Commentary for Friday, Oct 31, 2014 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc.………
Gold closed down $27.00 today at $1171.00 and at one time traded as low as $1161.00 and has given up $60.00 on the week.
As the Bank of Japan announced an additional $700 billion in stimulus the overnight Hong Kong and London market traded lower – a trend which was continued in the domestic US market. The Japanese stimulus caused the yen to move lower and was one of the factors which caused the dollar to surge. The move on the Dollar Index was massive – it opened around 86.15 (this alone is very strong) and when the BOJ news was released the Dollar Index moved to 87.13 – wow what a jump.
This amounts to a 4 year high for the dollar and at the same time WTI Crude is trading around a 2 year low at $81.00 a barrel. All of this is of course negative for gold but also weighing on the metals is a continued hot stock market. The DOW reached an all-time high today – there are green stock numbers all over the place.
A cynic might claim the DOW is an anomaly – there are plenty who claim it is overvalued but the point being for now things look pretty rosy – which is not good for gold. And as for the DOW why step in front of a moving train? The 3rd quarter GDP up 3.5% and the end of current quantitative easing yesterday set the stage for positive investment news all around – except for gold.
And what about this price support which is supposed to be coming from the physical buyers? It’s there if our across the counter business is any judge. The bigger world buyers might wait for a better price but the American public likes what it sees. And if the price of gold continues lower the domestic volume numbers will simply move higher.
I would not be surprised to see a bounce higher in these generally lower gold price numbers. It figures – but now that gold has broken down – meaning we are trading below the $1180.00 market there will be further downside testing. Expect further weakness while this market continues to unwind – downside however is not large. Perhaps 10% – the reason being we are already dealing with a discounted market.
Silver closed down $0.32 at $16.07 trading as low as $15.63 before reversing direction. So we are down $1.06 on the week – but for the record physical buyers exploded on the scene today driven by the new bargain prices and sales of 1 oz rounds, Silver Eagles and $1000 Face 90% silver coin bags hit record levels on the year.
Platinum closed down $10.00 at $1235.00 and palladium was up $11.00 at $791.00. Rhodium remains at $1240.00.
This from James Hyerczyk (FX Emprie) – Gold Plunges after BOJ Shocks Market with Monetary Easing – December Comex Gold futures broke sharply lower on Friday to levels not seen since 2010 after the Bank of Japan surprised the market with fresh stimulus. The move helped drive the U.S. Dollar higher and came on the heels of a slightly hawkish U.S. Federal Reserve monetary policy statement.
December Crude Oil futures traded lower on Friday, but remained inside its two-week range. Overproduction and low demand continue to keep a lid on this market, however, prices have stabilized since Saudi Arabia cut prices to Asia several weeks ago.
The reaction to the move by Saudi Arabia and other OPEC nations including Iraq, Iran and Kuwait seems to be indicating that the next move by these countries is going to be a production cut. This action would definitely put in a major short-term bottom. So for the time being, the price cuts are going to be supportive until its effect wears off. Then OPEC will likely have to decide on more aggressive measures to boost prices.
Recent comments by Saudi Arabia indicate it is comfortable with $80 crude oil. This may be suggesting, however, that it may not be comfortable with oil under $80.
The EUR/USD is trading lower but stable after the European Union’s statistics office reported that consumer prices rose 0.4 percent from a year earlier. This figure was in line with the estimates and slightly better than September’s reading of 0.3%. Eurostat also reported that Euro Zone unemployment held at 11.5 percent in September.
The inflation news took the pressure off the European Central Bank, at least temporarily, to implement fresh stimulus. This could trigger a short-covering rally over the near-term, but at the very least hold the Euro in a range until the next ECB policy meeting.
There were no major economic reports from the U.K. today, but the British Pound traded lower because of the strength in the U.S. Dollar. The GBP/USD is set up to close lower for a fourth straight month. This is its longest losing streak in 4 ½ years. The price action reflects the Bank of England’s reluctance to commit to an interest rate hike. The market may continue to weaken over the near-term because investors believe the BOE will continue to push back its rate hike date.
Precious Metal Closes & Dollar Strength – Oct. 27 through Oct. 31 – 2014
Gold Silver Platinum Dollar Index
Mon $1229.10 $17.11 $1254.00 $85.56
Tues $1229.20 $17.18 $1265.00 $85.47
Wed $1224.30 $17.21 $1268.00 $86.04
Thurs $1198.50 $16.38 $1245.00 $86.23
Fri $1171.10 $16.07 $1235.00 $86.88
Mon $786.00 $1230.00
Tues $793.00 $1240.00
Wed $800.00 $1240.00
Thurs $780.00 $1240.00
Fri $791.00 $1240.00
Our Patented Employee 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 – 2 believe gold will be higher next week – 4 think gold will be lower and 2 believe it will be unchanged.
Our Patented Customer Survey – Gold’s Direction Next Week?
Like the employees our actual customers were given three choices – up – down – unchanged. We limited the survey to a random sampling of 100 transactions – unscientific yes but worth considering because these people actually took action: 43 people thought the price of gold would increase next week – 40 believe the price of gold will decrease next week and 17 think prices will remain the same.
The walk-in cash trade was swamped all day and so were the national phone lines – thanks for your patience. This is a great example of the public wanting to buy on dips. The majority of action we wrote came from a public buying both gold and silver bullion at lower levels. I see no capitulation in the physical market even after today’s blow-out.
We still have seen no large selling at these lower levels. And we are only part of the picture – I talked with two large dealers today and everyone is swamped – so this buying surge is typical across the US.
The GoldDealer.com Unscientific Activity Scale is a “5” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 2) (Tuesday – 4) (Wednesday – 3) (Thursday – 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 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.