Gold – Bottom or Not?
Commentary for Monday, April 22, 2019 – Gold closed up $1.60 today at $1273.50 in another round of quiet trading. Overnight gold pricing in Hong Kong and London was fairly steady between $1277.00 and $1279.00 – not expecting much here folks with an after Easter market. Domestic pricing however in New York broke down reaching $1274.00 but flattened out at the lower end of this range.
So gold continues left-footed looking for a new and more comfortable price range. If the 60 day gold pricing chart drives your thinking this market still belongs to the bears – but it remains very quiet after the holiday. Not much, at least in what I can see relative to bargain hunting. There are a few mid-sized players across our counter but they are old time players – not new money.
Oil continues firm but stocks are a mixed bag – so let’s call these a “push”.
Actually, gold is holding up fairly well considering the dollar trend – the Dollar Index since last Tuesday has moved from 96.90 through 97.25. Not a big deal but “another” reason to question whether gold can muster its forces after the blow-out at $1340.00 back in February.
You could make a reasonable case that the dollar is overvalued if you are looking for something which would favor higher gold prices in the midst of all this malaise. The dollar has quietly drifted higher since January of 2018 when it settled around 90.00. Still this seems like a reach considering a robust stock market and low employment. But the Democrats continue to probe the President – nothing so far but if they strike a nerve the dollar could weaken, considerably.
So we are stuck with the same scenario we faced before Easter. Will this latest charge by the bears be able to wear down current trading ranges enough to set up a test of $1250.00 gold? It’s quiet enough out there to suggest that this scenario is on everyone’s mind but no one wants to be the first in the pool, just in case physical demand reasserts itself.
The latest US action against Iran is aggressive – the US will drop oil waivers. This has created some pause on the international scene. Not enough to push gold prices higher but anything which adds to Middle East tensions will at least support the “safe haven” dialogue. It’s problematical however that gold did not offer up more of a rally.
So for now, get ready to get ready. It would seem that gold and silver remain sleepy after the Easter season and it might take another few days for everyone to get back to work and back in the trading game. My hunch however is that you will not see a big breakdown in pricing – this market is already discounted and while real bargain hunting is still absent everyone is looking for that magic number. There is nothing like “cheap” to rally the precious metals base.
This from Zaner (Chicago) – “While the dollar is lower to start today we doubt that is the primary catalyst for the somewhat impressive initial rally in gold prices. In fact noted strength in crude oil from news that the US will “eliminate” waivers for countries importing Iranian oil has provided all commodities with a lift. Gold might garner some additional lift from the fact that Russia expanded its gold holdings in March. The market might also draft some support off Chinese official comments that were reportedly cautiously optimistic toward their economy and it is also possible that the bombings in Sri Lanka have added in a measure of political safe haven interest. Unfortunately for the bull camp ETF’s continued a recent pattern of selling at the end of last week. In fact last week ETF’s liquidated 528,200 ounces of gold and 1.27 million ounces of silver. However the most recent positioning report in gold has seen the net long brought down sharply over one week and that could increase the chance of respecting solid value at the $1275 level on the charts. The April 16th Commitments of Traders report showed Gold Managed Money traders net sold 59,706 contracts which moved them from a net long to a net short position of 3,969 contracts. Non-Commercial & Non-Reportable traders were net long 80,414 contracts after decreasing their long position by a large 66,029 contracts. With some press outlets noting gold’s relative expensive standing to silver (the gold/silver ratio reached a 25 year peak) one might expect silver to pick up some speculative buying interest but reports of a possible sharp decline in Indian silver exports because of a scandal could provide a demand glitch ahead. However spec long positioning in silver contracted sharply last week and is now only minimally vulnerable to stop loss selling. The April 16th Commitments of Traders report showed Silver Managed Money traders net sold 8,365 contracts and are now net short 10,838 contracts. Non-Commercial & Non-Reportable traders reduced their net long position by 15,139 contracts to a net long 22,478 contracts.
With both PGM markets this morning posting impressive upside action to start it would appear as if they have come back into vogue. In fact the markets have completely discounted news that platinum and palladium ETF’s both reduced their holdings last week and the markets appear to have largely shrugged off reports of a rash of Tesla car fires. Certainly the markets are seeing spillover lift from the strength in gold and from crude oil but the PGM markets are also benefiting from a bullish research report from over the weekend suggesting that palladium could reignite on the upside and eventually hit $1800. The Commitments of Traders report for the week ending April 16th showed Palladium Managed Money traders are net long 9,295 contracts after net selling 678 contracts. Non-Commercial & Non-Reportable traders net sold 759 contracts and are now net long only 8,882 contracts! On the other hand platinum positioning in the Commitments of Traders for the week ending April 16th showed Managed Money traders are net long 22,894 contracts with Non-Commercial & Non-Reportable Traders net long 40,379 contracts and therefore platinum is more overbought than palladium.
The path of least resistance is pointing upward today off a series of minor bullish developments overnight. However dollar weakness doesn’t appear to be a complete reversal and the bull camp might have to rely on persistently positive spillover from crude oil. The $1275 level in June gold is initial support followed by $1273 and the market might not have much in the way of resistance until $1284.90. In silver initial support is seen at $14.89 and then again down at $14.83 with initial resistance seen fairly close in at $15.06.”
Silver closed up $0.02 at $14.96.
Platinum closed down $2.30 at $897.50 and palladium closed down $28.70 at $1374.80.
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