Commodities | - Part 5

This item at The Economist provides a handy scorecard for asset class and stock market performance for various countries around the world, some of which make the impressive U.S. equity market returns in 2013 look quite pedestrian.

After a dismal showing last year, precious metals are starting out 2014 with a bang. It will surely be interesting to see how long that lasts.

2,000 Tonne Gold Vault Opens In Shanghai

Many once had high hopes for emerging Asia, but count this development as one more piece of evidence that they’re as backward as ever over there, spending time and money foolishly building a vault to store upwards of 2,000 tonnes of gold bullion as detailed in this report at Bloomberg when they could be buying shares of U.S. stocks and making a fortune.

The vault can store over $80 billion worth of gold bars at today’s prices, much of that metal transferred from vaults in London and New York as part of the ongoing flow from West to East, what Warren Buffett would no doubt deem a colossal waste.

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After a dismal April-to-June period, the gold price notched its first quarterly gain in a year during the third quarter that ended last Monday. However, the start of the fourth quarter on Tuesday ushered in one of the worst sell-offs in months. Amid more calls of market manipulation, this came just as the U.S. government began a shutdown that is now in its sixth day and quickly transitioning into a debt ceiling debate and potential crisis.

Gold BarsDespite the turmoil in Washington, American investors continue to shun precious metals based on recent ETF outflows and slowing coin sales.

In China, buyers were notably absent last week but will return from a national holiday on Tuesday and the gold market in India remains as confused as ever, though central banks around the world still hold the metal in very high regard, surprisingly, even here in the U.S.

Precious metals were lent some support by further declines in the U.S. dollar and the greenback could continue to fall given that Federal Reserve officials now seem inclined to taper their massive money printing effort later, rather than sooner. So far, inflation remains a “non-threat” and a decidedly negative factor for precious metals, however, that could change very quickly based on the latest trends in inflation expectations.

For the week, the gold price dropped 2.1 percent, from $1,336.20 an ounce to $1,311.20, and silver fell four cents to $21.74 an ounce…

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Precious metals are staging an impressive rebound today after yesterday’s drubbing that, once again, was initiated by a massive sell order that caused prices to plunge and stop loss orders to be executed, exacerbating the decline.

Gold and SilverThis came at the market open, after the government had shut down at midnight the night before, and was not the response that most gold (GLD) investors expected.

For reasons detailed here a week ago, a government shutdown and a looming debt ceiling crisis should clearly have been bullish for gold, but that was not the case yesterday in the opening minutes of trading.

Frank Tang at Reuters reported that “an unusually large trade in the New York futures market” played a key role in the early morning carnage yesterday as depicted in red in the Kitco graphic below.

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metals commentary that Tim only shares with subscribers, join Iacono Research.]

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