Gold Closes “Soft” into the Weekend
Commentary for Friday, Nov 20, 2015 (golddealer1.reachlocal.net) – Gold closed down $1.60 on the Comex today at $1076.40 in quiet trading. Still gold remains more firm than I would have expected given the dollar remains strong and the euro weakens on dovish comments by EU President Mario Draghi. The Dollar Index closed yesterday at 99.00 and the range today was 99.00 through 99.63 – we are currently at 99.57. With this continued dollar strength it is a wonder really that gold has finished higher 2 out of the last three days.
Gold is holding up most likely because of continued technical short-covering but we will see safe-haven buying pick up after the terrorist attacks in France and the follow though in Mali this morning. This is the problem with asymmetrical war – when there are no quick answers the vulnerability analysis goes into overdrive – officials begin to talk about what used to be considered “fringe” augments like protection of the water supply. The whole subject is depressing and tragic so let’s talk about something more upbeat.
Let me try and answer the email “big question” – what are you selling and how is the action? Of course this dynamic will change on a dime but here is a window into what we are doing currently.
By far the biggest selling group by dollar volume today is gold bullion. This figures – we are at 5 year lows and the physical market heats up when prices trend lower.
This might be counterintuitive to the American mind – why would anyone want to invest in something that is losing value? Well, first of all for many people gold is the only real money and to some gold will eventually turn a corner and there is money to be made. Believe it or not we do business with serious gold bullion buyers who are convinced this whole quantitative easing process is going to eventually blow up.
At any rate, to these folks the weapon of choice is the US Gold Eagle, the Perth Mint Kangaroo and the certified gold bar. Which bring me to a point – if you are buying gold bars with no certification be wary – it’s not that the bars are phony it is that without that little certification the buy-back will be cheaper because most likely the bar will have to be melted and not resold.
Second in line of popularity is silver bullion. This continues to be a niche market but very popular to the dedicated. I think the reason that silver bullion in the bigger picture has difficulty competing with gold is that any serious money ($250,000.00 or more) and you have a storage problem. Using legitimate storage like CNT has helped bring in more big players but large long term accumulation requires a big storage plan.
The most popular silver bullion forms at this time are the old favorites – 100 ounce bars and smaller units like 1 oz and 10 oz bars. The $1000 face 90% silver bag is also popular and premiums have fallen from $6.00 to $3.30 over but let me point out something which is not so apparent.
We put together small orders of 90% silver bags all the time – 5 and 10 bag deals are common. But no really big bag orders like we saw in the old days. In the 1970’s it was common place to trade 25 or even 50 bags at a crack – today this is not the case. In fact a 90% bag order of say 50 bags would place all major bullion dealers on hold – the reason is that it would have to be put together over time. An order that size might take a few weeks to locate – the reason being (I think) is that these coins have not been in circulation since the 1960’s – that’s 50 years of dispersion into the hands of the silver faithful. And remember – once investors have this material maybe 1 or 2 in 10 sell – this turns into a generational thing.
Finally bringing up the rear is platinum bullion. Here again this is a backwater relative to gold and silver investment volume numbers – the most popular choices being the Perth Platypus and the Canadian Maple Leaf. This market is so thin that if the public decided to buy in volume there is no way physical bullion dealers could quickly fill the orders. The US Mint has only produced the American Platinum Eagle 1 out of the past 7 years – believe me if there was any demand they would be minting coins. The Canadian Mint produces nice platinum bullion coins but the numbers are very limited. The only real shot out there today for very large orders would be to strike a deal with the Perth Mint who will make coins to order if the dollar size is large enough.
Silver closed down $0.13 at $14.11.
Platinum closed down $1.00 at $856.00 and palladium closed up $15.00 at $556.00. Platinum is now trading for $220.00 less than gold but look for price spikes like we saw today in palladium as these discounts to gold are severe – this does not mean that the worst is over (but it might be) it just means that short-traders are on a hair trigger to close that paper.
This from Allen Sykora (Kitco) – MKS: Gold Benefits as Traders Focus On Pace Of Fed Tightening Rather Than Liftoff – Gold has bounced more than $20 an ounce since Wednesday’s multi-year low, and analysts with MKS (Switzerland) SA say the metal may be benefitting as traders begin to focus more heavily on how gradually the Federal Reserve might hike interest rates rather than when those hikes begin. Minutes of the October Federal Open Market Committee meeting, released this week, were widely construed as signaling a likely rate hike next month. However, in the minutes, the Fed also said If policymakers do agree to remove monetary accommodation, they should do it “gradually.” After trading as low as $1,062 an ounce Wednesday, Comex December gold got as high as $1,086.60 Thursday and has been as high as $1,087.20 an ounce so far in overnight screen trading on Friday. “After touching a five and a half-year low on Wednesday, gold finally found interest as investors shift their focus to the pace of potential Interest-rates rises in the U.S. rather than when lift-off will occur,” MKS says. “The change in focus looks likely to have resulted in a correction to precious metals pricing and should result in short-term support as targets for gold extend to $1,095-$1,100.” Just before 8 a.m. EST, December gold was $5.80 stronger at $1,083.70 an ounce.
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 – 5 believe gold will be higher next week – 4 think gold will be lower and 1 thinks it will be unchanged.
Our Patented Customer Survey – Gold’s Direction Next Week?
Like the employees our customers were given three choices – up – down – unchanged. We limited the survey to a random sampling of 100 transactions – unscientific but worth considering because these people took action: 42 people thought the price of gold would increase next week – 42 believe the price of gold will decrease next week and 16 think prices will remain the same.
Precious Metal Closes & Dollar Strength – Nov. 16 – Nov. 20
The walk in cash trade was on the quiet side today and so were the phones. This will probably be the “normal” as we enter into next week’s Thanksgiving holiday season.
The GoldDealer.com Unscientific Activity Scale is a “5” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 8) (Tuesday – 7) (Wednesday – 7) (Thursday – 8). 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.
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Early Holiday Note: Next week is of course Thanksgiving – and we all have many things to be thankful for – one of particular note is living in this country. Not that we don’t have a legitimate grumble with how Uncle Sam handles our tax money – but America really does shine when compared to alternatives. We will be closed Thursday and Friday (Nov 26th and 27th) for Thanksgiving. Wishing you good health and all the best this holiday season!
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