| www.golddealer.com | California Numismatic Investments | Print this page |
Precious Metal and Bullion Commentary for Wed, May 16, 2012 - Gold closed off again this Wednesday down $20.60 to finish at $1536.20 and silver followed suit off by $0.88 on the day at $27.17. So as gold approaches the $1500.00 level it has basically given back most of its gains year on year after reaching a high of almost $1900.00 last summer. Believe it or not even with all this negative news the primary gold bull market is still technically intact, but just barely and if we break below current levels the first long term technical damage will have to be evaluated. So why this continued trouble in the gold bull ranks of late? It could be that Europe is in bigger trouble than most believe and has not dodged the bullet as claimed by most after the great financial meltdown. Recent figures from Germany are not that stellar but considering many nations are completely underwater they are not that bad either. Perhaps they are telling everyone behind closed doors that they will not finance the socialist agenda. Still the “sell-now” fear continues to push these markets and if not Europe then what? Believe it or not the fear agenda in trading holds a stellar position and while everyone wants to be more academic in their approach sometimes the “run and hide” technique works just fine like in the evolutionary trade. Well know gold commentator Pat Heller brings up an interesting point: The Indian and Chinese gold buyer is almost always a physical player and almost always buys on weakness and avoids a running bull market. His American counterpart on the other hand virtually never buys a declining market always opting to buy as gold tracks higher. The lesson here is that Indian and Chinese buyers have learned to take advantage of gold’s volatility because in many ways this precious metal is a way of life in those countries but the American side of the equation is still trying to understand gold. I would also add that sooner or later US citizens will be pushed into a more philosophical attachment to gold and we will see another phase of this still developing gold bull. Today less than 5% of the American public use gold bullion as a financial tool and so there remains a large and affluent pool of buyers still on the sidelines. I think this from Kitco/Commerzbank supports current thinking within the physical industry as other large dealers see lower volumes but not a great deal of physical selling: The continuing slide in gold appears to be the result of selling by short-term speculators, says Commerzbank. “Because gold ETFs (exchange-traded funds) are still recording no significant outflows, speculative financial investors must be largely responsible for the price slide. The ‘shaky hands’ will thus continue to be shaken out of the market, and the process of market adjustment will continue,” Commerzbank says. “Once this process comes to an end, gold should be able to launch a recovery from a solid basis.” Larry Edelson (Weiss Research) comments on the Chinese lowering their interest rate: “Meanwhile, as I’ve been warning my Real Wealth members for some time now, Europe is cascading lower again, and so is the U.S. Get used to it. I’m sorry to say it, but there is a great rebalancing of the global economy going on between the western world and the east, with China clearly having the upper hand as the world’s biggest creditor and most vibrant economy. The yuan is set for substantial appreciation. Not only because of the aforementioned, but also because the central banks of the U.S. and Europe will soon have to print trillions of dollars and euros to try and save their hugely indebted economies. In the end, it means the dollar is being devalued against China’s currency. And that means that your cost of living is going to go up, yet again.” So while day to day precious metal trading remains volatile the basics for higher inflation numbers and therefore higher gold prices are in place but it will take more patience to capitalize on these larger financial forces. Phone and walk in trade is steady but not overwhelming and buyers outnumber sellers by a wide margin. There is also a big jump in silver sales as the physical buyers are once again paying attention to cheaper prices. Thanks for reading and enjoy your evening.