Metals Market Report 10-13-2014

The Mike Fuljenz Metals Market Report

October 2014, Week 2 Edition

Gold tested its recent lows at $1192 last Monday. Gold passed that test with flying colors, rising $30 over the next three days while the stock market careened down about 3% last week. Thursday was the biggest daily drop in the Dow Jones index so far in 2014. As of October 13, the Dow is down 0.9% for 2014 while gold is up 3% in 2014, so gold has beaten the Dow Jones index by almost 4% so far in 2014.

U.S. Mint Coin Sales Rose Rapidly Enough to Halt 2015 Production

The U.S. Mint reported last Friday that weekly gold coin sales were the highest since mid-January, when new 2014-dated Gold Eagle and Gold Buffalo coins fueled buying interest. Specifically, gold coin sales reached 36,500 ounces last week vs. 15,500 ounces the previous week. The same was true for silver coins in the previous week, when sales were at their highest levels since the 2014 Silver Eagles came out.

In the week ending October 3, the Mint said silver coin demand surged to 2,751,500 ounces, the highest weekly totals since early January. This surprisingly high demand for silver American Eagle bullion coins temporarily interrupted production of the 2015-dated coins. The West Point Mint had to switch back to minting more 2014-dated coins to meet rising investment demand. The mint says their strategy is to have enough 2014-dated coins for orders from authorized dealers before shifting to 2015-date coin production.

Gold Passed the $1192 “Stress Test” Again Last Week

On the London market, gold’s cyclical low (since its 2011 peak) was $1192, set on June 28, 2013 and tested twice, first in December 2013 and then last week, October 6, 2014. Within two days, gold rose $30 per ounce to $1224, primarily based on the release of notes from the latest meeting of the Federal Open Market Committee (FOMC), which indicated that interest rates would remain low longer than expected.

Gold Has Built a Solid Bottom Around $1192

Date   Gold’s Bottom
June 28, 2013     $1192.00
December 23, 2013     $1192.75
October 6, 2014     $1193.25

As long as gold stays above $1192, technicians (like the Aden Sisters) believe that the bull market in gold is still intact. The fact that gold is rising while silver is relatively flat is a sign that gold is performing its role as global crisis hedge and as a currency hedge against the euro, dollar, yen and other fiat currencies.

Holiday Demand in China and India Boost Gold Sales

After the launch of the Shanghai Gold Exchange in September, Chinese demand has risen as retailers restock after China’s National Day holiday, celebrating the 65th anniversary of the founding of Red China in October, 1949. These celebrations ran a full seven days and are called “Golden Week.” While the press focused on demonstrations on Hong Kong, they ignored the fact that over one billion Chinese celebrated Golden Week by traveling, spending, or planning weddings during this auspicious week. For instance, jewelry dealers in Hangzhou reported gold jewelry sales rising over 100% during Golden Week.

India’s demand is up, too, as we enter their festival and wedding season. Next week, India will celebrate the festivals of Dhanteras on October 21 and Diwali on October 23. Both dates are considered auspicious times to buy gold. These dates overlap the traditional wedding season, when it is traditional to give golden gifts to the bride and groom. With gold’s low price and some relaxation of import duties, gold demand in India this week and next week could give a short-term boost to the price of gold bullion.

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