .HGX fell more than 1 percent. The dollar was little changed against a basket of currencies while prices for U.S. Treasury debt fell.
Supply Improving – In March, the inventory of unsold homes on the market increased 5.3 percent from a month ago to 2 million units, the highest level since last November. However, supply was up only two percent from a year ago.
Realtors and economists say insufficient equity and uncertainty about the economy’s strength were forcing potential sellers to stay longer in their homes. A recent survey by the Realtors association showed homeowners on average staying in their homes for 10 years instead of the typical seven years.
At March’s sales pace, it would take 4.6 months to clear houses from the market, down from 4.7 months in February. A supply of six months is viewed as a healthy balance between supply and demand. With supply still tight, the median price for a previously owned home increased 7.8 percent from a year ago to $212,100.
That was the largest percentage gain since February 2014 and suggested that the pace of home price increases, which had been slowing after double-digit growth for much of 2013, appears to be reaccelerating.
“It looks like the combination of limited available inventory and a decline in the share of distressed sales in the market continue to put upward pressure on prices,” said Daniel Silver, an economist at JPMorgan in New York. First-time buyers accounted for 30 percent of transactions last month, well below the 40 percent to 45 percent share that economists and realtors say is required for a strong housing recovery.
This is our usual ETF Wednesday information – these metrics are important to individual physical investors because they provide clues as to whether the physical market is enthusiastic and adding metals or is disappointed and selling metals.
Gold Exchange Traded Funds: Total as of 4-15-15 was 52,017,908. That number this week (4-22-15) was 52,244,163 ounces so over the last week we gained 226,255 ounces of gold.
The all-time record high for all gold ETF’s was 85,112,855 ounces in 2013. The record high for Gold ETF’s in 2015 is 53,901,867 and the record low for 2015 is 51,057,082.
All Silver Exchange Traded Funds: Total as of 4-15-15 was 619,088,285. That number this week (4-22-15) was 620,072,995 ounces so over the last week we gained 984,710 ounces of silver.
All Platinum Exchange Traded Funds: Total as of 4-15-15 was 2,565,405 ounces. That number this week (4-22-15) was 2,562,208 ounces so over the last week we dropped 3,197 ounces of platinum.
All Palladium Exchange Traded Funds: Total as of 4-15-15 was 2,887,325 ounces. That number this week (4-22-15) was 2,911,049 ounces so over the last week we gained 23,724 ounces of palladium.
This from Bloomberg/MineWeb (Ng – Deaux – Van Der Walt) – The mystery of China’s gold stash may soon be solved – China’s push to challenge US dominance in global trade and finance may involve gold – a lot of gold. While the metal is no longer used to back paper money, it remains a big chunk of central bank reserves in the US and Europe. China became the world’s second-largest economy in 2010 and has stepped up efforts to make the yuan a viable competitor to the dollar. That’s led to speculation the government has stockpiled gold as part of a plan to diversify $3.7 trillion in foreign-exchange reserves.
The People’s Bank of China may have tripled holdings of bullion since it last updated them in April 2009, to 3,510 metric tons, says Bloomberg Intelligence, based on trade data, domestic output and China Gold Association figures. A stockpile that big would be second only to the 8,133.5 tons in the US.
“If you want to set yourself up as a reserve currency, you may want to have assets on your balance sheet other than other fiat currencies,” Bart Melek, head of commodity strategy at TD Securities, said by phone from Toronto. Gold is “certainly viewed as a viable store of value for an up-and-coming global power,” he said.
China may be preparing to update its disclosed holdings because policy makers are preparing to add the yuan to the International Monetary Fund’s currency basket, known as the Special Drawing Right, which includes the dollar, euro, yen and British pound. The tally may come before the IMF’s meetings on the SDR next month or in October, Nomura Holdings Inc. said in an April 8 report.
Monetary Role – Gold played a central role in the international monetary system until the collapse of the Bretton Woods framework of fixed exchange rates in 1973, according to the IMF. While the role of bullion has diminished since then, the fund still holds 2,814 tons and most central banks have some on their balance sheets. Russia more than tripled its holdings since 2005.
China is the world’s largest gold producer and ranked behind only India among top consumers last year, but the amount of metal its central bank last reported holding in 2009 accounts for just 1% of foreign-exchange reserves, which have surged more than fivefold in a decade and are the biggest in the world. Most of that is in dollars.
The IMF estimates the dollar makes up 63% of world central bank holdings, while the No. 2 currency, the euro, accounts for 22%. Data from the Society for Worldwide Interbank Financial Telecommunication show the US currency was used for 43% of global payments in February.
Approved Programs – While China is promoting the yuan internationally, Swift data show the currency was used for only 1.8% of international payments in February. Private investors — both Chinese and non-Chinese — can move their money in and out of the country only through approved programs and in limited amounts, and changes in the currency’s value are only permitted in limited ranges.
Adding gold and other assets would ease China’s reliance on the dollar, said Nathan Chow, a Hong Kong-based economist at DBS Group Holdings Ltd.
It may bolster the view China has “a currency that’s well backed by a range of different assets,” said Steven Dooley, a Melbourne-based currency strategist at Western Union Business Solutions for Asia-Pacific. “The most-liquid currencies tend to have a wide range of foreign-exchange reserves.”
Market Mystery – With China disclosing so little about its hoard, finding out how much the central bank has in its vaults is of increasing interest to traders. Confirmation of bigger holdings would signal the importance of the metal as a reserve asset and boost market sentiment, TD Securities’ Melek said. At a time when prices are languishing, the buying could give support, said Suki Cooper, director of commodities at Barclays Plc in New York.
Bullion climbed from $882.05 an ounce at the end of 2008 to a record $1,921.17 in 2011 as investors sought safety from currency depreciation and the threat of inflation. Prices plunged 28% in 2013 as rallying stocks and a rebounding economy eroded the appeal of the metal, which closed at $1,204.22 on April 17.
China may not have expanded holdings by much. The dollar has strengthened since the middle of last year on expectations the Federal Reserve will boost interest rates, making the US currency more attractive than bullion, which generally offers returns only through price gains.
In a rare comment on gold, Yi Gang, the central bank’s deputy governor, said in March 2013 that the country could only invest as much as 2% of its foreign-exchange holdings in gold because the market was too small. The press office of the People’s Bank of China in Beijing didn’t respond to a fax seeking comment sent on April 14.
More Scope – “I wouldn’t expect a huge jump in gold holdings,” said Andy Ji, a currency strategist and China economist at Commonwealth Bank of Australia in Singapore.
Ashish Bhatia, the World Gold Council’s director, central banks and public policy, in New York, said there’s a lot of room for China to expand. “It’s ideal for central banks to have 4% to 10% of assets in gold,” he said. “The PBOC may already hold at least 3,000 tons,” said Warren Hogan, chief economist at Australia & New Zealand Banking Group Ltd. in Sydney.
“Gold has always been, through the history of China, a way to project power,” Kenneth Hoffman, a metals and mining analyst at Bloomberg Intelligence, said in an interview on April 9. “They are thinking about how to make the yuan more international, and so this is a possible reason why they are buying so much gold.”
The walk-in cash trade was active today and so were the phones but the action seems slow considering a “5” on our Activity Scale. The public in general does not seem too excited about lower prices – usually a plus with the over-the-counter crowd. So the higher activity rating may be the result on a few larger buys and not a generally higher interest because of lower prices.
The GoldDealer.com Unscientific Activity Scale is a “ 5” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 2) (last Friday – 2) (Monday – 3) (Tuesday – 5). 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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