In recent weeks J. Austin & Co has seen an uptick in gold and silver purchases. There is a slight squeeze in the market right now as demand is outweighing supply. Bitcoin buying and selling remains unchanged at this time. The Diamond market is starting to cool due to the increased popularity of lab-created stones. Those holding larger diamonds may wish to exit the market at this time.
We have also seen a remarkable increase in larger estate transactions to the extent we have had to continually reduce our store hours in order to process the goods during these times of heavy market volatility. Such will be the case next week. The Grants Pass shop will be closed Sept 12th through the 14th to open again on Tuesday the September 18th. The Ashland shop will maintain normal hours during this time.
Before you jump the gun and think it’s the end of the world for precious metals, let’s look at a few things. The Fed has continually threatened to raise rates since 2008 but has only managed to raise rates twice since then. This is paramount to understanding that the bust economy may not be over and a stock market crash might be on the horizon. Why? Because the last time the Fed raised rates before this week was in 2015 on Dec 16th.
Every year at Christmas time precious metals fall and the dollar tends to go up because economic indicators improve. That’s right, the temporary seasonal hiring and buying and selling for Christmas is treated as if it’s an economic recovery. Believe it or not, this happens every year, AND NO ONE SEEMS TO REMEMBER!
Suddenly around mid-January, we realize all that data was seasonal and possibly wrong. Metals then start to move up again with the fed threating to raise rates all year long (at least this was the pattern last year). The public has a short memory, and I think what happened in 2015 when silver closed lower than it is today will repeat itself in 2016 resulting in a big bounce in 2017. One big difference…? The stock market has rallied like never before. What goes up, must come down. With that downward correction, we could see a panic into gold and witness an unprecedented surge
Look at this week’s interest rate increase as smoke and mirrors. The Fed is riding on the wave of fourth quarter seasonal economic growth, not real economic change.
The top chart above shows the drop from the Dec 16th, 2015 rate hike (See 17-Dec). The second chart above shows the current prices after the most recent hike.
The January 2016 chart shows us the rate hike of Dec 2015 had little impact and gold continued its seasonal upward trend with silver following. Do not listen to me. I sell gold. Check out the charts for yourself and draw your own conclusion.
Gold continues to trade in a choppy manner within the range established early in the week. In light of some better than expected U.S. data this morning, the yellow metal is showing good resilience.
U.S. retail sales rose 1.3% in April, well above expectations of +0.8%. Not surprisingly, we are already seeing some upward revisions to Q2 GDP forecasts. The preliminary read on consumer sentiment jumped to 95.8 in May, above expectations of 90.0, vs 89.0 in April.
However, the stock market is less than impressed. The same is true of the bond market. The prospect for a rate hike late in the year, based on Fed funds futures, improved modestly. While the dollar did seem to like the news, as previously noted gold remains underpinned as is trading higher on the day.
Perhaps markets are putting greater emphasis on this morning’s business inventories report for March, which rose 0.4%, above expectations of +0.2%. ZeroHedge notes that “overall business inventories at their highest to sales since the crisis and deep in pre-recessionary territory.” The gist being that the persistent rise in inventories portends an imminent recession. ZeroHedge warns, “This won’t end well.”
I think gold remains underpinned because investors remain skeptical about the recovery. Something doesn’t feel right and they are making the requisite portfolio adjustments to protect themselves. That is clearly reflected in the gold demand data released yesterday, which showed a 21% jump in Q1, the best first quarter on record. That of course led to the best Q1 price performance in three-decades.
As economist continue to worry about “secular stagnation” and the likely reactions by central banks with ever-more experimental policy approaches, the demand for gold is likely to remain robust. Something the WGC eluded to their report in saying “the sector does appear likely to benefit further from the improved outlook towards gold among a broad investor base.”
Latest trends indicate that diamonds between .25 Ct and .40 are moving upwards in August. This is a good time to trade in the old stones if you are not wearing them. We are now buying diamonds of all sizes.