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Gold – Testing Support

Gold – Testing Support

Commentary for Friday, July 23, 2021 (www.golddealer.com) – Gold closed down $3.60 today at $1801.40 silver closed down $0.15 at $25.22. The gold market this week would appear bearish to a pessimist, but this may turn out to be a typical knee jerk reaction. Yes, prices have trended lower, but it is important to note that volume numbers have also dropped considerably. So, you might want to make the case that sellers have dried up and a bounce to higher ground is in the making. This more positive take would suggest gold traders are not as radicalized as it might appear. There are other factors which suggest gold bulls are not ready to jump out the window. Zaner (Chicago) while still cautious makes this observation. “We are very impressed with the gold market’s ability to maintain gains yesterday in the face of reports from the IMF that they might sell some gold holdings to finance their battle against world poverty. In the past, the mere mention of an IMF gold sale would have sunk prices aggressively and in turn might have sparked a capital/margin washout.” So, for now, “keep your powder dry” is becoming my favorite saying. Let’s see what next week has to offer. Last Friday gold closed at $1814.50 / silver at $25.78 – on the week gold was down $13.10 and silver was down $0.56.     

The good news is that delivery on 2021 US Gold and Silver Eagles is getting better (still not “normal” but improving). And we are finally receiving early .9999 fine silver round orders. The bad news is that “any new orders” are still 3 to 6 weeks coming from the manufacturer. My guess, however, is that delays will soon shorten. 

Should you decide to use our Delayed Delivery Program please talk with your service rep and understand how this program works. It is handy if you want to lock in the price “now” and insist on new product – but is not for everyone. Just like us – you must pay upfront to “lock in” prices and you can’t “change” your mind. So, unless God has blessed you with patience, please ask your rep for other options and thank you for your understanding.

Gold on Monday presented its usual confusing picture as the dollar reached for three-month highs and Treasury yields continued to weaken. The overnight Hong Kong and London markets broke down ($1795.00) while the morning domestic pricing had traders scratching their heads.  The market pushed back – remained left-footed but clawed its way back to almost unchanged in the aftermarket. To some degree the stronger dollar was offset by lower Treasury yields. There may be shifting strategic factors to consider this week, some of which are not good options.

Zaner (Chicago) believes this initial weakness may turn into a systemic problem. A combination of surging US and global infections already creating shutdowns in other countries is coupled with slowing growth, less risk appetite and growing inflation fear. This is the classic deflation scenario which has been around for years but never got traction because the massive amount of fiat currency being created seems to make this option unlikely.

Some believe a combination of rising pandemic worries and deflation will reinvent the original “fear” scenario which pushed gold to all-time highs. This never appealed to me, but in this wacky financial and depressing pandemic world who knows? It seems unreasonable that with the mass production of at least two miracle vaccines the world is struggling with this menace.

On the plus side gold’s bullish technical picture is intact. But threatened. On the negative side the bullish scenario is punished for not capitalizing on significantly lower Treasury yields.

It is too soon to venture a guess but if traders do not buy this dip and push prices higher the buzz will fade. Especially now that higher interest rates or tapering are being reconsidered.

The “idea” that the Fed may do “something” is now an official trading ghost which comes and goes on a regular basis. And it stands beside the reality that gold faces “tough overhead” resistance between $1800.00 and $1900.00. This combination creates bearish mojo.

And consider that Powell is a master at balancing interest rates without using his “tool kit”. For now, all that is necessary is a “hint” in the right place. Still, the Fed would not have to do much to satisfy those worried about inflation. And whatever that might be will stifle what the bulls see as the continuation of a long-established gold bull market looking for a newly forged “bottom”.

Veterans in the physical gold world keep their base intact by remembering that in the new “trillion-dollar dimension” of central bank generosity there is a “gold price” which will move everyone off the sidelines. Of course, that number is never obvious although everyone and their brother like to believe they possess such wisdom. So being watchful through this “transition” makes sense. Yet, I believe the “bottom” of this current gold cycle is closer than most believe. On the day gold closed down $5.80 at $1808.70 and silver closed down $0.65 at $25.13. 

On Tuesday the gold market was initially strong – moving towards $1830.00 in early trading most likely because of a rise in safe-haven demand as the US warns travelers about surging Delta coronavirus cases. Rising infections reduce risk sentiment because the virus threatens business recovery, hurts assets like stocks and oil and encourages safe haven assets like gold.

So just when you thought the market was making sense and it was safe to come out from under the bed gold reversed itself and dropped like a rock. The dollar roared as confusion suggested a nervous trade. The Dollar Index pushed to yearly highs (93.20) because the financial community considers it a reliable place to “park” money in uncertain times.

So, what is going on? I think Zaner got closer than anyone when they called the initial push to higher ground in early trading a “bounce”. They continue to worry about a possible deflationary scenario which would hurt bullish sentiment.

It was amazing how fast traders closed their initial long gold positions and it is clear this market offers a hair trigger, regardless of the working scenario. Call today’s radical trade a great example of the traditional bull trap or false signal as the deflationary scenario gained strength.

If you ignore this “noise” the technical picture still offers a small edge to the bulls. But struggles because gold cannot capitalize on 5-month low Treasury yields. This is a semi-big deal because low yields would suggest the FOMC is not going to make quick changes in its financial policy. This alongside returning safe-haven demand should have gold trading easily above $1800.00 instead of recycling the support conversation traders seem found of these days.

It is difficult to say how much of this mess is being created by the resurgence of the Delta variant, but one thing is sure. It is getting publicity and just a few days ago was pretty much ignored. The lesson to be learned should be obvious – stay vigilant and safe. Today gold closed up a disappointing $2.20 at $1810.90 and silver closed down $0.15 at $24.98.           

On Wednesday the price of gold drifted lower. The Dollar Index came off highs (93.00) which likely muted the decline. The lack of fresh bullish information and the surge in virus infections has diminished gold’s “inflation focus” and contributes to this relative weakness.  Reuters – “We’re back in this push-pull market condition with some factors affecting the gold market positively and others negatively,” said David Meger, director of metals trading at High Ridge Futures. Meger noted that the possibility of the Fed’s transitory inflation view being proved correct, especially given rising COVID-19 cases, was a negative for an inflation-hedge like gold, but accommodative monetary policy in that scenario would support gold. U.S. Federal Reserve officials will meet next week, while the European Central Bank meeting is on Thursday. “More tapering talk amongst FOMC officials could drag gold back into the sub-$1800 levels, though more dovish messaging and market participants embracing such cues, could alleviate some of the downward pressure on gold prices,” said Han Tan, market analyst at Exinity Group. “As long as the greenback remains as the dominant safe haven, spot gold is expected to remain suppressed.”

You do not have to be a professional to see this ride continues bumpy and uncertain. There are too many variables in the short-term mix. Still, more is made out of daily fluctuations than is necessary or wise. Today’s so-called $1800.00 litmus test should be taken with two grains of salt. The gold price changes we now see do create psychological “weight”. But may not be that meaningful. Using the August futures contract gold’s 100-day moving average is $1794.00 and its 200-day moving average is $1834.00. These form a tight range if you consider that gold saw a double bottom in March ($1700.00) and a recent top ($1900.00) two months later.

The pessimist will ask if gold could break down at the 100 DMA. It could, if the bears increase in number. But my point is that the difference between the 100 and 200 DMA is small, and it would be silly not to give gold the benefit of the doubt. The virus is back, the Fed has not changed interest rates or its bond buying program, and the inflation picture is confused.

I do not think you will see all-time highs in gold by year end. The hyper-anticipation has faded and takes the sizzle out of the short-term trade. But Goldman Sachs is still looking for $2000.00 gold because it does not expect wide-spread shutdowns. On the day gold closed down $8.00 at $1802.90 and silver closed up $0.26 at $25.24.        

Gold Thursday looked sleepy and typical for the summer months. It traded on both sides of unchanged. Reuters claims that prices are subdued because risk appetite is recovering (money is flowing into stocks). It is amazing that one day the stock market moves lower, worried about a bounce in Covid infections and a business slowdown. The next day money is back – full speed ahead. Earlier this week folks worried – they sold stocks and bought gold. Today they bought stocks. It would be tragic if the pandemic scenario faded as the pandemic reinvented itself.

This from Associated Press “Across the U.S., the seven-day rolling average for daily new cases rose over the past two weeks to more than 37,000 on Tuesday, up from less than 13,700 on July 6, according to data from Johns Hopkins University.”

The Dollar Index dipped in early trading yet recovered nicely. This obviously does not encourage the bulls. Gold also made new lows overnight which hurts the technical picture. President Lagarde (European Central Bank) comments that their low interest rates and substantial bond buying program will remain in place. Typically, this would embolden the bullish scenario – today gold prices yawned. The reasoning here is that the traders have factored in a dovish EU – which has consistently failed to spark higher inflation numbers. This may be the reason they continue to worry about deflation as a stubborn pandemic threatens.

Jim Wyckoff (Kitco) – “Technically, gold futures bulls have lost their slight overall near-term technical advantage as a price uptrend on the daily bar chart has been negated. Bulls’ next upside price objective is to produce a close above solid resistance at the July high of $1,835.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,775.00. First resistance is seen at the overnight high of $1,804.30 and then at Wednesday’s high of $1,814.40. First support is seen at $1,791.00 and then at $1,785.00.”

As the week draws to a close the metals look for fresh information which will convince the paper trade and push the bullish/bearish narrative. At this point, there is a negative bias, whether this tipping grows will depend on how much sand the short paper develops in the short-term. On the day gold closed up $2.10 at $1805.00 and silver closed up $0.13 at $25.37. 

Gold pricing Friday was a mixed bag, at first testing support then clawing its way back to almost unchanged going into the weekend. Still, the combination of a stronger dollar and increased risk appetite undermines the bullish scenario. The Dollar Index is holding at a 3 ½ month peak as Treasury yields firm according to Reuters. This is fertile ground for the bearish sentiment.

So, traders tested support, which figures in the paper market as commentators struggle with developing a coherent gold picture. But I think there is still not enough negative mojo as this most recent dip quickly led traders into oversold territory.

Why was the “test” short lived? Will weakness continue next week? It is likely these negative factors will stay with us because the paper trade remains distracted. To be fair there are plenty of bullish gold factors floating around but these positive stories are turning into a grind and are periodically ignored. The Europeans for example continue to embrace negative interest rates because they are worried about “something”. Not to be frivolous – but their concerns are warranted. They are worried about the much touted “quick” recovery and growing concern over deflation. On the other hand, America’s Pollyanna attitude in the face of a rising and dangerous threat grows. With only 50% of the US vaccinated it would be a mistake to get careless.

Grant on Gold(1) Gold probed back below $1800 during the past two sessions, as the dollar seems to be winning the battle as the preferred safe haven (at least at this point) amid rising concerns about COVID and the possibility of new restrictions. (2) Silver fell to a 14-week low on Wednesday and exceeded the 78.6% retracement level, weighed by rising COVID concerns. The white metal continues to trade like an industrial metal worried about a COVID-related economic slowdown. (3) Platinum fell to a 3-week low of $1054.50 on Tuesday, but minor chart support at $1049.50 contained the downside, keeping the more important $1019.00 low protected. (4) Palladium is up more than 6% from Tuesday’s low at $2567.82 and attempting to move back into the upper half of the recent range.

This from Neils Christensen (Kitco)Silver’s price weakness is exaggerated – Metals Focus –   The silver market faces some short-term headwinds as focus on the potential for tighter monetary policy; however, the precious metal’s drop to a three-month low below $25 an ounce has exaggerated the market’s weakness, according to one research firm. In a report published Wednesday, analysts at Metal Focus reiterated their positive outlook for silver, looking for higher prices by the end of the year. In the report, the analysts said they see the recent selling pressure as more strategic rather than a fundamental shift in investor interest.

“It is worth noting that much of the recent selling in silver has come from tactical players, as evidenced by a sharp reduction in managed money longs on COMEX. Silver ETPs also witnessed outflows, albeit modestly, leaving holdings just 5% below February’s all-time high. With trend following selling largely done and the hawkish tilt factored in, this should leave scope for fresh investment inflows later this year, leading to a healthy rebound in silver prices in the coming months,” the analysts said.

The analysts also noted that silver investors don’t have to fear rising interest rates anytime soon. “Across many economies, labor markets remain a long way from their pre-pandemic state. Against this backdrop, the continuation of ultra-loose monetary and fiscal policies in the U.S. and elsewhere seem inevitable,” the analysts said.

While paper demand for silver has dominated the marketplace, The U.K. research firm noted that investors are taking advantage of discounts in the physical metal. “Our bullion coin survey suggests that silver bullion coin sales jumped by 48% and 22% y/y in North America and Europe respectively in H1.21. A further sign of retail strength has emerged lately, with the launch of the newly designed silver Eagle selling out (although the initial quantity offered by the U.S. Mint was relatively low),” the analysts said.

Looking past investment demand, Metals Focus said that they still expect to see healthy industrial demand even as the spread of the COVID-19 Delta variant weighs on economic growth expectations. “Silver’s industrial offtake in 2021 is still on track to achieve a new annual high for our series back to 2010. Much of this year’s growth is due to photovoltaic (P.V.) demand, as new capacity additions year-to-date have exceeded previous expectations. Going forward, growing commitments to carbon neutrality across several key economies, coupled with a solid pipeline for P.V. projects, should help underpin silver demand.”

On the day gold closed down $3.60 at $1801.40 and silver closed down $0.15 at $25.22.

Platinum closed down $29.20 at $1059.60 and palladium closed down $42.20 at $2660.60.                      

My Brothers and Sisters, we always thank you for your business and fellowship. If you have unusual circumstances, need cash or are looking for a special visit – talk to Harry. Many on our staff have now received the vaccine as we continue to enforce rigid safety standards between people and product. Be careful, this virus remains a danger. At the same time trust that God will soon get us back to normal. Richard Schwary

Risk Disclosure – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisors. The precious metal and rare coin markets are random and highly volatile so they may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.

 

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Gold – Overhead Resistance

Gold – Overhead Resistance

Commentary for Friday, July 16, 2021 (www.golddealer.com) – Gold closed down $13.90 at $1814.50 today and silver closed down $0.60 at $25.78. The gold futures market for more than an hour today tried to break above $1826.00. But this “hard” overhead resistance proved to be a “bridge too far”. And in a classic “if you can’t beat them join them” turnaround – traders pushed gold into the red and profit taking won the day. I suspect this will be only one of many such battles as the commodity market tries to make sense out of an FOMC which is deciding and redeciding when and how to pivot. I would not obsess over these “ups and downs” but I would stay tuned. This story is developing and important. Last Friday gold closed at $1810.00 / silver at $26.21 – on the week gold lost $4.50 and silver lost $0.43.   

The good news is that delivery on 2021 US Gold and Silver Eagles is getting better (still not “normal” but improving). And we are finally receiving early .9999 fine silver round orders. The bad news is that “any new orders” are still 3 to 6 weeks coming from the manufacturer. My guess, however, is that delays will soon shorten. 

Should you decide to use our Delayed Delivery Program please talk with your service rep and understand how this program works. It is handy if you want to lock in the price “now” and insist on new product – but is not for everyone. Just like us – you must pay upfront to “lock in” prices and you can’t “change” your mind. So, unless God has blessed you with patience, please ask your rep for other options and thank you for your understanding.

Gold on Monday was typically indecisive. It pushed higher in early trading, sold off, touching $1792.00 and reversed again moving into the $1806.00 range. So, it looks like traders are pushing both sides of the road, looking for weakness or strength. This makes sense because this week there may be enough fresh information to confirm a bearish or bullish short-term trend.

I think the trade may at this point favor weaker gold prices. The Dollar Index remains at monthly highs (92.16) and according to Reuters safe-haven seekers are not concerned about the new Delta variant. Traders will also be watching the US CPI numbers out Tuesday. And will focus on content and tone when FOMC Chair Powell talks to Congress on Wednesday and Thursday.

“We’re almost in this environment where good news is bad news and bad news is good news” said David Meger, director of metals trading at High Ridge Futures, referring to the CPI data and it’s impact on Fed policy. If inflation data becomes more benign, the Fed would feel slightly less inclined to ease its asset purchases which should benefit gold, but if they are concerned about inflation, they’re more likely “to tap the brakes” on purchases, weighing on gold, Meger added.

Zaner (Chicago) – “While the gold market has respected $1,800 in the early trade today the bull camp continues to lack a definitive bullish theme capable of “driving” prices sharply higher. In a slightly negative development, overnight stories of Indian sales of family gold heirlooms are predicted to push scrap sales above 215 tons this year, with reports of very heavy sales of gold in southern India in the face of severe financial pressures from the pandemic. All things considered, the rally in gold over the prior two weeks has been impressive with the market fighting against periodic strength in the dollar and a slight sprinkling of economic disappointment. On the other hand, interest rates in the same timeframe fell precipitously and in turn became the “focus” of the gold trade. Given the lack of tight positive correlation between gold and silver, one could argue that the gold market focus has also been trained on a measure of flight to quality buying for gold while industrial demand disappointment is a feature in the silver market.”

For now, the gold “picture” remains mixed, with a mild negative bias. But I think it is a big mistake to discount the Delta variant. This “not to worry attitude” is what put us behind the 8 ball in the early pandemic. What is frustrating the bullish scenario is gold’s failure to take out overhead resistance. Looking at the 30-day pricing chart, gold seems “stuck” between $1760.00 and $1810.00. This usually takes the buzz out of the bullish scenario. On the day gold closed down $4.50 at $1805.50 and silver closed almost unchanged up $0.01 at $26.22.

On Tuesday however traders focused on the latest inflation news. The US Labor Department said its US Consumer Index rose 0.9% or nearly twice the expected number of 0.5%. The trade rightly sees this as “hot”, supporting the contention that inflation is a problem. And Fed Chief Powell will likely be grilled on this issue when he talks with Congress this week.

This 13-year high in inflation was enough “bullish news” to create fresh gold buzz in early trading. But gains were capped as the Dollar Index surged (92.75). By the end of the trading day gains were surprisingly mild. So, the futures market is still not convinced there is a “trend” in place. If they were, analysts would be talking about $2000.00 + this year.

The “inflation threat” does make the FOMC hawkish and threatens gold prices.

The problem everyone has centers around what the Fed might eventually do given this dilemma. Their long-established and successful recovery plan has been a “steady as she goes” approach which supports pandemic recovery and full employment. This massive spending program (Quantitative Easing) created $11 trillion dollars out of thin air and ballooned the Federal balance sheet to historical records. And the Fed claimed this spending spree would stay in place through 2022. Officials now claim early changes are necessary. And that is the catch.

The Fed has at least three options if the inflation scenario is not transitory. The first, and most likely will be to “talk down” this ruckus. The latest deficit numbers came in cold showing an 18% decrease year over year! This supports the Morgan Stanley claim that the Fed may not taper faster than anticipated. The second, they might raise interest rates – not a good option but effective. Third choice, they may modify their asset purchase plan. Now a whopping $120 billion a month. How all of this magic might work is still in the wind. Gold continues to consolidate around $1800.00. For now, a psychologically important level. Today gold closed up an unimpressive $3.90 at $1809.40 and silver closed down $0.10 at $26.12.           

On Wednesday the domestic gold market opened firm – pushing to $1830.00 before profit taking settled the day into mid-range gains. The professional trade is still cautious of recent strength these past 3 weeks, but Zaner (Chicago) points out that gold has shown resiliency with rising open interest and strong trading volume. Still, the trading atmosphere remains pensive – Fed Chair Powell will talk with Congress today, but I doubt this will clear up indecision over the question of inflation. It will be interesting to see how Powell squares the latest Democratic stimulus package with the rising inflation scenario.

Reuters – “Gold jumped on Wednesday after U.S. Federal Reserve Chair Powell reassured investors that the central bank would continue its accommodative monetary policy despite a recent spike in inflation readings. Powell, in prepared remarks before a congressional hearing, said the U.S. job market “is still a ways off” from the progress the Fed wants to see before reducing its support for the economy, while current high inflation will ease “in coming months.” “It really cements the belief that despite this hotter inflation data, the Fed still remains on course to be fairly accommodative,” said Edward Moya, senior market analyst at OANDA. Investors also cheered recent comments by European Central Bank (ECB) officials that the central bank would not tighten too early. “You’re going to see more dovish signals from the ECB and the People’s Bank of China (PBOC), which should provide some support to the dollar, but this is still good news for the stimulus trade and that is going to be very positive for gold.”

I would describe this market as mildly interesting. Today Powell sounded dovish, the US Producer Price Index came in hot, and the technical boys now give the edge to the bulls. Bearish talk is not as heavy. Still, the 60-day gold chart suggests strong overhead resistance between $1860.00 and $1900.00. So higher gold numbers, inflation or not will be no piece of cake.

The potential of rising interest rates, the negative FOMC scenario for gold remains the elephant in the living room. I expect the Fed will continue to dance around these questions in an effort to keep everyone on the same page.

If inflation is transitory, they will obviously take the credit for saving the day. If inflation numbers continue higher, they have time to take mild corrective action to cool this process down. In either case their plan of continued monetary support will change but not quickly. This is key to understanding the short to medium term. Expect choppy pricing and continued consolidation.

At the same time there are other, less obvious factors which support the bullish gold scenario. The genuine “world” fear of incipient inflation is a good example. As central banks continue to inflate their monetary base the notion of monetary abuse will become more obvious. I also like the longer-term argument of “relative value”. It is unfortunate that the gold trade is so highly focused on the short-term view. Demand for physical gold turns from incipit to immensely popular “at some number” so consider its current discount to all-time highs. Everyone knows there is plenty of loot sitting on the sidelines “waiting” so anticipating renewed fireworks makes sense. On the day gold closed up $14.90 at $1824.30. Silver closed up $0.13 at $26.25.           

Gold pricing Thursday was disappointing but logical. The market was essentially flat – but I think many were expecting a real push to higher ground. Zaner (Chicago) – “It is difficult to determine the primary bullish force serving to lift gold and silver prices this week, but we suspect that persistent resiliency in US treasury bond and note prices (lower yields) is at the top of the list. However, it is also possible that uncertainty on the economy (US data has been disappointing, the delta variant is increases infections significantly and the Fed chair has indicated the economy is not where they would like to be) providing a measure of uncertainty/flight to quality buying interest. In fact, the Federal Reserve chairman said that the recovery had not progressed enough to begin reducing the central banks monthly asset purchases. Unfortunately for the bull camp, gold ETFs saw an outflow yesterday bringing the year-to-date change to a decline of 6.1%. Clearly, the action in the dollar is not a primary driving force for gold and silver prices at present as the dollar has basically swung back and forth within a trading range for the past 3 weeks while the gold market has ground out almost $100 of gains. Some traders will suggest that gold and silver are benefiting from growing expectations for inflation, as the Fed once again indicated it was surprised in the magnitude of the inflation and suggested its sources expect to see more inflation ahead. It is also likely that better than expected Chinese economic data (GDP, industrial production, and retail sales) have sparked some hope of improved physical gold buying from China. Obviously, the gold market jumped in anticipation of Fed Chairman Powell’s first day of testimony to Congress yesterday, but we doubt the trade will see much in the way of fresh revelations from the 2nd day of testimony today.”

Given an obviously more dovish Fed and other bullish developments why is gold backing off Thursday morning? Perhaps the reality of tough overhead resistance is settling into the trading mentality. This is not new; traders have recently bought the dips and sold the rallies. It is interesting however that Powell’s revelations did not create continued buzz this morning.

The gold ETF outflows suggest that the public is not buying the “inflation” scenario and low treasury yields support this notion. Not many are too worried about much, including the resurgence of the deadly virus variants which could supercharge winter safe-haven demand.

The potential of higher gold and silver prices remain a primary focus for investors. But the fear factor is fading, which makes no sense because today’s inflation numbers, while being ignored are reminiscent of the 1970’s fiasco and the potential for damage now much larger.

Our across the counter action is also difficult to put into the standard box. We are busy but not in the extreme. Still, there are times when getting through on the phones is a challenge. Selling of gold and silver bullion has begun but not enough to suggest the public is worried about current price levels. The product we do buy is sold within a week, and in many cases within a few days. Immediate delivery is the driving public principle so there is a kind of hidden urgency here that may not yet be apparent to the average interested person.

Most of our employees have been vaccinated and are back in the building which makes coordination easier as we work toward reopening. But the variant virus will keep us cautious until an official announcement. We still wear masks, sanitize everything, and take temperatures. On the day gold closed up $4.10 at $1828.40 and silver closed up $0.13 at $26.38. 

The significantly bullish gold scenario on Friday remained elusive, even though dialogue remains upbeat. Yes, gold is trading around monthly highs, which suggests an optimistic technical picture, but today’s breakout attempt failed at $1826.00 leading to swift profit taking. A strong Dollar Index (92.75) also contributed to this reversal.

And while Powell’s early public comments were financially dovish – indicating more financial help would be necessary. By the end of the week, he noted the FOMC are watching inflation numbers carefully and were already in talks discussing possible taping scenarios.

In my mind the Fed Chief’s message should now be considered mixed. The inability of gold to capitalize earlier in the week coupled with the typical “summer” trade decreases that promising buzz and may lead traders back to an old scenario – selling the rallies and buying the dips.

LA County has reinstated the mask indoors mandate as the coronavirus numbers push higher. This variant problem has not developed much traction with the safe-haven crowd, but it is worth remembering that if the US slips backwards on the pandemic numbers it will give the Fed another reason to extend its massive financial support. I don’t think this will turn into the old safe haven push we saw at the beginning of this pandemic but if the numbers continue higher, it may be enough of a problem to at least underpin gold prices through the end of the year.

Grant on Gold (Zaner) – (1) Gold set a 4-week high on Wednesday and is up more than 1% on the week at this point. The yellow metal is currently up for a fourth consecutive week. (2) Silver remains consolidative and comparatively suppressed relative to gold. While the yellow metal has caught a safe-haven bid recently, silver is trading more like an industrial metal concerned about the global rise in COVID cases. (3) Platinum set a 4-week high on Wednesday at $1136.61. That’s more than 11% off the June low at $1019.00. (4) Palladium remains confined to last week’s range but the magnitude of the upside retracement already seen continues to bode well for another run at the $3017.00 record high.

And even with perhaps substantial cross currents Zaner (Chicago) suggests a positive tilt going into the weekend, notwithstanding this latest round of profit taking. “It is also likely that this week’s Fed patience with invoking tapering has been embraced by the marketplace at-the-same time that more analysts are beginning to doubt inflation will be temporary. However, the surge in global Delta variant infections has prompted a measure of flight to quality buying of gold with the US daily rate of infections approaching 34,000 on Wednesday. In another emerging bullish theme, there are reports from the international monetary fund that central bankers have resumed gold purchases, with Brazil thought to have added 42 tons to its reserves last month, which in turn is the largest purchase by that bank in over 2 decades. In conclusion, the gold bulls have seen a collection of different bullish themes begin to enter the daily trade lexicon, and that in turn has made sellers nervous. As we indicated earlier this week, the August gold contract appears to be on track to trade above $1,850 and we would remain bullish toward gold as-long-as the market avoids a close below $1,796. With the silver market continuing to coil in a very tight range, it is apparent that silver is not benefiting from or embracing the same fundamentals as gold. Therefore, it is likely that the silver market has drifted into a physical and industrial commodity standing and may have more in common with copper than gold.” On the day gold closed down $13.90 at $1814.50 and silver was lower by $0.60 at $25.78. Unfortunately, a disappointing finish to what many considered a very promising week.

Platinum closed down $29.00 at $1107.00 and palladium closed down $92.00 at $2635.50.                     

My Brothers and Sisters, we always thank you for your business and fellowship. If you have unusual circumstances, need cash or are looking for a special visit – talk to Harry. Many on our staff have now received the vaccine as we continue to enforce rigid safety standards between people and product. Be careful, this virus remains a danger. At the same time trust that God will soon get us back to normal. Richard Schwary

Risk Disclosure – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisors. The precious metal and rare coin markets are random and highly volatile so they may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.

 

 

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Gold – Mixed Signals?

Gold – Mixed Signals?

Commentary for Friday, July 9, 2021 (www.golddealer.com) – Gold closed up $10.40 at $1810.00 today and silver was higher by $0.24 at $26.21. The gold trade going into the weekend remains mixed but perhaps promising. The bullish outlook is improving yet subject to Fed governors who like to speculate over some form of bearish tightening, given the expected robust recovery of the US economy. Still the fact that gold has lost $93.00 this past month and is unchanged this past year seems to be carrying less weight. Consumers are stuck with trying to figure out if this latest drop is enough to bring in real bargain hunting, given the still developing inflation scenarios. At the same time Neils Christensen (Kitco) considers an aggressive future with 40% of non-gold investors looking to jump into market in the next 3 years – WGC, Greenwich Associates. This uncertainty offers up a fine kettle of fish on the short term – an old Scottish idiom borrowed nicely by Laurel and Hardy when I was a kid. Last Friday gold closed at $1782.60 / silver at $26.48 – on the week gold was up $27.40 and silver was down $0.27.  

The good news is that delivery on 2021 US Gold and Silver Eagles is getting better (still not “normal” but improving). And we are finally receiving early .9999 fine silver round orders. The bad news is that “any new orders” are still 3 to 6 weeks coming from the manufacturer. My guess, however, is that delays will soon shorten. 

Should you decide to use our Delayed Delivery Program please talk with your service rep and understand how this program works. It is handy if you want to lock in the price “now” and insist on new product – but is not for everyone. Just like us – you must pay upfront to “lock in” prices and you can’t “change” your mind. So, unless God has blessed you with patience, please ask your rep for other options and thank you for your understanding.

The gold domestic market this past Monday was closed for Independence Day. On Tuesday however gold was surprisingly higher for several reasons. Reuters believes gold pushed over the important $1800.00 mark because bond yields held near two-week lows as investors anticipate the FOMC minutes release this Wednesday. They also claim that central banks are now dismissing the idea that the Fed will soon change interest rates. In other words, their predominate lose money policy will remain in place, ignore possible inflation, and support continued growth

From Zaner (Chicago) – “While the expectation of inflation has not been consistently embraced by precious metal market it would appear a measure of inflationary sentiment is serving to lift commodity prices this morning. The source of the inflationary spark is the surge in energy prices following the inability to reach a deal for returning production withheld by OPEC plus members. Yet another source of inflationary psychology is the looming US Federal Reserve meeting minutes scheduled for release on Wednesday. While a potential temporary influence, it should be noted that the latest two days of infection count readings from the US (July 1st and July 2nd) registered lofty 17,911 and 15,515 cases respectively and that combined with continued highly contagious spread could put the Covid 19 storyline back in a front and center standing!”

Today’s higher prices may be transitory but serve a good purpose. They help build the notion that $1780.00 support continues to develop. This is critical for the return of bullish sentiment and a brighter outlook for gold traders. The technical picture is showing small improvement as the bulls hope that in place trader dialogue is developing new possibilities.

Gold this past month lost $100.00 over hawkish Fed interest rate comments. The professional trade moved from a neutral to negative bias. And the famous double bottom at $1700.00 was questioned. But if gold holds this consolidation ($1780.00) the talk over morning coffee may again shift. Could gold now be oversold in an overreaction to recent hawkish Fed comments?

Still, these are early days in this still developing picture. What exactly will the central banks of the world do in these unprecedented times? And gold pricing between $1800.00 and $1900.00 remains a challenge. It was at these lofty numbers that the original bullish scenario of $2300.00 gold broke down in the summer of 2020. Today gold closed up $10.90 at $1793.50 and silver closed down $0.33 at $26.15.          

On Wednesday gold pushed higher in the overnight Hong Kong and London markets, turned choppy in the domestic trade but still finished in the green. The FOMC minutes will be released after the markets close this afternoon and while all expect a continued dovish Fed the early rise in the Dollar Index suggests something is amiss. In early trading the dollar was initially lower but powered up more than a full point, which was enough to stop the gold surge at $1810.00.

Just what is happening here will probably be clear after the Fed release. For the present however the Zaner (Chicago) comments underpin gold’s recent firmness. We think the markets will “buy the rumor” of a dovish Fed – “However, looking back it should be noted that the US has now produced 5 disappointing nonfarm payroll readings out of the past 8 reports, and the FOMC meeting minutes were compiled in the wake of two disappointing monthly reports in a row! Therefore, we think the odds are good that the tone of the FOMC meeting minutes will be guarded toward growth and therefore less hawkish toward policy.”

Recent higher gold prices were also helped by falling Treasury yields now looking at February lows of 1.3%. The recent oil pricing indecision among OPEC has also added confusion to the gold trade. But generally, gold’s most recent higher numbers have been considered lackluster by traders considering its June drop of 7%.

TheStreet suggests a different dimension this morning. “Tapering is likely late this year, but that’s a distraction; the real issue is whether rates will have to rise in 2022, earlier than the Fed’s current forecasts,” said Ian Shepherdson of Pantheon Macroeconomics. “We think that’s a good bet, and we expect markets increasingly to take the same view.”

“The fall, then, will bring a struggle between the Fed leadership and markets which become increasingly skeptical of the dot plot,” he added. “Accordingly, we expect 10-year yields to head towards 2% by the year-end, putting pressure on equity valuations even as earnings surge.”

If they are right – traders would obviously abandon the dovish Fed conclusion and the price of gold will remain choppy, struggling in the absence of solid inflation numbers. Today Reuters points out that if fresh hawkish cues reappear gold could move below its important 100 day moving average ($1790.00).

On the day however the release of the Fed minutes offered no new information. And lower Treasury yields (because the fear of higher interest rates is diminishing) continues to support current gold prices. On the day gold closed up $8.00 at $1801.50 and silver closed down $0.04 at $26.11.          

Gold on Thursday once again pushed towards $1820.00 and was met with the characteristic profit taking round which now appears to be solidly in place. While the technical picture is improving for the bulls on the shorter term there are still bears in these woods and the possibility of short-term profit taking will remain a professional trading priority.

The bullish or bearish view in this market should rightly now be called “transitory” as the Fed dances around the issue of central bank asset purchases. Reuters – “While a pick-up of inflation should bring new buyers into the (gold) market, tighter monetary policy is set to keep the metal within recent ranges,” BofA Global Research said, forecasting gold to average $1,828 this year.

I expect a continued choppy trade supported by improving bullish sentiment. The Dollar Index has risen a whopping 2 points this past month which is likely not sustainable – given a dovish FOMC – so look for a weaker dollar supporting current gold pricing.

While Covid related safe-haven demand has moved lower this dynamic should not be ignored in longer term planning. Ciara Linnane (MarketWatch) warns that the new Delta variant of Covid-19 posses a significant threat as global death toll climbs above 4 million on Thursday. The Delta variant is now the dominant strain in the US and is highly transmissible. Stay safe, currently 9 out 10 Covid deaths are now in unvaccinated people.

And while Zaner remains optimistic about firm gold prices given a declining dollar they still have reservations. “However, it is likely that a significant washout in crude oil prices, a 5th straight day of ETF gold liquidation and initial weakness in platinum, palladium, and copper prices is holding back gains in gold and silver.” On the day gold gave up earlier gains closing down a disappointing $1.90 at $1799.60 and silver closed down $0.14 at $25.97. 

Gold did not surprise on Friday offering up a mildly higher tilt, likely because the Dollar Index was somewhat weaker, yet still solidly above the powerful 92.00 mark. The bulls and bears are still fighting for this middle ground. Fresh news will push this argument but there are legitimate differences between professionals and so gold struggles against overhead resistance between $1800.00 and $1810.00.

Zaner has been around forever and likes support pricing levels for gold, hinting at a shifting gold psychology. But still gives the edge to the bears. “We are surprised that gold and silver prices are tracking higher this morning in the face of a positive dollar trade and slightly soft Chinese CPI and PPI readings for June. On the other hand, seeing mild inflation is thought to allow the Chinese government to provide more stimulus in the form of a reduced reserve rate requirement for banks or other measures like rate cuts and government spending. Investors remain cool toward gold and silver, with ETF holdings in both metals falling yesterday with the silver outflow very significant at 1.8 million ounces! However, gold should see support from overnight news that Indian imports last month increased by 14% over year ago levels, but year ago levels were extremely anemic due to the pandemic lockdown in the country. Nonetheless, it is likely that Indian gold consumption is on a slow grinding recovery, with some pent-up demand likely to add to consumption.”

Reuters has growing concern over the possible impact of the Delta Covid variant, especially in countries lagging in their vaccination programs. This does not carry much weight at the present but could become a big factor this winter as Pfizer scrambles for a Covid variant booster.

Grant on Gold – July 8, 2021 (Zaner) – “Gold has been on the bid since the first of the month. In fact, the yellow metal notched six consecutive higher daily closes through Wednesday and scored a 3-week high of 1818.34 on Thursday before selling pressure emerged. Silver is lagging gold on the upside this week. The white metal is actually 1.8% lower on the week as of Thursday’s close. Platinum is trading lower for a second consecutive week with upside progress thwarted by the rebound in growth risks. Palladium seems to be weathering this latest storm the best, given its persistent supply deficit and the prospect of it worsening.”

It’s interesting that in the middle of this central bank mess opinions vary over how to proceed. Reuters – Five reasons the ECB didn’t follow the Fed on inflation. These reasons revolve around such things as politics, the ECB’s own miss on inflation (it was much bigger), the ECB chose a tailored strategy with flexibility because targeting average inflation over a period of time is messy. Finally, our Fed’s own struggles dissuaded the ECB from going down the same path.

So why should this worry anyone? Because as Europe goes – so goes (eventually) the US. We both have many common free enterprise goals. And I would assume their methods would not be materially different from ours. The more they differ the more confusion as to who is right.

On the day gold closed up $10.40 at $1810.00 and silver closed up $0.24 at $26.21.                                         

Platinum closed up $21.20 at $1094.40 and palladium closed up $1.80 at $2810.20.                     

My Brothers and Sisters, we always thank you for your business and fellowship. If you have unusual circumstances, need cash or are looking for a special visit – talk to Harry. Many on our staff have now received the vaccine as we continue to enforce rigid safety standards between people and product. Be careful, this virus remains a danger. At the same time trust that God will soon get us back to normal. Richard Schwary

Risk Disclosure – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisors. The precious metal and rare coin markets are random and highly volatile so they may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.

 

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Gold – A Cautious Long Weekend

Gold – A Cautious Long Weekend

Commentary for Friday, July 2, 2021 (www.golddealer.com) – Gold closed up $6.70 at $1782.60 with a positive $8.00 aftermarket. Silver closed up $0.40 at $26.48. The much-expected job numbers were out today, and the picture is mixed. The US added jobs, but unemployment also moved higher. It is the fear of higher unemployment that pushed gold into the green. At the same time, it is interesting that the Dollar Index remains at 6-month highs. The reasoning here is a bit obscure. Better employment should equal lower gold, but the increase was less than expected, in other words it disappointed. This is not enough to discourage the current bearish picture but provides a warning to the short trade. Reuters “Gold has done a really healthy job of solidifying a bottom and we’re seeing a bullish technical tailwind behind gold,” Streible said, adding that gold investors were also likely expecting some weaker economic data into the third quarter.” Expect thin trading into the 4th of July holiday – commodity markets and GoldDealer will be closed Monday, July 5th. Last Friday gold closed at $1776.60 / silver at $26.08 – on the week gold was higher by $6.00 and silver was almost unchanged – up $0.40.  

The good news is that delivery on 2021 US Gold and Silver Eagles is getting better (still not “normal” but improving). And we are finally receiving early .9999 fine silver round orders. The bad news is that “any new orders” are still 3 to 6 weeks coming from the manufacturer. My guess, however, is that delays will soon shorten. 

Should you decide to use our Delayed Delivery Program please talk with your service rep and understand how this program works. It is handy if you want to lock in the price “now” and insist on new product – but is not for everyone. Just like us – you must pay upfront to “lock in” prices and you can’t “change” your mind. So, unless God has blessed you with patience, please ask your rep for other options and thank you for your understanding.

This past Monday gold was choppy, trading in a tight $10 range looking for a reason to shake off recent losses and a deteriorating technical picture. Reuters claims that gold investors are caught between fears of the new Delta coronavirus variant and the expectations of an early rate hike by the US Federal Reserve.

While this trading pattern is typical of summer months, and the Fed has only talked about possible actions there is tension in this trade. And while the technical picture is bearish for gold, I believe this trade is not yet “heavy” and does not portend dramatically lower prices. Gold is lethargic for sure, showing no interest in overnight US air strikes in Iraq and Syria. And this gives way to negative thinking. But you could just as easily be seeing the rising Chinese interest in gold trying to resolve the falling interest in India.

“Early trading patterns in gold today fail to telegraph a preferred chart direction but Zaner (Chicago) gives the edge to the bear camp as fears of slowing physical demand from the Asian infection problem. In fact, demand fears were given added credence this morning by evidence that Hong Kong gold exports to mainland China in May fell precipitously. Gold might see additional pressure from a Goldman analyst suggestion that inflationary pressures are likely to be transitory, as is the company line of the US Federal Reserve. Recently, Goldman has predicted further sharp gains in oil prices and a resumption of the commodity flare and the overnight forecast that inflation might only be transitory is a partial change in market sentiment from the brokerage firm.” Today gold closed up $3.00 at $1779.60 and silver was up $0.14 at $26.22.          

On Tuesday gold prices were initially choppy in Hong Kong and London but finally broke down in the domestic trade as the Dollar Index pushed to three-month highs (92.10) and the US consumer confidence index soared as the pandemic winds down in the US.

Our shiny friend is trading at an 11-week low as its technical picture disappoints but its significant that today’s drop caught a solid bid at $1755.00 recovering half of today’s early losses in what looks like a combination of short covering and bargain hunting. Reuters points out that if upcoming job’s data improves it will weigh on gold. And Federal Reserve Bank of Richmond President Thomas Barkin suggests the Fed had made “substantial further progress” in its inflation goal in order to begin tapering asset purchases.

The growing fear of a Fed interest rate change is the elephant in the living room which has weighed on the price of gold since Powell’s most recent FOMC hawkish pivot. So, today’s drop is just a continuation of the latest big wash-out and may still have legs.

But in the longer-term cheaper prices in gold have always attracted bargain hunters. And both gold and silver traders are still trying to get a handle on real “value” in a post pandemic world.

I think Fed action this year will be limited because the pandemic in countries like India continues to menace and is likely the reason behind their falling physical demand. There is no reason for them to move quickly. Their super accommodative monetary policy is already being questioned but will likely remain in place until the real short term inflation picture become clear.

The possibility of a significantly modified approach by the FOMC is what feeds the various bearish gold trends. Still, various bearish scenarios overlook the fallout which classical economists fear when too much fiat money is created. But this reasoning is tired for the present and technical “pile on” may resume. But gold pricing is easily oversold.

There may be too much emphasis placed on uncertain future Fed action. Meaning price volatility may come and go while traders carefully watch to see inflation become a problem on the short term. Obviously, Treasury yields will be watched carefully. Reuters two days ago notes that 10-year yields have moved about 1.5% as inflation rises. But historically 1.5% is still super cheap. On the day gold closed down $16.80 at $1762.80 and silver closed down $0.35 at $25.87.         

Gold was flat in overnight Hong Kong and London Wednesday and mildly higher in the domestic trade as both gold sees its largest monthly decline since November 2016 according to Reuters. “The dollar is rallying, the S&P 500 has consistently forged new record highs,” said Phillip Streible, chief market strategist at Blue Line Futures in Chicago. The dollar index ticked 0.2% higher, making gold more expensive for other currency holders. Additionally, hawkish Fed officials have re-affirmed they are going to raise rates in 2023 as well as start tapering bond purchases. “These are all things gold investors hate,” Streible added.

Zaner is also downbeat – “While August gold has managed to respect the $1750 level overnight, the damage to the charts yesterday and the damage to bullish psychology is significant and will likely result in a failure of the $1,750 level in the coming sessions. In fact, even if the $1,750 level is some form of technical value in gold, the gold and silver markets continue to lack a definitive bullish theme. Not surprisingly, investors are also cool toward gold and silver ETFs with gold exchange traded funds yesterday seeing an outflow of 18,256 ounces and silver holdings posting a decline of 998,457 ounces. It should be noted that this year’s net sales of gold ETF holdings has now reached 6.2 million ounces at-the-same time that silver ETF holdings yesterday saw the 9th straight day of outflows and in turn posted the longest outflow streak since November 30th. In another negative development, gold and silver failed to benefit from positive Chinese PMI data released overnight. Furthermore, reports overnight highlighted ongoing contraction in the Indian economy with the month of May showing a drop in the Bloomberg monthly GDP tracker and that in turn casts doubt on a recovery of Indian gold demand.”

So, are we all ready to jump out the window? Not really, like I said bearish and bullish sentiment comes and goes in this market like wind. And to dismiss a plausible inflationary scenario on what the Fed might have in mind is not good financial planning given the state of modern central bank financing. Even in this negative safe-haven environment virtually any acceptable bullion product has a short shelf like in our inventory and there are standing orders for specific bullion products with money wired upfront! Not all investors are ready to ignore the dangers of inflation regardless of how well the Fed is at making the case for safe central banking. Not many like a falling market but averaging down is always an option. My bet is however that most will be patient during this transition – sellers will not materialize in any great degree and buyers will bargain hunt. Many will wait and see what happens between now and the end of 2022. Gold closed up $8.00 on the day at $1770.80 and silver closed up $0.30 at $26.17.

Trading on Thursday reflects a somewhat confused trade in that early pricing pushed higher and then quickly reversed itself as traders sold the mild rally. This likely the result of a Dollar Index and bond yields moving to recent highs. You might also speculate that if our recovery stays on tract with some pluses and minuses (which has been the case) the Fed might feel no need to act quickly. A bit optimistic but plausible in this mighty central bank balancing act.

I think this pricing picture will remain muddled even with the bears holding the technical aces – at the present time. The current bearish technical picture is weighty especially when it plays into the scenario of falling safe haven demand as the pandemic winds down.

But this trade present cautionary signs. The new virus variants should not in good conscience be easily dismissed if we have learned anything from this pandemic. The “no inflation” scenario may hold water on the short term but present real problems over the next few years.

The still underappreciated bullish idea here is that central banks must keep interest rates low or suffer the consequences. Higher interest rates set up possible nightmare financial scenarios concerning growth. Not at the beginning – but as rates rise growth goes out the window. I do not think the typical “Dr. Doom” collapse is possible, but I would at least consider the possibility.

My point being that there are so many possible gold scenarios on the table that watching the metals carefully makes sense. The silver lining in this market is that while pricing is moving lower, the metals are still holding on to most of the gains it has seen over the past 5 years.

And whether gold holds up at its most recent double bottom ($1700.00) or drifts lower in an oversold market is not the point. Consider taking advantage of what should now be considered bargain prices. The notion that gold will collapse is a circus side show. The reality is simple. What other option offers protection against potential financial catastrophe? And includes complete privacy with no third-party intrusion? This latest drop in pricing will likely lead to further bargain hunting and consolidation. Waiting for inflation to come walking in the front door. Gold on the day closed up $5.10 at $1775.90 and silver closed down $0.09 at $26.08.

Gold surprised on Friday in what some may call a relief rally. But this call for a continued bearish outlook for gold pricing may turn out to be an important pivot point for the metals even though both gold and silver ETF’s saw outflows yesterday. It also worth noting that given the cyclical performance of the Dollar Index (now at 6-month highs) it is possible that any “economic miss” – entirely reasonable given the crosscurrents now in play, will lead to a weaker dollar and further good news for the bullish scenario. It is also worth noting that yesterday and today “big boy” orders have been coming across our counter. Counter to ETF indications but an indication that American buyers are not convinced the FOMC line is playable and are bargain hunting. On the day gold closed up $6.70 at $1782.60 and silver closed up $0.40 at $26.48.                                        

Platinum closed up $7.00 at $1085.40 and palladium closed up $23.60 at $2790.70.                     

My Brothers and Sisters, we always thank you for your business and fellowship. If you have unusual circumstances, need cash or are looking for a special visit – talk to Harry. Many on our staff have now received the vaccine as we continue to enforce rigid safety standards between people and product. Be careful, this virus remains a danger. At the same time trust that God will soon get us back to normal. Richard Schwary

Risk Disclosure – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisors. The precious metal and rare coin markets are random and highly volatile so they may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.

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Gold – Quiet Summer Trading

Gold – Quiet Summer Trading

Commentary for Friday, June 25, 2021 (www.golddealer.com) – Gold closed up $1.00 at $1776.60 and silver closed up $0.03 at $26.08. While there was some inflation excitement in the early gold trade, the market sold off at $1790.00 and finished the day almost unchanged. For now, traders and investors seem to respect the Fed’s latest “transitory” inflation definition and so are content with selling the rallies. Current solid support at $1780.00 may however portend another challenge at $1800.00 on the short-term. Last Friday gold closed at $1767.90 / silver at $25.96 – so on the week gold gained $8.70 and silver gained $0.12.  

The good news is that delivery on 2021 US Gold and Silver Eagles is getting better (still not “normal” but improving). And we are finally receiving early .9999 fine silver round orders. The bad news is that “any new orders” are still 4 to 8 weeks from the manufacturer. My guess, however, is that delays will continue to shorten. 

Should you decide to use our Delayed Delivery Program please talk with your service rep and understand how this program works. It is handy if you want to lock in the price “now” and insist on new product – but is not for everyone. Just like us – you must pay upfront to “lock in” prices and you can’t “change” your mind. So, unless God has blessed you with patience, please ask your rep for other options and thank you for your understanding.

This past Monday gold staged what should be called a relief rally. And saw some short covering as treasury yields and the dollar’s rally weakened. The Dollar Index came off highs (92.30) and settled around 91.89 as inflation talk continues. Reuter’s – “The reversal in some of the strong gains we saw in bond yields last week has supported the market. Adding to that the dollar is trading a tad softer after the recent strength,” said Ole Hansen, head of commodities strategy at Saxo Bank. “We’ll see some consolidation here and correction to the upside. Gold needs to break at least above $1,800 and the real battle is probably more around the $1,820 level.”

This market now looks for specific direction after last week’s hawkish stance relative to the possibility of rising interest rates. Since the Fed has begun to talk about rising rates and modified asset purchases this elephant in the front room will be the primary focus on the short term. Powell’s written comments, released today, stated that inflation has risen “notably” but repeated that this was only “transitory”. He also noted continued threats from the Covid pandemic.

The bearish scenario is now in charge of the technical picture but there continues to be plenty of crosswinds in gold’s fundamentals. The recent drop in prices has spurred buying interest in India but a yawn in China (Zaner – John Miles). Crude oil at $73/barrel and ECB President Lagarde’s testimony that the central bank will maintain aggressively loose monetary policy and ignore current inflationary pressures are bullish gold factors in the longer term.

Because lower treasury yields suggest the “inflation scenario” is losing steam look for consolidation at current pricing levels. Still, the core inflation argument is deeply rooted within and threatens modern fiat currency creation so do not expect it to go away anytime soon. Just how long this consolidation will last will depend on how apparent real inflation numbers become over the next month. If this washout turns into a “bottom” it will not take much to revive the bullish sentiment and use this base to push into higher ground. Today gold closed up $13.90 at $1781.80 and silver closed up $0.06 at $26.02.          

On Tuesday gold was a bit softer as the Dollar Index continues strong around 92.00 and traders remain worried about the Fed’s most recent “hawkish” turn. Fed Chair Jerome Powell will have a question-and-answer session with the politicians today in what now looks like another opportunity to calm the trading waters. Still any chance to get some sense of what the Fed might be up to regarding interest rates or tapering won’t be overlooked.

A lot has been made about gold trading below its 200-day moving average. And while our shiny friend remains left footed technically, I would point out that these averages remain within the green striking distance. The optimist might even step back and embrace this latest pricing trouble as a cheap opportunity to test all the hoopla.

Still, professional traders are now “short” gold and silver paper meaning they think the market is moving lower on the short term.

And frankly any “dip” buying in this country has been weak considering the large drop in prices. But let me assure you that this is typical for the precious metals, those still buying weakness are first core players. It just takes more time for the bargain hunters to be convinced.

There is also a buying/selling dynamic which sets the stage. When in bullish trends everyone talks about dollar collapse and record high gold prices – it is a great creator of buzz. When facing bearish trends, the opposite is presented – the end of the world for gold is right around the corner. I suggest that most “gold bugs” are not Armageddon orientated – they simply want some distance between them and total dependence on the Federal reserve.

If you are not sure where you fit within these two groups just be patient. Gold and silver bullion plays are especially important part in the world’s financial stability – both today and tomorrow.

A closer look at the business we are doing in the mail and across the counter may add workable information. The slide in both gold and silver prices has prompted light consumer selling today. Yet on these occasions our computers indicate that most product will be resold within a week to public core buyers, not new customers. On the day gold closed down $5.50 at $1776.30 and silver also closed down $0.17 at $25.85.         

Gold was flat in early trading Wednesday but pivoted to challenge $1800.00 before settling just modestly higher. The primary reason being that Fed Chief Powell calmed the waters yesterday stating that inflation would not be the only determinant in interest rate decisions. This is interesting because this is not a new information – but a reminder that relaxed some of the hawkish trading sentiment which has been growing this past week. His comments pushed the Dollar Index lower. Keep in mind that the index spiked (92.00) 2 points this month and numbers around 90.00 make more sense considering the recent averages. The theory here is that massive Fed spending will push the US further into the red and weaken the dollar. Finally, there is talk that lower gold prices have attracted both the Indian and Chinese trade.

Citigroup has lowered its gold pricing average by $50.00. Buzz in the gold market is obviously lacking. Gold exchange traded funds have posted their biggest one-day gain since March. Silver exchange traded funds are liquidating. A modestly lower dollar will attract at least some currency related buying – all according to Zaner.

So where are we at after the big washout in gold prices? The picture remains mixed but a bit more upbeat today after Powell’s question and answer session. Today’s higher price in gold was encouraging but tepid and looked more like expected short covering. But it does suggest a less hawkish Fed. Traders will continue to look for more bottom confirmation.

Gold will likely continue to consolidate with little buzz. But this is exactly what it needs – time to get on its feet and get a feel as what the Fed will deliver in the post pandemic era. Gold closed on the day up $6.00 at $1782.30 and silver closed up $0.26 at $26.11.

Gold trading on Thursday reflects the still developing picture of what might be in store from the FOMC concerning interest rates trading on both sides of the center line. These narrow and careful trading ranges continue to point out uncertainty in the metals trade. There is not enough bullish sentiment to move above overhead resistance at $1800.00. And bearish sentiment has again been only mildly tempered with two Fed officials saying today that inflation pressures may last some time. So, I continue to look for narrow trading ranges and a defensive market.

It makes sense to view gold as fundamentally weak on the shorter term because the technical picture still belongs to the bears but keep in mind the big deal this week is that the bulls have at least stabilized prices waiting for the next shoe to fall.

The good news however is that this narrative has come and gone many times in this long battle over just how much fiat money the Fed can create without damaging our financial ship. And frankly both sides make realistic arguments, so patience is required and buying weakness is a good strategy that even some bulls forget in the fire fight.

But struggling for the status quo will not reinvent the bullish scenario. So, consumers may have to settle for “pricing drift” perhaps with a downside bias over the shorter term. It is too soon to claim gold is oversold but my guess is that you are not too far from a solid short-term bottom unless the Fed once again pivots with significant news.

Highlights from Grant on Gold June 23 (Zaner) –

  • Gold set a new 7-week low at $1759.91 on Monday but has since stabilized somewhat. Nonetheless, the bias remains to the downside in the wake of last week’s Fed-inspired sell-off.
  • Silver set a 9-week low on Monday but has been generally consolidative since. However, the downside remains vulnerable in light of the sharp impulse move lower seen last week.
  • Platinum set a 22-week low at $1019.00 on Monday but has still managed to notch three consecutive higher daily closes through Wednesday. The rally off that low is already nearly 7%.
  • Palladium also seems to have found support after failing to build on last week’s notable losses and is back above its trendline.

Our across the counter and national mail trade remains mixed. There is again a complete absence of big sellers but there is light selling. This market feels more like traditional summer trade than one that being threatened with what the Fed might do between now and 2023! Gold on the day closed down $6.70 at $1775.60 and silver was down $0.06 at $26.05.

A mildly weaker dollar supported gold prices on Friday. I believe that going into the weekend gold and silver traders may lean toward a bearish bias. Likely because they are surprised at the lackluster performance after the big drop in prices. And the fact that both metals are ignoring what under any other circumstances would be considered bullish information.

Biden gets the green light for $1.2 trillion in infrastructure improvements and suggests this is only tandem legislation – he expects more to support social ideas. Employers are short skilled labor coming out of the pandemic and are raising the ante with signing bonuses and higher wage offers. And today’s PCE (Personal Consumption Expenditures), the Fed’s preferred inflation indicator came in at 3.4%. And 84% of Americans are worried about inflation (CNBC).

The above should have rekindled interest in both gold and silver safe haven buying. But in fact, the best these markets have produced these past 5 trading days is a weak short covering rally and diminishing trading volume. From a trading standpoint a retest of recent lows might be in order but for now this market seems content to build support along the higher $1780.00 line.

At the same time, the latest Kitco Gold Survey is optimistic for both Wall Street and Main Street responders. The majority, roughly 54% expect higher gold numbers next week with about 24% being bearish and 22% neutral. The higher bullish sentiment is based on the notion that this week was simply base building, the gold bulls gathering themselves for another attempt at $1800.00.

The price difference between the bullish and bearish scenario continues to narrow. A break – either way of $40.00 in gold is now important. What also makes this conversation interesting is that the Fed has done a good job this week of walking back earlier hawkish statements. What they might have in mind next week promises to further define this small divide. As investors try to answer a recent question posed by J. Miles (Zaner) – “Does the $1750.00 level in gold and the $26.00 level in silver represent solid fundamental value? On the day gold closed up $1.00 at $1776.60 and silver closed up $0.03 at $26.08.                                        

Platinum closed up $9.70 at $1102.80 and palladium closed down $6.50 at $2633.30. .                    

My Brothers and Sisters, we always thank you for your business and fellowship. If you have unusual circumstances, need cash or are looking for a special visit – talk to Harry. Many on our staff have now received the vaccine as we continue to enforce rigid safety standards between people and product. Be careful, this virus remains a danger. At the same time trust that God will soon get us back to normal. Richard Schwary

Risk Disclosure – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisors. The precious metal and rare coin markets are random and highly volatile so they may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.

 

Posted on

Gold – A Bad Week

Gold – A Bad Week

Commentary for Friday, June 18, 2021 (www.golddealer.com) – Gold closed down $5.90 at $1767.90 and silver closed up $0.12 at $25.96. The Fed’s latest news release this past Wednesday created a fire storm in the metals and historic washout, negating an upward trend in gold and pushing the Dollar Index higher by a full point. Fed Chair Jerome Powell’s comments after its 2-day meeting were significantly hawkish and commercial traders sold the market with both hands. The Fed addressed rising inflation, and contrary to its previous statements suggested that interest rates may be raised twice next year and possible “tapering” or winding down of in place financial programs to ensure pandemic and employment recovery. It remains to be seen if this discussion is serious or theater but for now it has chilled the bulls and left the bears technically charge. And considering the chart damage, look for considerable consolidation before the bulls are back in action. In the meantime, the metals are on sale while the world still contemplates rising inflation. Last Friday gold closed at $1877.40 / silver at $28.13 – so on the week gold lost 109.50 and silver lost $2.17. 

The good news is that delivery on 2021 US Gold and Silver Eagles is getting better (still not “normal” but improving). And we are finally receiving early .9999 fine silver round orders. The bad news is that “any new orders” are still 4 to 8 weeks coming from the manufacturer. My guess, however, is that delays will soon shorten. 

Should you decide to use our Delayed Delivery Program please talk with your service rep and understand how this program works. It is handy if you want to lock in the price “now” and insist on new product – but is not for everyone. Just like us – you must pay upfront to “lock in” prices and you can’t “change” your mind. So, unless God has blessed you with patience, please ask your rep for other options and thank you for your understanding.

This past Monday gold remained uncertain – dipping in Hong Kong and London, recovering some of the loss in the domestic trade. The Dollar Index trended mildly lower but remains solidly above 90.00. And yet Treasury yields remain tame. The typical explanation would be that traders are taking short term profits and remain worried over safe haven demand.

This week’s FOMC meeting is also adding uncertainty in a trading environment that cannot make up its mind about possible “tapering” although lower treasury yields suggest this possibility is fading. Some professionals believe the slide in gold today was helped by the talk last week of a global minimum tax. Biden is selling this idea to the G-7, but I cannot imagine the US Congress is on board.

Today’s initial sudden drop was a surprise, but the bounce back supports the notion that bargain hunters remain in place and ready to buy weakness. This more optimistic gold view obviously supports the longer term “inflationary” view.

Still, the gold and silver trade remain pensive. Volatility will remain a problem until the bullish or bearish sentiment becomes more defined. Also keep in mind that further confirmation, one way or the other is always subject to change.

The metals are feeling their way around, looking for that “value” number like other financials. Believable, longer term inflation trends will be the key to market direction. The Covid threat remains in place as England officially delayed lockdown easing over variant concerns. Today gold closed down $13.40 at $1864.00 and silver closed down $0.11 at $28.02.         

On Tuesday gold opened flat turning mildly negative as the Dollar Index remained firm (90.50). The bullish trade was hoping for more interest in “buying the recent dip” but for now gold is facing challenges. Commercial accounts are taking ETF profits ahead of the Wednesday news release. Reuters most recent poll shows 60% of economists said a taper announcement will come next quarter. And gold ignored today’s Producer Price Index which beat expectations!

I suspect the Reuter’s economists hold little sway with the FOMC but all of these nice people are recognized academics and widely followed. The FOMC meets this week and will have something to say after the markets close on Wednesday. Whether they will address “tapering” remains to be seen but even a “discussion” would feed the bearish gold scenario.

The most recent wash out in gold is also weighing on this market. Technically a nine-week uptrend has been negated, the $1860.00 longer term support line is now challenged. This support goes back a month with further support coming in at $1840.00. So, the technical folks will be watching carefully to see if these numbers hold up. If so, this will provide time for gold bulls to gather themselves once again.

While the above sounds formidable this latest weakness is also psychological backlash from gold once again failing to move above $1900.00 not so long ago. The difference here is $50.00 and gold is higher by $140.00 year over year – but the failure makes for a heavy trade.

No big deal – but not long ago this conversation was focused on inflation and the bullish buzz was building. What has really changed? The government is still printing money by the barrel full, and Biden is selling infrastructure and more social spending.

There is some physical liquidation across our counter but not much. The public has turned cautious, and the phones have quieted down. For now, keep your powder dry and let us see if the Wednesday release is another round of shadow boxing or there are more fireworks in store. On the day gold closed down $9.50 at $1854.50 and silver was down $0.34 at $27.65.         

Gold in early trading Wednesday was choppy with everyone waiting for something fresh from the FOMC and a news release today after market close. So, the markets were calm through the close in gold ($1859.50) and silver ($27.80). Frankly, I did not expect the Fed to say much – holding their usual line of “transitory” inflation. I was wrong – they unleased a fire-store of surprisingly hawkish information. Gold dropped nearly $80.00 an ounce as everyone watched and worried. The degree of this trading reaction is difficult to understand. The Fed acknowledged rising inflation numbers but stood by previous statements. So, the rise does create concern on their part but again they again took no immediate action. It is also significant that they did not do anything to calm the inflation waters – which has been part of their tool bag since the beginning of the pandemic. It is counterintuitive but the Fed should embrace rising inflation. As opposed to the deflationary/recessionary scenario which has always been part of this pandemic discussion. At any rate, the FOMC governors are talking about 2 rate hikes in 2023 and believe that bond purchases will begin to slow this year.

Jim Wyckoff (Kitco) – “Technically, August gold futures bulls have lost their overall near-term technical advantage. Prices have dropped well below the key 200-day moving average. A nine-week-old price uptrend on the daily bar chart has been soundly negated. Bulls’ next upside price objective is to produce a close above solid resistance at $1,850.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,700.00. First resistance is seen at $1,800.00 and then at today’s high of $1,826.40. First support is seen at today’s low of $1,776.20 and then at $1,750.00.”

At this point – the unlikely line in the sand for gold is $1700.00, the now famous double bottom we saw in March. My initial feeling remains the same, the Fed remains between a rock and hard place. They for sure have promised to raise interest rates if inflation becomes a problem but they are still just talking but carrying a big stick.

Talking has created a much stronger Dollar Index – last Friday we were at 90.00 – today we are looking at 92.00! So, what does all this mean? Not as much as you might think. My bet is that traders are now considering an oversold gold market and will looking for any rebound hint. Stocks are weaker but are not falling out of bed – which suggests Wall Street has doubts about raising rates anytime soon. And the Dollar Index could easily sell off after this barrel of cold water wears off. Gold closed on the day at $1859.50 up $5.00 and silver closed up $0.12 at $27.80. Obviously, the Fed waited until after the close to disclose its latest thinking.

Gold trading on Thursday reflected yesterday’s aftermarket – as analysts tried to get their head around why the Fed may be backtracking on its claim that inflation is “transitory” and that interest rates would remain near zero until the pandemic was over and the US was back to full employment. Powell himself created more confusion when he warned in his speech yesterday about reading too much into the dot-plot as these inflation estimations need to be taken with a grain of salt. In fact, the FOMC made no decisions about asset buying tapering but said it would consider the idea at every future meeting. “You can think of this meeting that we had as the ‘talking about talking about’ meeting, if you’d like,” Powell said. “I now suggest that we retire that term, which has served its purpose.” Gold on the day was down $85.70 at $1773.80 closed and silver was down $1.96 at $25.84. I think the public was initially a bit dazed. Goodnight Irene, for the more senior readers.

The gold trade Friday struggled for direction. Weakly higher on the open – most likely short covering after yesterday’s shellacking. The Dollar Index roared (92.29) and once again there are plenty of bears roaming the woods. Reuters cites St. Louis Fed President James Bullard’s comments that faster monetary tightening was a “natural” response to faster than expected economic growth and inflation. So, the markets remain fearful of further revelation. But it is interesting that Goldman Sachs and Commerzbank said that gold could be set for recovery and in fact Commerzbank kept its $2000 an ounce year end forecast unchanged. Grant on Gold (Zaner) believes this market is already oversold but would like to see a rebound and close above $1800.00 to ease pressure on the downside.

The action across our counter is typical – the public eventually bought the dip. There were no sellers and physical product remains a challenge. I believe the big turnaround here will be in hands of the foreign market, especially India and China. If they believe today’s prices are cheap and the world faces real and mounting inflation you can bet, they will buy with both hands. Look for more volatility next week. While I respect the tough job the FOMC has on its hands – don’t dismiss the power of theater in these financially dangerous times. On the day gold closed down $5.90 at $1767.90 and silver closed up $0.12 at $25.96 .                                        

Platinum closed down $14.20 at $1040.10 and palladium closed down $43.90 at $2465.70.                    

My Brothers and Sisters, we always thank you for your business and fellowship. If you have unusual circumstances, need cash or are looking for a special visit – talk to Harry. Many on our staff have now received the vaccine as we continue to enforce rigid safety standards between people and product. Be careful, this virus remains a danger. At the same time trust that God will soon get us back to normal. Richard Schwary

Risk Disclosure – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisors. The precious metal and rare coin markets are random and highly volatile so they may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.

 

 

Posted on

Gold – Narrow Ranges/Mixed Sentiment

Gold – Narrow Ranges/Mixed Sentiment

Commentary for Friday, June 11, 2021 (www.golddealer.com) – Gold closed down $16.80 at $1877.40 and silver closed up $0.11 at $28.13. Last week’s volatility in both gold and silver has been replaced with tight trading ranges this week. Most likely because trading conversation has been split over shorter term direction. The possibility of the Fed “tapering” seems to be losing steam. Yet pandemic news, while upbeat, may present a mixed bag supporting gold with new variants affecting China, India and now the UK. The physical market remains active and yet gold pricing has turned flat since mid-May trading between $1880.00 and $1900.00. So, bargain hunters are still in place. Year over year gold is higher by $150.00. Last Friday gold closed at $1889.80 / silver at $27.88 – on the week gold lost $12.40 and silver is up $0.25. 

The good news is that delivery on 2021 US Gold and Silver Eagles is getting better (still not “normal” but improving). And we are finally receiving early .9999 fine silver round orders. The bad news is that “any new orders” are still 4 to 8 weeks coming from the manufacturer. My guess, however, is that delays will soon shorten. 

Should you decide to use our Delayed Delivery Program please talk with your service rep and understand how this program works. It is handy if you want to lock in the price “now” and insist on new product – but is not for everyone. Just like us – you must pay upfront to “lock in” prices and you can’t “change” your mind. So, unless God has blessed you with patience, please ask your rep for other options and thank you for your understanding.

This past Monday gold opened quietly with a slight downward drift, but traders eventually bought the weakness, and it finished the first day of the week in the green. This most likely because the Dollar Index came off Friday’s highs (90.5) and is now trading considerably lower (89.2). Reuters claims gold is listless because investors are waiting on inflation data this week and perhaps a clearer picture as to what the Fed intends to do with interest rates.

Treasury Secretary Yellen said over the weekend that Biden should push press forward on his now $4 trillion dollar infrastructure bill even if it does produce inflation. China has increased their gold reserves by 7.5% month over month and increased their reserves 10% this past year.

Still the fear of both rising interest rates and treasury yields may cap significant gains in the metals until the inflation picture comes into focus. For now, we have the classic standoff between the Federal Reserve and the financial community.

The Fed has done a good job at balancing monstrous pandemic spending considering the world’s economic system has never been so exposed. But there are many cross currents with the present situation. Can the Fed unwind without creating a turbulent stock market? Has federal largess created more permanent dependency? Is the inflation genie already out of the bottle?

At the center of this discussion is the possibility of FOMC “tapering”. Meaning when will they begin to turn the financial spigot off? “Keep in mind, that the Federal Reserve chairman indicated that they would begin to discuss tapering after “several” robust gains in non-farm payroll readings. Therefore, the Fed discussions of tapering are pushed further into the future and gold and silver should see one less headwind”. (Zaner)

There is something to the argument that gold at $1900.00 has developed an affordability perception. But this is only because the inflation argument has not sufficiently developed. If inflation continues down its current path this pricing issue will go out the window. Gold still holds a sold 9-week up trend but needs to develop fresh buzz to push above $1900.00. Today gold closed up $7.00 at $1896.80 and silver closed up $0.12 at $28.00. Sleepy but interesting.        

On Tuesday gold flirted with $1900.00 in the European trade, but domestically it was choppy and pensive. First, pushing towards $1905.00 – then selling off to $1885.00 before a modest recovery and finishing slightly in the red for the day. This looks like the paper trade is testing both sides of the aisle for weakness or strength. Reuters notes – look for a focus on US inflation data, the ECB policy meet on Thursday and SPDR Gold Trust ETF holding falling by 0.6%.

The Dollar Index holding above 90.00 contributes to this jitteriness – although the index is flattening out. On the other hand, Treasury yields are slipping which of helps the bullish gold scenario because it hints that the paper trade believes the Fed will not soon taper. “It’s a tug of war between bulls and bears (for gold) at the 1,900 level,” Phillip Streible, chief market strategist at Blue Line Futures in Chicago, said, noting that declining bond yields are the “best” near-term tailwind, while the strengthening dollar and equities are headwinds.”

“A development that might provide support to gold was seen from the London Bullion Market Association overnight with their analysis indicating that gold vault holdings reached a value of $580.1 billion, with silver’s vault holdings rising for the 9th straight month to 36,440. An additional underpin for gold and silver prices is seen from a rising chorus of inflationary projections with both Chinese and US monthly inflation readings to be released directly ahead and many indicate that is the driving force behind the increase in physical gold holdings as measured by the London bullion exchange.” (Zaner)

I think no one wants to really argue with gold’s positive technical picture but at the same time these higher levels present a solid deck of overhead resistance. So, both the bullish and bearish trade are searching for fresh news which might offer confirmation of their views. On the day gold closed down $4.60 at $1892.20 and silver closed down $0.28 at $27.72.         

The gold pricing for Wednesday drifted lower in the European trade but pushed back into the green domestically as traders bought the dip. Still the numbers do not impress considering that the Dollar Index has again dipped below 90.00 and Treasury yields are at monthly lows. There could be some buzz created over Thursday’s European Bank meeting as everyone will be listening for “inflation talk” and anticipating monetary policy adjustment – if any.

“Apparently, a lack of definitive direction from the dollar has allowed currency related selling of gold and silver, but it is also possible that a 12% gain in Indian gold prices in terms of the rupee is discouraging gold demand in India. As-a-consequence, Indian gold prices have traded at a discount to world pricing, which is not surprising considering that India remains under significant lockdown due to its ongoing infection problem.” (Zaner)

I think traders respect this market but without a significant change in the bullish or bearish scenario will look for tight trading ranges. Challenges of higher numbers have been met with liquidation selling. Still, any real weakness attracts bargain hunters. The reason this dynamic is so difficult to shake is because each side makes a reasonable short-term argument.

At the same time, the Fed’s colossal spending spree may foreshadow real problems. While the “Armageddon Line” has not be adopted by most, a few credible sources believe current spending is so dangerous it could seriously alter or destroy our financial landscape over the next decade.

I am not a big fan of this dark scenario if you consider the economics and growth of Wall Street and e-commerce during the pandemic. We will likely walk away from this pandemic bruised yet encouraged. But this dark scenario has enough followers to keep the bullish gold core unified and expecting problems – facts or not. Most of these good people are fundamentally suspicious of government intervention in the extreme. So, for now let us keep our sails trimmed, hope for a good outcome, and prepare for at least some economic disruption. This has always been my favorite “middle ground” scenario when you are not quite sure who is telling the truth. Gold on the day closed up $1.00 at $1893.20 and silver closed up $0.27 at $27.99. 

Gold trading on Thursday revisited a favorite theme. The overnight foreign market dipped (1870.00) and the domestic market bought the weakness pushing prices back into the green. The European Central Bank (ECB) kept its monetary policy unchanged which figures – they are in the same spot as the US and the Consumer Price Index rose 0.6% in May. “The key takeaway (from the inflation data) is that this market is firmly believing that the U.S. Federal Reserve is not going to change stance anytime soon and the (accommodative policy) playbook for gold remains,” said Edward Moya, senior market analyst at OANDA. Some pricing pressures remain for gold, but ultimately the belief that “runaway” inflation, which could trigger a Fed policy tightening, is unlikely and that should keep gold supported, Moya said, adding that the Fed’s policy meeting next week could act as a near-term catalyst to push gold prices higher. (Reuters).

Weekly jobless claims dropped to their lowest level in 15 months as the pandemic winds down. What will happen to gold pricing next depends on how you see this recovery. If you believe that rising inflation numbers are “transitory” – meaning they are tied to economic recovery, the idea of runaway inflation supporting higher gold prices is not in your play book. On the other hand – if you believe massive monetary expansion has created “systemic” or rising inflation which will not go away and come to plague our financial system buying the metals makes sense.

The Dollar Index remains steady around 90.00 today. One in five global central banks plan to purchase gold this year and gold ETF holdings increased yesterday. (Zaner)

I expect that bearish sentiment is not widespread because of gold’s recent technical picture. But sentiment is lagging in typical “what have you done for me lately” fashion. And safe haven demand, while steady is not “crazy” in typically slow summer months. This makes sense if you consider that trading ranges are getting closer which tends to produce a sleepy kind of trade. Platinum is now trading at an $800.00 discount to gold. The new (2021) Perth Mint platinum Kangaroos won’t last long – talk with Alex about availability. On the day gold closed up $1.00 at $1894.20 and silver closed up $0.03 at $28.02.  

Gold pushed slightly above $1900.00 in overnight Hong Kong trading but saw profit taking in the London trade and continued lower in the domestic trade Friday. These profit taking rounds have become familiar as our shiny friend struggles with numbers above $1900.00. Today’s lower prices was a reaction to a rising dollar. The Dollar Index moved less than 90.00 to 90.50 in a matter of hours. I think the consensus at this point is that the trade is getting comfortable with the idea that inflation is transitory. This position is short sided, but the trade points to the fact that gold ignored both yesterday’s CPI inflation number (the largest jump in more than a decade) and the continued weakness in Treasury yields (1.44%).

This argument over the nature of “inflation” has been the dominate theme this week and its likely this discussion will continue to waver between two realities. This past month the Dollar Index has touched 90.5 on two occasions and sold off both times. So, my bet is that next week we may see some softening in the dollar with would support gold. But unless the index breaks down again at 90.00 it is likely that any short-term rallies will be met with bearish selling.

Yesterday both gold and silver ETF’s saw positive inflows. A shift in these numbers may further undermine bullish sentiment. But keep in mind significant cross winds continue to threaten both sides of the metal’s argument. Russian gold production is lagging but South African production is extraordinarily strong. At the same time consider that the pace of US growth continues to disappoint. This makes a powerful case for more Fed support and underpins gold pricing.

Still, we may be in for a quiet summer unless everyone begins to worry about rising inflation. On the day gold closed down $16.80 at $1877.40 and silver closed up $0.11 at $28.13.                                        

Platinum closed up $5.10 at $1149.90  and palladium closed up $3.00 at $2777.70.                    

My Brothers and Sisters, we always thank you for your business and fellowship. If you have unusual circumstances, need cash or are looking for a special visit – talk to Harry. Many on our staff have now received the vaccine as we continue to enforce rigid safety standards between people and product. Be careful, this virus remains a danger. At the same time trust that God will soon get us back to normal. Richard Schwary

Risk Disclosure – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisors. The precious metal and rare coin markets are random and highly volatile so they may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.

 

 

 

Posted on

 Gold – Volatile Uncertainty

 Gold – Volatile Uncertainty

Commentary for Friday, June 4, 2021 (www.golddealer.com) – Gold closed up $18.60 at $1889.80 and silver closed up $0.42 at $27.88. The gold market surprised to the upside today as most expected further downside action as seen on Thursday. The primary bullish driver was a weaker dollar but a slide in US factory orders and a slight miss in US non-farm payrolls helped refresh the bullish scenario. So, for now gold’s technical picture remains in the green but yesterday’s significant drop is still making this trade a bit on the heavy side. Last Friday gold closed at $1902.50 / silver at $27.99 – on the week gold lost $12.70 and silver has lost $0.11.

The good news is that delivery on 2021 US Gold and Silver Eagles is getting better (still not “normal” but improving). And we are finally receiving early .9999 fine silver round orders. The bad news is that “any new orders” are still 4 to 8 weeks coming from the manufacturer. My guess, however, is that delays will soon shorten. 

Should you decide to use our Delayed Delivery Program please talk with your service rep and understand how this program works. It is handy if you want to lock in the price “now” and insist on new product – but is not for everyone. Just like us – you must pay upfront to “lock in” prices and you can’t “change” your mind. So, unless God has blessed you with patience, please ask your rep for other options and thank you for your understanding.

This past Monday was Memorial Day and US markets were closed. 

Gold opened steady on Tuesday but sold off on positive economic news, an upbeat stock market after the long weekend and profit taking after this 5-month drive to higher ground. The sell-off looked at $1890.00 before traders bought the dip and the market finished the day almost unchanged. Surprisingly, the Dollar Index was marginally lower, but Treasury yields are rising as Wall Street again worries that solid economic news will embrace inflation. This may prompt the Fed to consider raising interest rates sooner than expected.

This is an old story but still carries trading weight. I think there is no chance of rising interest rates this year and perhaps even next, especially with President Biden’s massive $6 trillion dollar budget still in the works. Also keep in mind that other world central banks may not have this option if economic recoveries are poor. So, the Fed will watch other banks carefully and hope all fiat currencies move in the right direction (lower). Raising US rates will make America less competitive, hurt this Wall Street run, and make paying back massive debt more difficult. The Fed’s balancing act is not coming to end as the pandemic fades – it becomes more important.

Zaner (Chicago) – “While the August gold contract did not hold the upside breakout initially the market did forge the highest trade since January 7th and should be supported as a result of initial weakness in the dollar and surging crude oil prices. In fact, crude oil prices with the overnight rally reached up to the highest level since October of 2018 and that smacks-of-inflation especially when combined with surging grain prices. We suspect that gold and silver garnered some lift from favorable Chinese PMI readings which in turn prompted economists to suggest that exports from China will continue to propel their economy forward. Both gold and silver ETF holdings increased in the last trading session documented, but gold holdings on the year have declined 5.6%, while silver holdings on the year have gained 5.5%. From a technical perspective, the gold market came away from the month of May with the strongest gain in 10 months and the market continues to display positive follow-through momentum. In a surprising development, gold and silver prices in India ticked higher from improved spot demand but also because recent price gains have sparked fresh interest in both gold and silver prices before they become more inflated.” On the day gold closed up $0.40 at $1902.90 and silver up $0.09 at $28.08.        

The gold pricing for Wednesday was tight in overnight trading but developed a small upward bias in the domestic trade. This may be a traditional pause in pricing in that for now numbers above $1900.00 present great overhead resistance. But the technical picture remains solid, and I think this good news overrides trader caution at least for the present. With the Dollar Index moving again above 90.00 this morning I would expect sluggish gold pricing.

This from Zaner (Chicago) – “The gold and silver markets start the Wednesday trade under moderate pressure, with strength in the dollar likely providing the brunt of the weakness. On the other hand, the markets overnight saw a slight uptick in US treasury yields and a significant decline in Perth mint gold sales in a possible sign that pricing near $1900 might be discouraging retail demand. On the other hand, European Producer prices came with a gain of 1% which should contribute to inflationary support of the precious metal markets. In fact, energy and grain prices overnight remain very strong adding to the interest in inflation sensitive instruments from the food sector. In other words, outside market forces continue to signal the chance for inflation, at-the-same-time that other scheduled price readings like ISM manufacturing prices paid and the PCE from last week continue to register their own form of inflation. While gold ETF holdings yesterday increased by 179,811 ounces silver ETF holdings were reduced by 131,938 ounces.”

Some analysts are saying the slowdown in gold sales from the Perth Mint is indicative of consumer resistance to $1900.00 gold. I wonder, the Perth Mint has set records for months of recent production and we have no trouble selling physical gold bullion coming across our counter. Still, the pricing territory above $1900.00 introduces the possibility of an all-time high challenge not seen since August of last year. So, some trepidation is to be expected. Gold on the day closed up $4.60 at $1907.50 and silver closed up $0.11 at $28.19. 

Gold on Thursday broke down in early trading over several factors, some of which were foreshadowed earlier in the week. The ADP payroll numbers were the beginning of the bad news – employers significantly beat expectations hiring with both hands. At the same time the Dollar Index soared moving higher by half a point (90.45). The ISM nonmanufacturing Purchasing Managers Index came in hot (64%) suggesting solid economic growth. And finally, gold Exchange Traded Funds sold off yesterday suggesting a lack of longer-term conviction.

As gold’s bullish trend cooled, paper traders took profits and moved to the sidelines testing support at $1870.00. The problem with this breakdown is that gold moved through short term support at $1880.00 so computer models will now consider $1840.00.

The premise of lower gold prices is based on the Fed’s response to growing inflation. If the FOMC once again stands pat and does not at least threaten to use some of its inflation fighting tools traders will likely buy this dip and this standoff will continue.

Still today is a great example of what I have recently suggested. Gold moving back to all-time highs will be challenging and test conviction. However – such roadblocks in this still developing story are good for the metals. They will pare down the bullish sentiment, get rid of weak hands and leave a more committed core in this country and in the rest of the world. Gold and silver bullion have never been a choice of the majority – for that to happen the dollar would have to collapse and that serves no one’s interest. For now, ignore the “noise”, buy weakness, and watch the inflation numbers – like everyone else. Tomorrow’s employment numbers may also add to this turbulence so buckle up – but enjoy the ride as pandemic numbers continue to decrease! On the day gold closed down $36.30 at $1871.20 and silver closed down $0.73 at $27.46.  

Gold opened flat on Friday but soon rebounded from two-week lows after the created jobs number missed for last month and the dollar weakened. Those hiding under the bed from yesterday’s drop will welcome this “relief” rally and look for more bullish news next week.

While today’s jump in the price of gold is modest – it is psychologically important. It provides a needed boost to the short-term technical picture. The weaker dollar makes gold more affordable to holders of other currencies, while the 10-year yields also move lower. “Part of what we’re seeing in terms of the strength in gold are inflation expectations and those are partly based on the stronger economic data, like higher jobs growth, broader recovery in the U.S., parts of Europe and China is still doing well,” said Jeffrey Christian, managing partner of CPM Group. “Gold prices will probably continue to trade between $1,855 and $1,920 an ounce levels.” (Reuters).

The jobs miss is an overreaction – it was only mildly off. But this suggests an underlying credibility problem with the Fed. It was still a miss – so it once again introduces the idea that they still have a developing mess on their hands and raising interest rates would make matters worse. At this point I think Christian’s viewpoint is the most playable lie – look for moderation within recent trading limits. This implies gold has solid recent support below $1900.00 (traders buying the dip theory). At the same time the middle ground allows the paper trade to take profits on rallies (a long-standing trend). Finally, keep in mind even with these crosscurrents gold still threatens all-time highs and is in the green $100.00 this past month.

On the day gold closed up $18.60 at $1889.80 and silver closed up $0.42 at $27.88.                                       

Platinum closed up $1.90 at $1163.20 and palladium closed up $15.20 at $$2837.90.                    

My Brothers and Sisters, we always thank you for your business and fellowship. If you have unusual circumstances, need cash or are looking for a special visit – talk to Harry. Many on our staff have now received the vaccine as we continue to enforce rigid safety standards between people and product. Be careful, this virus remains a danger. At the same time trust that God will soon get us back to normal. Richard Schwary

Risk Disclosure – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisors. The precious metal and rare coin markets are random and highly volatile so they may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.

 

 

Posted on

Gold – Fresh Inflation News?

Gold – Fresh Inflation News?

Commentary for Friday, May 28, 2021 (www.golddealer.com) – Gold closed up $6.80 at $1902.50 and silver closed up $0.07 at $27.99. The gold trade finished the week choppy, but firm as fresh inflation news supports the still in place bullish trend. I suspect volatile price swings as the summer progresses but for now there is a new enthusiasm in both the paper and physical trade. Based on the reality that the Fed will be patient to action – inflation or not.

This is a position they espoused months ago but few took them seriously because at that time inflation was not as issue. As long as the FOMC keeps interest rates low and continues to buy bonds gold should hold its footing waiting for these dynamics to shift. Turbulence, one way or the other, will likely be initiated by the dollar.

The Dollar Index lost 10% of its value this past year but could bounce back given strong economic numbers coming out of the pandemic. Still there are many who believe the inflation genie is out of the bottle so the bullish scenario gains momentum. Last Friday gold closed at $1876.70 / silver at $27.47 – on the week gold was higher by $25.80 and silver up by $0.52.

A friendly reminder that we will be closed Monday for Memorial Day. As we salute and honor those who have died in the performance of their military duties.  

The good news is that delivery on 2021 US Gold and Silver Eagles is getting better (still not “normal” but improving). And we are finally receiving early .9999 fine silver round orders. The bad news is that “any new orders” are still 4 to 8 weeks coming from the manufacturer. My guess, however, is that delays will soon shorten. 

Should you decide to use our Delayed Delivery Program please talk with your service rep and understand how this program works. It is handy if you want to lock in the price “now” and insist on new product – but is not for everyone. Just like us – you must pay upfront to “lock in” prices and you can’t “change” your mind. So, unless God has blessed you with patience, please ask your rep for other options and thank you for your understanding.

Gold on Monday opened choppy but firm as the Dollar Index dipped below 90.00 as traders once again consider another run at last week’s 4 ½ week highs. Technically these numbers are encouraging as gold moves above its 200-day moving average and bond yields remain tame. I think traders are off to the races this week with a lighter step and expectation.

Continued inflation worries, economic uncertainty and India’s COVID-19 tragedy underpin this market – so traders expect another shot at $1900.00+ gold – perhaps even this week. People selling cryptocurrencies and buying gold continues with support from recent CNBC coverage and the news that Hong Kong will restrict crypto exchanges to professional investors.

I would however argue for some caution here for four reasons. First, the Chinese are worried about rising industrial material prices. If they intervene it could dampen this growing metal’s enthusiasm. Second, the dollar is famous for comebacks. Three, the possibility of a dramatic economic recovery as the pandemic wanes weighs on the price of gold on the shorter term. And four, Bitcoin is up 15% this morning so its relationship to gold remains questionable.

Watch the dollar/inflation news for gold’s short-term direction. The Dollar Index has lost 10% of its value this past year. This past month gold is up $100.00 but the index will likely have to make new lows to continue the run. Still, our growing debt makes the best case for gold appreciation. On the day gold closed up $7.90 at $1884.60 and silver closed up $0.42 at $27.89.  

Gold opening flat on Tuesday but jumped higher in later trading as the Dollar Index made fresh daily lows (89.55) as Treasury yields slid to 11-day lows. There are other distractions – new homes sales fell 6% and there appears to be conflicting news about consumer confidence. Most remain optimistic on the state of the economy at the present but are beginning to worry about the future. Perhaps this is the result of the growing inflation concern even though the Fed assures everyone that current jumps in specific commodity prices are the result of transitory forces within the economy and are not growing inflationary trends.

This from Reuters – “Gold should benefit directly from suggestions that the Fed will stick with its ultra-expansionary monetary policy, and indirectly via the weak dollar, said Commerzbank analyst Daniel Briesemann in a note. Fed Board Governor Lael Brainard and other officials in separate remarks all backed the U.S. central bank’s current easy monetary policy view. The dollar hit 4 ½ month lows, making gold less expensive for holders of other currencies. Gold could receive support from higher Chinese physical demand if China has been importing more gold from Switzerland and Hong Kong due to commercial banks there being granted higher import quotas for April and May, Briesemann added.”

Gold’s technical picture continues positive, both gold and silver Exchange Traded Funds are moving higher and there is an expectation that inflation will steady or underpin current trading ranges. But gold must still move above $1900.00 with conviction – this is no small order.

I expect this fight for higher ground will turn into an old-fashioned slugfest as they used to say when I was a kid. Especially if the Fed is right about inflation trends or the dollar does not cooperate. Keep your powder dry and let us see how this 4 ½ month peak resolves growing cross currents. On the day gold up $13.50 at $1898.10 and silver closed up $0.15 at $28.04.        

The gold pricing for Wednesday was firm despite a rising Dollar Index. The bull trade should also be encouraged that gold has held up after the Chinese overnight took the first steps to quell speculative trading in commodities according to Zaner. Today’s action above $1900.00 is not spectacular but few expected fireworks at these 5-month highs.

Not many would dare short this market because the psychological picture now favors the stronger bullish scenario. And the technical picture continues to improve – a big plus.

But traders are by nature cautious and always suspect a Greek gift so it’s likely the paper trade will tiptoe around these encouraging numbers. But keep a sharp eye out for any change in the wind. Like I have been saying – moving higher in both gold and silver will bring perhaps dramatic price changes – one way or the other.

But for now, the metals continue to breath fresh air – and real enthusiasm.

This from Reuters – “Gold prices firmed above the key $1,900 level on Wednesday, boosted by weaker U.S. Treasury yields and expectations that the U.S. Federal Reserve will maintain a dovish monetary policy stance. “Some of the economic data has been slowing down, and that’s likely to keep Treasury yields grounded, which has been the primary driver in sending gold prices higher,” said Edward Moya, senior market analyst at OANDA. “The market is probably going to have to deal with a slight rebound in the dollar here…but we are still going to see gold prices continue to rise and $1,950 level seems like a very short-term goal.” Gold on the day closed up a modest $3.20 at $1901.30 but moved down $7.00 in the aftermarket which might suggest a rather pensive mood. Silver closed down $0.19 at $27.85.

Gold on Thursday drifted lower in a mild round of profit taking, prompted by upbeat US economic data, rising Treasury yields and a Dollar Index which has moved from 89.60 through 90.00 since yesterday. Price weakness in other commodities many also be a contributing factor in that this diminishes the rising inflation argument. And finally, some believe the gold market may now be overbought because this higher pricing run is two months old.

I am not convinced bullish sentiment will fade easily. Everyone and their brother will be lined up to see if traders buy this dip and push prices even higher based on the inflation argument. Gold ETF inflows continue higher, and China is buying with both hands.

Still there is talk that the Chinese – now cracking down on commodity speculation – may add gold to their list – but I don’t believe the rumor.

At this point there is no reason to believe government debt worldwide will not continue to grow. If this dynamic remains in place gold’s primary bullish argument (inflation) will tag along. On the day gold closed down $5.60 at $1895.70 and silver closed up $0.07 at $27.92.  

Gold pushed lower on the Friday open approaching $1880.00. But quickly reversed itself likely because the personal consumption expenditure, another key inflation index rose 3.1% year over year. So higher than expected and a confirmation of the also rising Consumer Price Index (CPI).

Keep in mind these combined figures are significantly higher than the 2% Federal Reserve  target, yet the Fed refuses to reduce the pace of their bond buying program or move rates higher. This still evolving picture supports firm, perhaps even higher gold prices.

Reuters points out that investors are now eyeing the release of President Biden’s first full budget since taking office. And he will seek $6 trillion in federal spending for the 2022 fiscal year.

This from Zaner (Chicago) – “While gold and silver prices showed divergence yesterday, it appears as if inflation prospects have brightened again, with a significant surge in grain prices yesterday, an upside breakout in crude oil this morning, and analysts suggesting that China might not be able to squelch surging commodity prices. In fact, some traders are suggesting that the Chinese attempt to talk down commodities prices has backfired, with corn prices at times yesterday locking limit up! However, gold and silver are likely to remain off balance today because of the blip up in US interest rates on Thursday and from periodic strength in the Dollar.”

Still, today’s price action in gold was muted by the rising Dollar Index (90.13). So, it’s easy to see that the bullish inflation scenario is not sufficiently developed to blow through overhead resistance at the higher end of this most recent climb from $1780.00 through $1900.00. On the day gold closed up $6.80 at $1902.50 and silver closed up $0.07 at $27.99.   

Silver closed today up $0.07 at $27.99. The silver trade seemed sleepy today.                                  

Platinum closed up $3.40 at $1180.80 and palladium closed up $21.90 at $2824.20.                   

My Brothers and Sisters, we always thank you for your business and fellowship. If you have unusual circumstances, need cash or are looking for a special visit – talk to Harry. Many on our staff have now received the vaccine as we continue to enforce rigid safety standards between people and product. Be careful, this virus remains a danger. At the same time trust that God will soon get us back to normal. Richard Schwary

Risk Disclosure – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisors. The precious metal and rare coin markets are random and highly volatile so they may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.

 

Posted on

Gold – Turning Choppy?

Gold – Turning Choppy?

Commentary for Friday, May 21, 2021 (www.golddealer.com) – Gold closed down $5.10 at $1876.70 and silver closed down $0.58 at $27.47. Today’s gold pricing will be disappointing to the bulls – most were looking for a $1900.00 challenge. We got off to a good start but manufacturing data came in hot so traders of course revisited the idea that the Fed may be forced to soon “taper”. And gold remained in negative territory despite the third monthly drop in US existing home sales. I can’t argue with the logic, but I wonder if today’s action relates less to possible FOMC action and more to profit taking in a market which for now sees overhead resistance going back to last August as “a bridge too far”. Last Friday gold closed at $1837.90 and silver at $27.35 so on the week gold was higher by $38.80 and silver higher by $0.12. 

The good news is that delivery on 2021 US Gold and Silver Eagles is getting better (still not “normal” but improving). And we are finally receiving early .9999 fine silver round orders. The bad news is that “any new orders” are still 4 to 8 weeks coming from the manufacturer. My guess, however, is that delays will soon shorten. 

Should you decide to use our Delayed Delivery Program please talk with your service rep and understand how this program works. It is handy if you want to lock in the price “now” and insist on new product – but is not for everyone. Just like us – you must pay upfront to “lock in” prices and you can’t “change” your mind. So, unless God has blessed you with patience, please ask your rep for other options and thank you for your understanding.

Gold on Monday provided a good reminder to be careful about “group think”. It opened steady – pushed above $1850.00 and sold off ($1844.00) to the usual bearish chorus of “too much overhead resistance at $1850.00”. And then pushed quickly into the $1860.00 range. This most likely was just a short covering rally coupled with lower weaker Treasury yields – which does not mean much but intuitively it looks like gold wants to rally higher.

Whether it will or not likely depends on the dollar – the Dollar Index today has not been substantially weaker which supports the shorter-term bullish scenario. But for gold to really gather steam the index will have to break down at 90.00.

Reuters claims gold hit a 3 ½ month high because of the dip in US Treasury yields and persistent inflation worries. “Higher than expected (U.S.) consumer price inflation and weaker retail sales was really the potent combination for gold,” said Ole Hansen, head of commodity strategy at Saxo Bank. “Higher inflation has been the key source of inspiration for renewed demand that we have seen in gold, especially during the last couple of weeks.”

Federal Reserve Vice Chair Richard Clarida comments that the economy has not made the progress needed to begin tapering asset purchases again helps the current bullish scenario. Some veteran commentators believe the weakness in the crypto currencies is a plus for the metals.

In the last analysis gold must show strength above $1850.00 before traders will take this rally seriously but they are watching carefully as both gold and silver challenge their 200 day moving averages. On the day gold closed up $29.60 at $1867.50 and silver closed up $0.91 at $28.26.  

Gold opening choppy Tuesday but quickly challenged $1875.00 before prices moved back to unchanged just as quickly. I would not say the paper trade are turning into convinced bulls, but they are closely watching now that inflation worry is at least part of the conversation.

And with this most recent uptrend in place, they will continue to test overhead resistance while at the same time keeping an eye on the dollar. It is surprising that gold did not hold earlier gains given the index dipped below 90.00 and housing starts fell as builders contend with shortage of materials and labor (MarketWatch). This must bolster inflation concerns in some, but such is the power of rising Treasury yields as traders remain suspicious of FOMC interest rate intentions.

Physical dealers are impressed with this current upward trend because they are struggling with immediate delivery of larger orders. But the most promising bullish trends for gold and silver are the downside breakout of the dollar (6-month lows) and renewed safe-haven buying in the exchange traded funds and physical market. Both metals have a steep hill to climb in moving towards old highs – so expect volatility and buy weakness if you like the inflation argument.           

This from Neils Christensen (Kitco): It didn’t take much to drive hedge funds back into gold and push prices above $1800.00. Hedge funds once again see value in gold as money managers increase their bullish bets on the yellow metal and cover their bearish positions, according to the latest data from the Commodity Futures Trading Commission. The threat of rising inflation, coupled with economic uncertainty following disappointing employment numbers is prompting investors to find safe-haven assets again, analysts said. For many, gold’s push Monday to its three-month highs above the 200-day moving average means that momentum is just starting to pick up.” On the day gold closed up $0.30 at $1867.80 and silver closed up $0.05 at $28.31.       

The gold pricing for Wednesday began mildly bearish moving from $1870.00 towards $1850.00 but in early trading reversed itself and surprisingly challenged $1890.00. There are several factors including wobbly stocks over inflation fears and a weaker dollar – the Dollar Index has moved lower by almost a full point since last Thursday.

There is also an interesting twist in this story as China has moved to ban the cryptocurrencies. For some time now there has been talk that these new forms of computer created money have attracted investors looking for a gold replacement. Whether this holds water or not the collapse in Bitcoin today corresponds to the spike in the price of gold. I think this jump was more of a knee-jerk reaction than anything else – but it does suggest a nervous market.

Gold’s surprising move from $1780.00 through $1890.00 this past month has refocused bullish sentiment and presents a strong short-term technical picture at this 4-month high. Still, it faces a very tough overhead battle moving towards the magic $1950.00 level we saw in August of last year. The bullish pluses – safe-haven demand is returning pushed by inflation fear and perhaps developing world turmoil. The “fear factor” is not back but we did get a taste as Bitcoin prices crumbled in early trading. For now, let us say that “growing concern” is creeping in around the edges of this financial conversation. This alone is not enough to create all-time highs on the short to medium term, but it is enough to support current trading ranges. Folks are still trying to figure out the extent of the collateral damage created by this massive relief money. Gold on the day closed up $13.50 at $1881.30 and silver closed down $0.30 at $28.01. 

Gold on Thursday drifted lower in overnight markets but again pushed as high as $1880.00 domestically before settling into the $1878.00 range. The Fed minutes released yesterday suggested that some Fed officials believe it might be time to discuss “tapering” – if the recovery presented no problems. Just this discussion was enough to push Treasury yields lower this morning, but surprisingly gold trading remained passive. Still “passive” is a “plus”, under normal circumstances talking about less asset purchases would pressure gold lower.

This Reuters however suggests that economic recovery may not be as easy as hoped. “Pandemic Mindset” persists among global consumers. People in the world’s leading economies remain overwhelmingly nervous about returning to life as normal, even after having been vaccinated against COVID-19, a survey released on Thursday found.”

This from Zaner. “While it is premature to assume that gold is benefiting from the travails in bitcoin, if that relationship develops that could provide significant rotational buying interest in gold. In a very positive classic physical demand development, Chinese gold imports (according to Bloomberg) almost tripled last month from the prior month with April imports at 111,911 kg the highest reading since December 2019!”

Gold watchers believe that inflation is becoming a problem which will eventually push gold to all-time highs. But this timeline is very uncertain and dicey – coming out of this unprecedented pandemic. So, expect turbulent times and prices. At the same time, gold and silver bullion have always presented an independent insurance policy providing the slightly cynical with peace of mind. Not because the metals are infallible but because physical bullion is under their complete control. For now, that works! On the day gold closed almost unchanged up $0.50 at $1881.80 and silver was higher by $0.04 at $28.05.  

Gold pushed higher on the open Friday threatening $1890.00 but reversed direction on better-than-expected manufacturing data and moved into negative territory. “The US economy saw a spectacular acceleration of growth in May, the rate of expansion of business activity soaring well above anything previously recorded in recent history as the economy continued to reopen from COVID-19 restrictions. The service sector saw an especially impressive surge in growth, beating all prior records by a wide margin, accompanied by another solid expansion of manufacturing output,” said Chris Williamson, chief business economist at IHS Markit in a statement.”

Unfortunately, this trading pattern is nothing new – information which suggests a spectacular pandemic recovery feeds the bearish gold scenario because traders begin to doubt the Fed will continue their big spending plans and begin “tapering”. I still cannot figure out why this is the case. I appreciate the worry that higher yields create but the Fed has been very clear – it will not alter their loose money course until the economy and employment have fully recovered.

So, today’s reversal is perplexing in the face of higher inflation both here and in Europe and the reality that we all have a great deal of work to do just to stay ahead of the COVID problem.

Still, these are typical problems in a financial world trying to get on its feet while the pandemic still threatens. I would not call gold pricing “stuck” at current levels. We are still technically solid short-term, central banks are adding to their gold reserves, gold and silver ETF numbers are moving higher, and the metals should draft support from problems in the crypto world.

But today’s price reversal suggests that something more decisive will have to change or gold could settle into a prolonged channel on both sides of $1800.00. We certainly have enough fundamental buzz to support $1800.00 – regrouping next week (my guess – traders will buy the dip) and taking another shot at $1900.00. But not enough to make all-time highs.

It would be easy to figure higher prices if inflation pops or the dollar breaks down but while you are waiting consider a counterintuitive idea – deflation. This idea too has been around for a long time but gets less traction these days. Deflation would create significant stock market weakness – maybe even initial weakness in gold but would eventually reinvent safe haven demand.

The David Lin (Kitco) conversation with Chris Vermeulen (TheTechnicalTraders.com) is worth noting. “Overall, the stock market, it’s lost a lot of its winds out of its sails as well. We’re seeing half of the sectors that I follow are in a downtrend. That means, the market is definitely limping along here. There’s not a lot of power behind it. If you look at the NASDAQ…it looks like it’s forming a bear leg here and could very easily head lower. Overall, the stock market to me, is in a risk-off mode. You don’t really want to be in stocks right now. Everything is turning bearish. We’re seeing gold, utilities, bonds are holding up fairly well,” he said. Vermeulen noted that when defensive assets like utilities and gold are holding up well relative to the rest of the stock market index, it means that institutional capital is rotating away from risk-on to risk-off assets.” On the day gold closed down $5.10 at $1876.70 and silver closed down $0.58 at $27.47.   

Silver closed today down $0.58 at $27.47. Silver bullion business remains surprisingly steady.                                  

Platinum closed down $35.40 at $1167.80 and palladium closed down $95.20 at $2775.30.                   

My Brothers and Sisters, we always thank you for your business and fellowship. If you have unusual circumstances, need cash or are looking for a special visit – talk to Harry. Many on our staff have now received the vaccine as we continue to enforce rigid safety standards between people and product. Be careful, this virus remains a danger. At the same time trust that God will soon get us back to normal. Richard Schwary

Disclaimer – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisors. The precious metal and rare coin markets are random and highly volatile so they may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.