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Gold Market Report – Gold Finally Reacts to Dovish Fed Minutes

Commentary for Thursday, April 7, 2016 (www.golddealer.com)

Gold Market Newsletter with Richard Schwary

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

Gold closed up $15.00 on the Comex today at $1228.00. This is starting to look like a ping-pong match – even though the dollar was flat.

I wish this up-draft was a game-changer but my guess is that traders are reacting to yesterday’s dovish Federal Open Market Committee (FOMC) minutes coupled with reappearing worries about the European economy. Of course the Greek debt problem has not gone away and monetary stimulus has done little to inspire the European economy. On top of that Great Britain votes in June as to whether or not to stay in the European Union. Like Japan the ECB’s great experiment with negative rates continues to disappoint.

Next week begins earnings reports in the stock market and if stocks go lower look for accelerated buying in the metals. Gold has put in a solid performance at the 50 day moving average ($1217.00) but must challenge both the 100 DMA ($1147.00) and the 200 DMA ($1139.00) before it will get any respect. If this does not happen look for this back and forth action to continue.

Silver closed up $0.10 at $15.15.

Platinum closed up $11.00 at $953.00 and palladium closed down $4.00 at $535.00. Platinum is trading for $275.00 less than gold.

Keep the Rhodium 1 oz Baird Bar ($860.00) in mind – this is embarrassingly cheap – add a few ounces to your precious metals holdings and pat yourself on the back in a few years. Rhodium used to trade for $10,000.00 in 2008. Granted a spike in the market price but consider that the average price of rhodium for 2008 was $6,450.00.

gold_doveThis from Clara Denina (Reuters) – Gold gains on lower dollar after Fed remains cautious on rates – LONDON, April 7 Gold jumped almost two percent on Thursday as the dollar remained under pressure on uncertainty around future U.S. interest rates increases, while global shares fell, rekindling investor appetite for safer assets.

Minutes from the Federal Reserve’s March meeting showed policymakers debated whether an interest rate hike would be needed in April, but a consensus emerged that risks from a global economic slowdown warranted a cautious approach.

They signalled that they expected to raise rates twice in 2016 but the timing still appears unclear.

Spot gold benefited from a 17-month low in the dollar versus the Japanese yen. Prices hit a two-week high of $1,243.45 an ounce and were up 1.7 percent at $1,242.60 by 1354 GMT.

The metal saw its biggest quarterly rise in nearly 30 years in the three months to March, rallying more than 16 percent and hitting a 13-month high on speculation the Fed was not in a hurry to normalise interest rates.

It had however drifted back towards the key $1,200 level in the past week after hawkish comments from several Fed officials. Gold is sensitive to rate increases as they lift the opportunity cost of holding the non-interest-yielding metal.

“The Fed’s minutes yesterday and the dollar’s weakness have created an environment that gives gold an additional push and attract some pent-up demand,” Saxo Bank senior manager Ole Hansen said.

“The most immediate resistance is $1,244 but a break above $1,255 could suggest a new high in the market.” The Fed should be patient and cautious about raising short-term interest rates, but should nevertheless increase them in a sustained way, Dallas Fed President Robert Kaplan said on Wednesday.

European and U.S. shares fell on Thursday on uncertainty over global growth. “The share markets are in the red and that is helping gold’s ascent today… a run towards $1,250 is possible,” MKS SA head of trading Afshin Nabavi said.

Assets in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.51 percent to 819.60 tonnes on Wednesday, the first inflow in nearly two weeks.

This is our usual Thursday Chicago Mercantile Exchange report covering the last 5 trading days – so we are looking at the trading volume numbers for the “April” Gold contract: Thursday 3/31 (359,425) – Friday 4/01 (356,707) – Monday 4/04 (355,225) Tuesday 4/05 (358,168) – Wednesday 4/06 (353,513).

We have introduced silver to our CME rundown – so we are looking at the trading volume numbers for the “April” Silver contract: Thursday 3/31 (114,148) – Friday 4/01 (113,986) – Monday 4/04 (111,747) Tuesday 4/05 (110,711) – Wednesday 4/06 (108,102).

Well – there is a full court press on radio and television pushing gold and silver IRA accounts. Notice the terms – radio and television – this alone should provide a cautionary note to the informed. Radio and television are very expensive advertising and someone has to pay the bill. Unfortunately that means these costs are passed on to the consumer – that means you.

I would not argue the merits of putting gold or silver bullion into your IRA – it works for many and is a big part of the precious metal industry. And there are plenty of reputable IRA sources – we do a great deal of business in Individual Retirement Accounts.

There are two specific ways however that this “reasonable” sounding idea goes off the tracks. Take notes here especially if you are new to the precious metals business.

Number One in my soon to be written book – How to Make Sure You are Not Taken to the Gold IRA Cleaners (I’m not really writing a book on the subject but a cool title goes a long way in forging good investment practice).

Forget the telemarketing promise that you can manage your own account and a trustee is not necessary. This will invite a visit from Uncle Sam pronto and is not worth the trouble – if you want to put gold or silver into an IRA choose a good custodian and pay them a few bucks for their trouble – it is tax deductible and safe.

Any nonsense about the “government” confiscating your holdings is pure telemarketing hype and those who offer such advice may have been selling overpriced aluminum siding in Florida last year before the Feds shut down the operation.

Number Two on my “bad investment hit list” are “certified gold or silver bullion coins” which carry a large premium over their regular “bullion” country cousins.

These fall into a wide category like PCGS or NGC graded Proof or MS 70 Eagles which sell for a great deal more money than the same coin which is not graded. The sad truth is that the telemarketing trade sells this junk to first time gold or silver bullion investors because they make a fortune in the process and their big commission comes out of your retirement bottom line.

Finally another caveat emptor – when considering “what” to put into your gold or silver retirement account shop around before deciding on any product. It is amazing to me that when it comes to something as dearly earned as retirement money that some consumers simply ask the salesman what he suggests.

In the coin business all telemarketing sales are commission sales – these folks are told every morning in a closed sales meeting what brings them (not you) the most money.

It’s that simple – so let’s be careful out and pursue due diligence like a professional.

A good rule to follow when it comes to choosing a gold or silver bullion product for your IRA is to look for the product with the lowest premium. This insures the majority of money allocated to this part of your retirement actually goes into metal.

Finally if you read the LA Times today under Business you will see that the government is also tired of this dog and pony show. The Obama administration is making changes to the law which will help protect consumers from the onslaught of Gold in Your IRA Abuse – it’s about time.

If you are confused about “premiums” or the real cost of IRA gold ownership call us toll free (1-800-225-7531) for an honest answer – if that is not convenient try an email to [email protected] before you sign on the bottom line.

The walk-in cash business was very quiet today and so were the phones.     

If you are new to the metals don’t be in a hurry. The process of protecting yourself financially with real gold or silver bullion has been around for a long time and can be abused when prices move higher. Avoid pressure from telemarketers who are on commission. And especially avoid promises of quick profits – a sure sign that the dealer will be the only one who makes money. Be careful if the dealer calls you describing a profit opportunity. Take your time in the process – sleep on the idea – compare prices between dealers and make an informed decision.

The GoldDealer.com Unscientific Activity Scale is a “4” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Friday – 5) (Monday – 5) (Tuesday – 5) (Wednesday – 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”. Our “activity” is better understood from a wider point of view. If the numbers are generally increasing – it would indicate things are busier – decreasing numbers over a longer period would indicate volume is moving lower.

Disclaimer – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisers. The precious metals and rare coin market is random and highly volatile so it may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.

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  1. “Assets in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, rose 0.51 percent to 819.60 tonnes on Wednesday, the first inflow in nearly two weeks.”

    How reliable are GLD’s holding reports? GLD does not give retail investors the right to redeem for any of its mystery physical gold holdings. This fact alone ensures the GLD shares to be nothing more than paper at the end of the day. GLD also has a glaring audit loophole in their prospectus that states they have no right to audit subcustodial gold holdings. To this day, I have not heard of a single good reason for the existence of this backdoor to the fund. Some other red flags I’ve stumbled upon, verified and welcome everyone else to verify for themselves:

    “Did anyone try calling the GLD hotline at (866) 320 4053 in search of numerical details on GLD’s insurance? The prospectus vaguely states “The Custodian maintains insurance with regard to its business on such terms and conditions as it considers appropriate which does not cover the full amount of gold held in custody.” When I asked about how much of the gold was insured, the representative proceeded act as if he didn’t know and said they were just the “marketing agent” for GLD. What kind of marketing agent would not know such basic information about a product they are marketing? It seems like they are deliberately hiding information from investors.

    I remember there was a highly publicized visit by CNBC’s Bob Pisani to GLD’s gold vault. This visit was organized by GLD’s management to prove the existence of GLD’s gold but the gold bar held up by Mr. Pisani had the serial number ZJ6752 which did not appear on the most recent bar list at that time. It was later discovered that this “GLD” bar was actually owned by ETF Securities.”


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