Daily Gold Newsletter Archives

Posted on October 15, 2021 by Richard

Gold – Still Making up its Mind

Commentary for Friday, Oct 15, 2021 (www.golddealer.com) – Gold closed down $29.50 at $1767.20 today and silver closed down $0.13 at $23.33. Not to see gold follow through after the big jump in prices Thursday will disappoint the bulls. And some will suggest today’s loss is the result of a big jump in retail sales, but I think profit taking makes more sense. Regardless of the reasoning gold remains stuck at these higher levels. Supported by dovish FOMC or weak economic news and weakened by news that quantitative easing will be modified. There is however a persistent feeling that inflation is a threat. Which is why gold has spent most it its time wandering between $1750.00 and $1800.00 since April. The kind of prolonged consolidation we see in gold is usually a negative influence, but investors have consistently bought the dips, which is why immediate delivery can be a challenge. Last Friday gold closed at $1756.30 / silver at $22.68 – on the week gold was up $10.90 and silver was up $0.65.

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 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.

On Monday gold opened flat, sold off and recovered – this typical back and forth pattern still suggests uncertainty over FOMC quantitative easing intensions. And today is Columbus Day, a federal holiday so I would expect a round of “quiet” trading.

I think most are getting used to the idea that the Fed will soon taper. But few have a clue as to how, when, or possible outcomes. Still, rising Treasury yields, 1.7% as of last Friday suggest we should see at least the first moves towards decreasing quantitative easing.

And it is not surprising gold is left footed as the Dollar Index remains steady above 94.00 -despite the poor jobs showing last week. But there is a developing debate as to whether the economy has suffered permanent pandemic-linked scarring according to MarketWatch.

The argument against higher gold prices because it failed to hold recent gains will take time to dissipate. And while traders are defensive, they are not exactly down beat. Reuters – “Gold is seeing some “bearish pressure” after not being able to hold on to Friday’s gains, said Kinesis Money analyst Carlo Alberto De Casa. However, “a good part of tapering is already priced in” and as long as bullion holds above $1,750, it’s a positive for the metal, limiting “big volatility”.

Zaner (Chicago) – “The gold market remains vulnerable to further liquidation after last Friday’s noted failed rally attempt and because of a 3-day low on the charts early today. Surprisingly, the gold market has not drafted support from news overnight that Indian gold imports reached 93.5 tons in September compared to a dramatic pandemic influenced 8.4 tons of imports last year! Certainly, some buying in September is seasonally related and could be a one-off event, seeing Indian gold imports reach 100 tons per month puts their total imports back on a “near normal” standing. While some traders suggested that the failed rally last week was the result of increased economic uncertainty from the non-farm disappointment, others indicated that the failure was the result of dollar strength. However, the dollar had some negative chart action on Friday with a four-day low and a temporary probe below 94.00 and that argues against a tight gold/currency correlation. Last week gold ETF holdings declined by 199,063 ounces and posted the 8th straight daily decline. Even though the gold market added significantly to its net spec and fund long markedly in the latest weekly positioning report, the overall net spec and fund long remains modest and within recent ranges. The October 5th Commitments of Traders report showed Gold Managed Money traders added 25,718 contracts to their already long position and are now net long 67,841. Non-Commercial & Non-Reportable traders were net long 212,122 contracts after increasing their already long position by 16,287 contracts. Going forward, the markets are likely to be less concerned about tapering with many anticipating Friday’s news delayed the US taper start until December. However, there is still a portion of the market that sees inflation as a developing problem that the Fed may want to get ahead of. In the event the Fed displays a definitive hawkish turn by tapering between meetings, that could be very negative to gold and silver pricing. On the other hand, physical demand statistics for China and India are improving relative to year ago levels and the markets could draft support from that “return to normal”. Seeing demand improve from India and China is always material given that they are number one and number two in the world consumer list but given small imports last year, the year over year comparison is difficult. Critical pivot point support seen at $1,745.40 and resistance moves closer in at $1,771.” On the day gold closed down $1.70 at $1754.60 and silver closed down $0.04 at $22.64 in very light trading.

Gold on Tuesday opened choppy, sold off and in a surprising turnaround pushed to $1770.00 before once again settling off highs but still in the green. So, this market remains fidgety for lack of a better word. This latest strength is hard to figure because the Dollar Index this morning topped weekly highs at 94.50, likely capping this morning’s bullish sentiment which is inflation driven according to Reuters. Tomorrow’s focus will be on the Fed’s September 21-22 policy meeting and the consumer price index, both could be big players on Wednesday.

Zaner (Chicago) remains cautious noting – “In addition to the potential financial crisis in China from 3rd missed interest payment by a huge real estate company, China is battling severe flooding which in turn has interrupted the flow of coal. Seeing the flow of coal interrupted accentuates the pre-existing energy crisis in China and should have provided lift to gold this morning. The gold market has also not reacted to fresh saber rattling by North Korea with its push toward a nuclear missile. However, it should be noted that Indian gold imports recently surged and have returned to near normal levels in a development that could help underpin gold prices on weakness. In other words, Indian buyers have been bargain-hunting buyers and with gold prices more than $100 below the summer highs, Indian wholesalers could be interested in rebuilding their pandemic reduced inventories.”

The latest news from the International Monetary Fund (IMF) may also be adding to this underlying inflation scenario according to Anna Golubova (Kitco) – Gold price sees double-digit jump as IMF cuts global growth outlook, cites ‘dangerous divergence in economic prospects’ – “This modest headline revision, however, masks large downgrades for some countries,” the IMF said in the report. “The outlook for the low-income developing country group has darkened considerably due to worsening pandemic dynamics. The downgrade also reflects more difficult near-term prospects for the advanced economy group, in part due to supply disruptions.”

The 2021 growth forecast for the U.S. was slashed from 7% to 6% due to supply constraints. Also, the report warned that if the U.S. does not pass President Joe Biden’s infrastructure package worth $4 trillion, it would cut the forecast for the U.S. even further. China’s growth forecast for this year was trimmed just by 0.1 percentage point to 8%. Growth projections for Japan, the U.K., Canada and Germany were also cut. Meanwhile, the euro area growth outlook for 2021 was raised to 5% from 4.6%.

The IMF also warned that the COVID-19 recovery looks increasingly divided. “Overall, risks to economic prospects have increased, and policy trade-offs have become more complex,” Gita Gopinath, the fund’s director of economic research, said in the report. “The dangerous divergence in economic prospects across countries remains a major concern.”

The disparity in this economic recovery primarily comes from what the IMF calls the ‘great vaccine divide,’ noting that 96% of the population in low-income countries remains unvaccinated. With rising stagflation fears worrying investors in the last quarter of the year, the IMF report stated that it sees inflation returning to 2% in advanced economies by the middle of next year. However, emerging and developing nations are still likely to see inflation at 4.9% next year. For now, however, inflation risks are “skewed to the upside,” while growth risks are “tilted to the downside,” the report pointed out. “Inflation risks are skewed to the upside and could materialize if pandemic-induced supply-demand mismatches continue longer than expected,” the IMF said. For central banks, this means being ready to change tactics quickly and tightening monetary policies if inflation is more persistent.

“Although central banks can generally look through transitory inflation pressures and avoid tightening until there is more clarity on underlying price dynamics, they should be prepared to act quickly if the recovery strengthens faster than expected or risks of rising inflation expectations become tangible.” On the day gold closed up $3.70 at $1758.30 and silver closed down $0.15 at $22.49.

On Wednesday gold prices opened mildly higher then dipped on rising inflation data which some believe encourages Fed intervention (tapering). But just as quickly the market pivoted on lows and moved dramatically higher, pushing above $1791.00 which was not surprising as the Dollar Index was generally lower today. So, what is encouraging the bulls, when common wisdom says the Fed likes what it sees in the latest economic numbers and could begin tapering as early as next month? Gold bulls would like to believe this latest push to higher ground despite today’s normally bearish tapering news is the game changer which gives them the perfect storm for higher gold numbers. World stagflation (slow growth coupled with rising inflation) has been hinted at by professionals but frankly this scenario is not appealing to me. Still, it could be the real deal so I’m paying attention but consider that today’s rally will have to prove itself. A big sell off when the Fed finally does roar will prove this suspicion false. On the other hand, if we are considering $2000 gold by Christmas the Fed might is behind the inflation curve and the world is stocking up for more troubled times especially outside the US.

Zaner (Chicago) – “In looking ahead to today’s action US consumer price readings and the release of the last FOMC minutes will bookend the Wednesday trade. Inflation expectations are relatively muted compared to recent readings with an anticipated gain in month over month readings for September of 0.3%. In our opinion, if inflation is building today’s CPI should come in above 0.3%. However, gold could be limited by two separate Fed interviews yesterday which resulted in views that the Fed should begin tapering just in case inflation is not transitory. In fact, one Fed member (the St. Louis Fed’s Bullard) suggested it was looking like inflation was lasting longer than they expected. While we see gold and silver prices remaining in a sideways chop, the gains in gold yesterday were impressive considering strength in the dollar and general deflationary influences from other physical commodity markets. On the other hand, headlines touting hacking losses of bitcoin holdings by small investors could exert pressure on bitcoin as investors realize the risk associated with cryptocurrencies. On the other hand, it is possible that a slight downshift in cryptocurrencies interest could result in some rotation into gold. Furthermore, it would appear as if US interest rates have started to fall back which will alleviate some pressure from rising interest rates. It should be noted that inflation chatter has moderated but the prospect of tapering in November remains in place. We see critical consolidation low support in December gold at $1,745.40 and solid resistance at the $1,782 level.”

This from Anna Golubova (Kitco) – ‘This is a game-changer for gold’: Shift in Fed’s rate hike expectations take gold price towards $1,800 – “The new U.S. inflation data release has triggered a rollercoaster ride in gold, with the latest move taking the precious metal nearly $40 higher on the day. September’s inflation numbers showed price pressures accelerating to 5.4% annually, slightly more than the market was expecting.

“We are starting to see the market growing nervous about the U.S. consumer. After digesting this report, it shows that the market is now anticipating sooner rate hikes. At the same time, we see the yield curve flattening, and that is good news for gold,” OANDA senior market analyst Edward Moya told Kitco News. “Gold is entering a period where risks now outweigh the reopening trade, and we’ll see more safe-haven flows into gold. This is a major reversal of trends and very positive for gold.”

More persistent inflation could mean a more aggressive Federal Reserve when it comes to tightening. “Potentially, gold will no longer see significant weakness whenever we get more inflationary pressures because now inflationary pressures will mean growth concerns,” Moya said. And an environment of higher inflation and lower growth is known as stagflation, which is when gold is known to thrive, said Blue Line Futures chief market strategist Phillip Streible. “The IMF is continuing to downgrade global growth and rising inflation, and that is the stagflation environment that gold thrives so well on,” he said. “The inflation data reaffirms the Fed’s position on tapering this November.”

Moya pointed out that a more persistent inflation pressure guarantees that the Fed will begin its tapering in November, and it could be more aggressive than what Fed Chair Jerome Powell had described a month ago. “Initially, Powell highlighted that tapering will be completed by the middle of next year. Now, expectations are that it will be done sooner, before we get to hot summer months,” he said. This reset in Fed rate hike expectations “is a game-changer” for gold, Moya highlighted. And if growth concerns continue to rise, gold has a chance to re-test those all-time highs of above $2,000 an ounce seen over a year ago. “Gold right now is facing massive resistance at $1,800; we’ll test this level a handful of times. But I am still looking for further momentum. We’ll see prices continue to move towards $1,840, which is where prices will consolidate more,” he said. Streible noted that he first needs to see what gold does at $1,800 an ounce, stating that he is using this time to lighten some of his overweight positions. “Even if gold broke through that 50-day moving average, now it has $1,800 as psychological resistance, then there’s $1,825-35 and then $1,850,” he said. “Tapering could mark a bottom in gold.”

The markets are closely watching the release of the Fed’s minutes from its September meeting this afternoon. And this massive reset in Fed rate hike expectations following the inflation report could be what gold needs, Moya said. “There’s now over 90% chance that the Fed will raise rates by September 2022. There’s uncertainty with the global energy crisis and the potential that Biden will make an announcement on China. Investors are scrambling for safe-haven positions.” Investors are looking for signs from the Fed that it is leaning towards the idea that inflation is more persistent than transitory, which will continue to drive rate expectations hikes, Moya added. “Fed has done everything it can on the employment front. Even if we see sluggish job growth, with infrastructure spending, you’ll see stable hiring in the first half of the year. This could allow gold prices to rally because the market will become more fixated on the inflation.” On the day gold closed up $35.40 at $1793.70 and silver closed up $0.66 at $23.15.

On Thursday gold pushed mildly higher on inflation fears and seemed to ignore the bearish news that US weekly jobless claims moved lower this week. I was surprised that we did not see some sort of correction from yesterday’s jump in gold prices and remain cautious. If gold runs out of gas at these higher levels a round of profit taking might be in order. And the $1800.00 overhead resistance has been problematic going back to last summer.

But there is no denying this upward pressure on the price of our shiny friend with inflation at 13-year highs. The big question is whether gold will continue to perform because of inflation or safe-haven fears if the Fed begins tapering next month and continues with this hawkish program through next year? This flies in the face of traditional thinking in which higher interest rates will send gold bulls to the sidelines. Still gold and confused world economics are old friends. So problems outside the US may reinvent the bullish sentiment that was so common when traders were thinking $2300 gold was right around the corner.

Both gold and silver are now looking at a four-week high. Pushed by rising inflation worries, supported by a weaker Dollar Index which has moved from 94.50 through 93.75 since Tuesday of this week, and rising energy concerns as winter approaches.

Treasury yields also dipped today reacting to lower-than-expected producer inflation. The notion that higher inflation numbers may not be transitory is supported the fact that crude oil pricing has moved from $35 through $80 a barrel this past year.

It is too soon to take yesterday’s pop in prices seriously but there are enough moving parts to this inflation equation to keep the price of gold in the news. At the same time the bulls should consider whether QE modification and higher gold prices can walk on the same road.

This from Reuters – “Current high levels of inflation may not abate as soon as many U.S. Federal Reserve policymakers expect, St. Louis Fed President James Bullard said on Thursday, as he once again urged the central bank to pursue a faster taper of its bond-buying program.

“I think this is concerning,” Bullard told a virtual gathering of the Euro50 Group, with regard to inflation. “While I do think there is some probability that this will naturally dissipate over the next six months, I wouldn’t say that’s such a strong case that we can count on that happening.” Bullard added that he sees only a 50% probability either way.

The Fed signaled on Wednesday it could start reducing its crisis-era support for the U.S. economy by the middle of November amid growing worries on inflation, and said a reduction of its bond-buying program would last until the middle of next year.

Bullard has been among the fiercest advocates among policymakers for an accelerated completion of the Fed’s tapering of its bond-buying program, which was put in place at the onset of the COVID-19 pandemic to stabilize financial markets and keep borrowing costs low. He has said he would like to finish the taper by the first quarter of 2022 as doing so would allow the central bank to raise interest rates sooner than expected if inflation remains uncomfortably high.”

On the day gold closed up $3.00 at $1796.70 and silver closed up $0.31 at $1796.70.

Gold was weaker on Friday snapping a three session rally this week as US bond yields moved higher, the dollar steadied and a surprise increase in September retail sales refocused the idea that an improving economy would further encourage the Fed to modify quantitative easing.

Today’s weakness also looks like a round of profit taking as gold once again failed to move above resilient overhead resistance at $1800.00. So, the buy the dips and sell the rallies trading model persists. Strong stocks and a new high in bitcoin also helped the bears.

Zaner (Chicago) – “December gold set back overnight but still held more than half of Wednesday’s gains. Inflationary expectations may have taken a hit yesterday with the lower-than-expected PPI number, and traders may be interested in taking profits. Inflation is in the headlines, even outside the financial news, with reports of higher grocery and gasoline prices, which could be encouraging more investors to look for safe-haven instruments like gold. ETFs even added 12,245 ounces of gold to their holdings yesterday, bringing this year’s net sales to 8.39 million ounces. It seems like the idea that inflation will not be transitory is gaining traction as well, with Bank of America CEO Moynihan and Morgan Stanley CEO Gorman both stating they expect it to stay around. And a spate of strike actions by various unions suggest there is something at work beyond just supply-chain issues. St. Louis Fed President Bullard has given inflation a 50% chance of sticking around. September PPI was up 0.5% from August and up 8.6% from a year ago. The core PPI rose 0.2% from August and 6.8% from year ago. This was the smallest gain for core all year, which could have been a disappointment to the bulls. The FOMC minutes appeared to confirm the Fed would begin tapering by mid-November, but this news did not seem to discourage the bulls. The inflation story seems to be driving the market rather than fear of dollar strength induced by Fed actions. Jobless claims dropped 36,000 to a seasonally adjusted 293,000 for the week ended October 9, the lowest since March 2020, which further supporting tapering ideas. There may not be a dominant fundamental to drive gold higher, but the market seems to be more open to inflationary expectations than it has in some time.”

On the day gold closed down $29.50 at $1767.20 and silver closed down $0.13 at $23.33.

Platinum closed up $6.20 at $1056.70 and palladium closed down $74.30 at $2079.40.

My Brothers and Sisters, we thank you for your business and fellowship. If you have unusual circumstances, need cash or are looking for a special visit – talk to Harry. All our in-house staff have received the vaccine and one stepped up for the booster! 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

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Posted on October 8, 2021 by Richard

Gold – Fed or No Fed?

Commentary for Friday, Oct 8, 2021 (www.golddealer.com) – Gold closed down $1.60 today at $1756.30 and silver closed up $0.05 at $22.68. To say this was a confusing trading week would be an understatement. Pensive market sentiment moved from bearish to bullish and back to mildly bearish. By today’s close most paper traders were happy to go home for a quiet weekend. Of course, all this drama was created by trying to figure out what the Fed might do about winding down pandemic financial support. And that question remains unanswered within the context of a still strong dollar. I would not be surprised to see next week present another set of whirlwind speculation and more volatility. Last Friday gold closed at $1757.00 / silver at $22.51 – on the week gold was up $0.70 and silver was up $0.17.

On Monday gold dipped on the open as treasury yields firmed but quickly regained session highs as the Wall Street Journal suggests broader inflation pressures are running ahead of the 2% Fed target. Reuters – “Gold will track moves in U.S. yields, while risk appetite will continue to provide short-term direction in terms of safe-haven demand ahead of the U.S. nonfarm payrolls report on Friday,” said Ricardo Evangelista, senior analyst at ActivTrades. The report, expected to show a continued improvement in the labor market, could influence the Federal Reserve’s timeline for tapering economic support. Hence, “investors are in a wait-and-see mode”, and any indication about the timing of the next decision from the Fed could offer new direction to gold, Kinesis Money analyst Carlo Alberto De Casa said.”

While the gold trade is always inflation sensitive, I think today’s firmer pricing is simply the result of a delayed reaction to a mildly weaker dollar. The Dollar Index has trended lower since last Wednesday – this morning coming in around 93.75. Keep in mind that the index was trading around 92.00 in late September and reached a high (94.34) only a few days ago. This massive jump was the result of the still sound idea that the Fed will soon modify quantitative easing. But the longer they wait the weaker the dollar may become – supporting current gold prices.

This dynamic does not provide enough “juice” however to reinvent the bullish scenario. Because sooner or later the Fed will act. But it does provide a wider opportunity window for the bulls to reinvent the buzz that was in the air when gold topped $2000.00 in March of 2020.

Zaner (Chicago) sees a mixed market – “Fortunately for the bull camp, the dollar seems to have stalled below the 94.50 level, but the trend remains up and therefore problematic for the longs in gold. However, the bull camp has been able to shape US Federal Reserve dialogue recently into a positive despite several Fed members indicating tapering was likely in November or December. From the ETF front it should be noted that gold saw ETF holdings decline by 577,807 ounces last week, while the silver market saw silver ETF holdings increase by a very significant 7.4 million ounces! In fact, silver ETF holdings have risen to the highest level since August 19th and therefore daily flows of silver ETFs should be monitored directly ahead.”

With the holidays right around the corner, I can’t see the Fed being particularly aggressive. Who wants to rain on the Santa Clause parade? This may further encourage the bulls. But a longer-term solution to the Fed problem of winding down quantitative easing remains a problem.

While gold looks quiet today, volatility always looms in modern financial times. The Evergrande debacle has not been resolved and trading in its stock was halted today. Crude oil is trending higher, perhaps confirming higher inflation. Boston Fed President Rosengren and St. Louis Fed President Bullard will speak during morning trading hours today – which introduces potential volatility because I’m not sure all the governors are on the same page. Also consider the massive drop in tech stocks this morning. This will likely increase safe haven demand in the metals.

Finally, not long ago I said delays in delivery of gold and silver bullion were once again getting longer. And got the usual reply. How can you have significant large order delays when pricing in moving lower? Actually, it’s easy. Manufacturers judge production on a demand curve. They cut back when they believe demand is moving lower because they don’t want expensive inventory just sitting in their safes. We just placed another large order of 1 oz silver rounds. Paid up front for the deal and were told not to expect delivery for a month. It’s still a crazy world out there and FOMC still has not made up their mind. On the day gold closed up $9.20 at $1766.20 and silver closed up $0.11 at $22.62.

Gold on Tuesday dipped lower likely on a strong ISM economic reading. The ISM is a monthly indicator of US economic activity based on a survey of purchasing managers at more than 300 manufacturing firms. A strong ISM reading may suggest robust economic activity is right around the corner and this will prompt the Fed to act, perhaps before year end in modifying its quantitative easing program. This “on again / off again” QE story has driven gold prices higher and then lower for months because while the Fed has turned hawkish relative to early pandemic days Powell is still cautious about this recovery.

Stock indexes are also back in the green this morning adding to this “risk on” trading environment. But the price of crude oil is soaring ($80.00). Because oil is widely used in manufacturing and commerce, sustained higher oil prices suggests the inflation scenario will continue to grow – ultimately supporting higher gold prices.

So as usual these days, the pricing picture for gold remains mixed. Reuters suggests that yesterday’s selloff in stocks and higher oil prices created a safe-haven run towards the dollar.

“It’s another frustrating trading day for the gold market,” focusing on the usual short-term developments such as gains in the dollar and U.S. Treasury yields, “while ignoring an unfolding energy crisis that’s driving a negative growth narrative,” said Saxo Bank analyst Ole Hansen.

Apart from inflation, fragile U.S.-China trade ties, China Evergrande’s debt crisis and a stalemate over the U.S. debt ceiling also dampened risk appetite for equities.

While gold could still move higher, a significant move would require a break above technical resistance, especially the 21-day moving average, Hansen said.

Investors’ focus was also on U.S. nonfarm payrolls data due on Friday, expected to show continued improvement in the labor market which could allow the U.S. Federal Reserve to begin tapering its monetary stimulus before yearend.”

If you look at the 30-day gold pricing chart it’s easy to see that gold has been defensive – moving from $1820.00 through $1730.00. But the most recent bounce higher at $1730.00 was strong enough to encourage the bullish scenario. Most likely based on the belief that the FOMC would not act quickly on QE. But I suggest that gold has not acted classically in relation to growing inflation fears. “Transitory” or not, higher inflation both here and Europe has not generated the expected buzz within the gold trade. Until “inflationary fear” translates into higher gold prices this back-and-forth pricing based on the FOMC soup du jour will remain in place.

Zaner (Chicago) – “In the near term, gold should draft support from predictions that the National Bank of Poland will increase its gold reserves by 100 tons this year and because of reports that Perth mint gold coin and bar sales jumped 83% in September from August. It is possible that the markets have revisited comments from the Federal Reserve last week where the Chairman suggested that inflation might be more than transitory!” On the day gold closed down $6.60 at $1759.60 and silver closed down $0.04 at $22.58.

On Wednesday gold dipped on the open as the dollar strengthened. The Dollar Index pushing as high as 94.44 in the early trade. But as the index cooled gold recovered, the trading range being $1745.00 through $1760.00. Expect traders to push either way depending on their perception of dollar strength. The expectation being that treasury yields and a higher dollar will continue to plague higher gold prices. And while these markets reflect bearish sentiment there is also a mildly bullish trade which manages to buy the dips and bargain hunt. Today being a good example with gold trading in the aftermarket around $1765.00. Granted, no big deal but this would suggest traders may not be as dire as the headlines might suggest.

Reuters – “Xiao Fu, head of commodities markets strategy at Bank of China International said that even if the non-farm payrolls data is not “spectacular and just in line with expectations”, some Fed members already think the condition for tapering has been fulfilled, and that is putting pressure on gold. Expectations are for 488,000 jobs to have been added in September, enough to keep the Fed on course to begin tapering before year-end. Therefore, markets are unwilling to make a decisive move ahead of the report, as they “grow more accustomed to the heightened prospects of the Fed’s tapering which is boosting the dollar and U.S. real yields,” said Han Tan, chief market analyst at Exinity.”

Perhaps a brighter outlook would better serve the physical trade. With all the bearish news out there is not much chance of a big surprise. This scenario may turn into a grind, but cheaper prices keep the bulls attentive. Gold will still have to push above $1770.00 to get out of the semi-doghouse but as long as upbeat economic news points further Fed action our shiny friend will remain left-footed and at the lower end of its current trading range.

And again, a brighter outlook will make a value case for gold bullion. These past 6 months the $1750.00 support line has been tested 4 times. And because gold topped $1900.00 during that time today’s tepid bull likes taking advantage of the pricing discount. Obviously, this market is not on fire but it’s actually holding up well considering most of the spec money has moved on, not sensing an immediate momentum play.

There continue to be logical working illustrations which the hard asset base embraces. Regardless of the wider held theoretical aspects of what the FOMC might do in the short term. From a practical standpoint Americans are paying up at the gas pump – dealing with the highest gas prices seen in 7 years. This obviously because of the massive rise in crude oil ($78.00) which has almost doubled this past 12 months. And I think hard money advocates think there has been too much made of possible interest rate hikes. Money has been too cheap since early pandemic days but moving to high interest rates is off the table considering the cost of carrying our massive debt and the negative implications to a highly leveraged Wall Street. The Fed will raise but has a lot of latitude so you will likely see a small increase, in keeping with the Europeans. The bottom line being, that money will still be historically cheap, so rising safe-haven gold demand and rising interest rates may not be mutually exclusive. On the day gold closed up $0.90 at $1760.50 and silver closed down $0.07 at $22.51.

On Thursday gold remained choppy looking at the unemployment numbers. The weekly jobless claims moved lower, and the more reliable moving average was somewhat lower. This all points to an improving economic picture which boosted Treasury yields and stoked bets that the Federal Reserve may soon start winding down economic support according to Reuters. The big kahuna number (how many jobs created) will be out tomorrow. And will create more turbulence.

Lower unemployment is a proxy, but I expected more of a dip in gold considering the build in negative buzz this week. Employment numbers are highly touted because they suggest possible Fed action. Not to be cynical here – but if unemployment numbers paint a great picture why is the Dollar Index mildly flat to lower since yesterday? It remains strong (94.00) but is not acting like it expects a strong raise in the number of jobs created tomorrow. Still, just the threat of Fed action has gold stymied and traders are cautious, anxious for Labor Department numbers Friday.

Zaner (Chicago) offers an interesting slant. “While Chinese gold reserves at the end the September were pegged to be unchanged versus the end of August, we suspect China is building its central bank gold reserves in secret and at an appropriate time in the future they will reveal that build up to the world. Obviously, China seeks to be the world’s financial hub and world reserve currency and that requires substantially expanding the amount of gold reserves currently attributable to the country. In a potential positive ahead, Indian daily infection counts have declined to 7-month lows amid climbing vaccination rates which some analysts think will improve peak sales season interest for gold jewelry just ahead. Typically, Indian demand for gold picks up in the 4th quarter ahead of Diwali, Festival of lights and Dhanteras in Noida. Last year the world Gold Council pegged Indian 2020 gold consumption at 315.9 tons of gold and that compares to the world’s largest buyer’s (China) purchases of 433.3 tons.”

We remain in the middle of a “wait and see” gold trade even through commentary is generally bearish because of possible Fed action. Still, gold pricing is stronger than what might have been expected. Not that our shiny friend is bullet proof, but gold is holding its own against a rising dollar. Silver on the other hand is reinventing itself after its recent wash out. Prices have stabilized. Both the public and exchange traded funds are buying cheaper prices. US silver eagle monster boxes remain in short supply as the mint slows production and retools for 2022 dated coins. On the day gold closed down $2.60 at $1757.90 and silver closed up $0.12 at $22.63.

Gold Friday initially moved to two-week highs as the dollar took a breather after US jobs data came in well below expectations, casting doubts about an immediate start to tapering by the Federal Reserve according to Reuters.

The problem with this end of week rally was that it held little conviction as gold then moved back to almost unchanged. The pop to higher prices was a relief rally supported by short covering. But this enthusiasm was based on a faulty premise – the Fed is in a weak position. And that is simply not true considering the enduring power of the US dollar.

As soon as traders realized that the “miss” on jobs was not the big game changer everyone expected they, in usual fashion, sold into the rally. Professionals are still cautious as to what the Fed has in mind. They are convinced this Covid menace will disappear, world economies will recover, and inflation will not soon become a problem. All this bullish economic scenario still supports the notion that the Fed will likely begin tapering next year.

Still there are other important reasons gold bulls should not be permanently disappointed. Crude oil at $80.00 has large inflationary consequences which for some reason are still being ignored. Zaner (Chicago) points out this morning there is an inflationary feel out there and physical markets are heartened by the return of China from holiday. Indian gold imports have been slow to recover but they now are improving. And silver is regaining its mojo based not on spec demand but expected industrial usage.

Most however would still question whether today was a good day or bad day for the metals? It was disappointing to see the big “pop” in early trading turn into a weekend whisper. But consider the alternative. A solid jobs number would have created the perfect bearish scenario – likely testing gold support ($1700.00) going back to March of this year. At today’s close we are still holding recent highs ($1760.00). Granted we are not out of the woods, but I don’t see near as many bears as I did earlier in the week. Considering all the uncertainty flying around as the Fed draws nearer to a definite decision (or not) I would consider this a great trading day.

Finally, it helps to keep gold’s fundamental nature in mind. It has always been a faithful financial partner. You may not always like the price, but it represents “no questioned asked” cash on demand. It is private, quiet, easy to store, has no third-party obligation and stands “at the ready” to provide a better night’s sleep. On the day gold closed down $1.60 at $1756.30 and silver closed up $0.05 at $22.68. Whew, what a week!

Platinum closed up $42.70 at $1026.60 and palladium closed up $118.00 at $2075.80. .

Posted on October 1, 2021 by Richard

Gold – Is the Buzz Returning?

Commentary for Friday, Oct 1, 2021 (www.golddealer.com) – Gold closed up $1.70 at $1757.00 and silver closed up $0.49 at $22.51. To say that gold had an interesting week would be an understatement today. Traders moved from slightly bearish to more bearish and from worried to confused. Bearish professionals finally decided it was safer to lighten their short positions sending spec money to the sidelines to catch their breath looking for better insight next week. Such is the life of a paper trader and frankly the physical market this week echoed the same themes. Large physical sellers in both gold and silver appeared as buyers decided to take advantage of cheaper prices. The jump in prices Thursday refocused the bulls and created welcomed buzz but the tepid follow through today was disappointing. Last Friday gold closed at $1749.70 / silver at $22.39 – on the week gold was up $7.30 and silver was up $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 2 to 4 weeks coming from the manufacturer. My guess, however, is that delays will continue to shorten.

On Monday gold opened mildly lower but traders are becoming more convinced that the Fed will soon modify its quantitative easing programs. This bearish development for the metals has come in and out of focus for months but rising treasury yields (1.5%) and a strong dollar suggest that traders are convinced the FOMC will act before year end. This mounting hawkish momentum was created by public comments offered by several Fed governors who believe it is time to begin some sort of tapering. There is also academic pressure to act. A Reuters poll confirms this view as 100 economists predicted that the Fed would announce a plan to taper its $120 billion monthly asset purchases this year, with withdrawal to start early next year.

“We continue to doubt the Fed’s narrative that inflation is ‘transitory’ and instead see the risks it stays elevated for many more months,” said James Knightley, chief international economist at ING in New York. “Consequently, there appears little reason to continue with the Fed’s QE asset purchases.” Only two respondents expected the Fed’s quantitative easing (QE) program to end later – in early 2023.

Zaner (Chicago) “In retrospect, news that China was moving to outlaw cryptocurrencies and outlaw crypto mining should have been a big benefit for gold, as an alternative flight to quality asset for Chinese investors, but no such chatter emerged.”

It is interesting that the dialogue to reign in quantitative easing creates a heavy gold trade but does not seem to slow down Wall Street. Less “free money for all” should create an equally bearish cloud over Wall Street. And while it has created some pause – this shift in Fed policy does not overshadow stocks as much as it does metals. Which suggests some believe that the metals will have the opportunity to shake off this higher interest rate threat if the Fed adopts a “middle ground” approach to QE. But this formalistic Fed “business as usual” approach will go out the window if inflation is not transitory or the pandemic reinvents itself. There are other wild cards which might yet come into play. An example being fresh bargain hunting in both gold and silver as prices trend lower, always a possibility will support current trading ranges. Or an over aggressive FOMC hand creates stock turmoil prompting safe have demand in the metals.

Given that gold pricing has presented lower highs and lower lows since early September the short-term technical picture is bearish. Perhaps suggesting a test of recent August lows ($1730.00) is in the cards. On the other hand, if $1750.00 holds up in light growing bearish sentiment it would suggest the bears are tired and encourage bargain hunting. On the day gold closed almost unchanged up $0.30 at $1750.00 and silver closed up $0.27 at $22.66.

Gold on Tuesday drifted lower on the opening as the Dollar Index surged and treasury yields continue strong. So, yesterday’s trend remains in place driven by fears of quantitative easing reform perhaps in the near future. If traders were looking for clues about tapering in Fed Chair Powell’s comments, they were looking in the wrong place. Today’s question-and-answer session ignored the elephant in the living room – for now. And I doubt gold traders took seriously Secretary Yellen’s warning of catastrophic circumstances if the debt ceiling is not raised by October. Talking about a “ceiling” on anything these pandemic days might easily be called political theater. Powell and Yellen sharing the podium created no buzz in the aftermarket.

Gold continues to ignore the classic inflation threat of rising crude oil prices. It also failed to react despite consumer confidence being down for the third month in a row. Should you be worried? I am not and believe gold’s month-old downtrend will soon run into short covering.

Still there are a lot of moving parts involved in keeping the FOMC ship heading for a safe port. Just the expectation of a heavy QE hand created a great deal of red ink in the tech sector today. And the last thing the Fed wants is that uncertainty to spread into Wall Street. Expect volatility and watch carefully how bargain hunting plays out as gold tests support below $1750.00. Any rally here might surprise you, given strong bearish sentiment but this latest testing of support we soon give fresh money a good idea of whether it is safe to come out from under the bed.

Neils Christensen’s (Kitco) comments on yesterday’s Federal Reserve shakeup also flew under the radar. “Dallas Fed President Robert Kaplan said he would retire on Oct. 8 and Boston Fed President Eric Rosengren said he will retire on Sept. 30. The two embattled regional central bank presidents are stepping down as they come under scrutiny for investments they made last year. Analysts note that next month there will be six seats open on the 19-seat monetary policy meeting. Ole Hansen, head of commodity strategy at Saxo Bank, said in a comment to Kitco News that the vacancies could create some uncertainty as almost one-third of seats on the committee now need to be filled.

Analysts say that Rosengren’s vacancy could have the most significant impact on future monetary policy because, under the current system, he becomes a voting member of the Federal Reserve in 2022. “He was a hawkish voice on the Fed,” said Hansen. The Dallas Fed representative will be a voting member in 2023. The resignations also come as the Federal Reserve looks to shift its monetary policy, with growing expectations that it will announce its plans to reduce its monthly bond purchases at November’s monetary policy meeting. It is also expected that the tapering will begin in December and finish in mid-2022. The latest dot plots also show that the Federal Reserve is evenly divided on interest rate hikes. Currently, nine members see the potential to raise interest rates in December 2022. One vote could make the difference for when the central bank raises interest rates. Some have said that the Fed shakeup is not impacting gold because it is unlikely Rosengren will be replaced with a dovish president.” On the day gold closed down $14.20 at $1735.80 and silver closed down $0.23 at $22.43.

Grant on Gold / Sept 28th (Zaner/Chicago) – (1) Gold begins the week on a consolidative note, trading within striking distance of the 6-week low that was set at $1742.28 on the previous Monday. (2) Silver eked out a slightly higher close last week and while trading was modestly higher on Monday, the downside still seems to be the path of least resistance. (3) Platinum has recovered somewhat from the 10-month low set last Monday at $901, but most of the important trend indicators continue to point down. (4) Palladium is consolidating the recent plunge to a 15-month low at $1845.25 as the market is increasingly resolved that auto sector disruptions will extend into next year.

On Wednesday gold opened with a weak short-covering rally but a surge in home sales encouraged the bears who embrace the optimistic pandemic recovery and no inflation scenario. At the same time the Dollar Index roared – never good for the bullish gold scenario. The index is trading at yearly highs (94.25), fully 4 points higher than yearly lows (90.00) seen in January!

The mighty dollar set up the expected test of August lows ($1730.00) but traders finally bought the market at $1726.00 creating a reasonable short-covering rally. This was mildly comforting to the bullish scenario, but this price washout still carries significant sway. Technicians will now move to the bigger yearly picture for clues in judging the significance of this small rally.

I would not get too wrapped up in this most recent downdraft but keep in mind that gold has lost $80.00 this month and $158.00 this past year. These numbers are large enough to again consider the possibility that gold and silver are oversold.

I’m surprised gold caved so easily given the uncertainty of the next FOMC move. But this might be a good example of how traders respect herd mentality. And are sometimes eager to join the latest party for the short term as these momentum plays are usually short lived. This does not mean the bears are retired, just tired. But given that gold has broken down at August lows paper traders will consider longer term support ($1700.00). This solid support may be significant for two reasons. First, it represents a classic technical double bottom in what I already believe is an oversold market. The second reason is an old but important argument. The world will always like independence from government intrusion. In all times, confused or not, pandemic driven or the return to normal living. Both gold and silver bullion are simple solutions that fulfill that investment need in a transparent and manageable way. Like stocks, their price swings can create concern on the short term. If that is you stand aside and look for better prices. You rarely get that perfect price but generally the consumer has a pretty good feel of what works for them. Today gold is trading at a 6-week low and silver at a 14-month low. On the day gold closed down $14.30 at $1721.50 and silver closed down $0.97 at $21.46.

On Thursday gold pushed dramatically higher on a combination of factors, including some good old fashion bargain hunting. Jobless claims rose for the third week in a row which leads to uncertainty about Fed tapering because the FOMC is looking for a strong jobs market according to Reuters. The Chicago PMI was also a miss, coming in at 64.7, the lowest since February. And the Dollar Index is cooling off somewhat which is most likely the prime mover this morning.

Today is the confirmation that yesterday’s mild buying interest has turned into a short-covering rally, for sure in gold but one that is less powerful in silver. Reuters notes “Federal Reserve Chair Jerome Powell said on Wednesday that resolving “tension” between high inflation and still-elevated unemployment is the most urgent issue facing the Fed right now, acknowledging the U.S. central bank’s two goals of stable prices and full employment are in potential conflict.”

I would not say this latest interest in gold and silver are relief rallies or the return of safe-haven buying. Stocks have gathered themselves after yesterday’s severe tech sell-off. No, today’s higher prices in gold and silver are the result of trader recognition that both markets were oversold. Professionals want squared books going into the weekend.

This does not mean gold’s troubles with FOMC “tapering” are out the window. This cloud will likely remain in place until next year. But recent economic feedback showing elevated unemployment might give Chief Powell pause before talking about unwinding the long-standing QE package. A better approach to slowing down government support is to do something small, like the Europeans who avoided the word “tapering”. They call it “adjustment” these days.

Besides US traders have made such a big deal over Fed “intention” that damage to gold pricing is reflected in its current trading range. Or if you are a pessimist – today’s pricing may have further downside but the worst of this is in the rear-view mirror.

Consider the bigger picture. According to World Gold Council data central bank gold purchases will climb to 500 tons in 2021 and 540 tons next year. That’s below the twin peaks above 600 tons in 2018 and 2019, but a significant advance on the 326.3 tons purchased last year. So central banks are buying gold’s price weakness and adding to their reserves. On the day gold closed up $33.80 at $1755.30 and silver closed up $0.56 at $22.02.

Gold Friday opened flat in early trading but soon edged higher in what feels like mild follow through buying from yesterday. Reuters – “Even though it doesn’t feel and look like it, gold has actually had a phenomenally strong week,” considering the strong moves in the dollar and yields, the “normal negative drivers”, Saxo Bank analyst Ole Hansen said. “Anyone trying to convince market participants that inflation is not here, that’s a fool’s game,” and with soaring energy prices due to a crunch in China and Europe likely to hit growth and earnings, that will leave us with a volatile October and, in turn, support gold, Hansen added. Providing a floor to gold, European stocks fell following a slide in Wall Street and Asia on expectations that euro zone inflation could jump, amid slowing economic growth.”

It is a bit early to come out from under the bed, but this is beginning to sound like some buzz is returning to the bullish trading floor. The technical picture still belongs to the bears but could quickly change next week with follow through momentum. Considering the pressure gold was under at the beginning of the week, and the fact that we are going into the weekend on a positive note, we could be doing a lot worse. And Bloomberg overnight suggesting that silver was washed out and could be attractive from a long-term bottom perspective helps raise precious metals prospects looking for good news.

I would also make my usual case that the dollar at yearly highs only makes sense if the FOMC raises interest rates. Yes, they might but not until next year – which might suggest the dollar is overbought and could trend lower in the ensuing months supporting gold.

If you were bearish on the dollar, which not long ago was the common scenario you could make a case that the Dollar Index trading around 94.00 could easily move toward 90.00, its longer-term base support number. So, there remains a strong bearish dollar case waiting on the sidelines. This outside the box thinking is not popular in today’s view of the all-powerful FOMC. But there is a reality at work here which should not be ignored considered the development of world commerce and the growing competition for alternative world currencies. On the day gold closed up a quiet $1.70 at $1757.00 and silver closed up a welcomed $0.49 at $22.51.

Platinum closed up $11.20 at $972.10 and palladium closed up $3.90 at $1906.50.

Zaner (Chicago) as usual remains cautious – “We remain highly suspicious of yesterday’s outsized rallies in gold and silver prices. The Press pegged the source of the large rally in gold and silver yesterday as a simple end of quarter shift in the flow of funds. However, we are suspicious of a $40 gold rally caused by position squaring and/or other mechanical market forces in a market that has not displayed significant volatility recently. On the other hand, the gold market probably saw a lift from soft US (a 3rd week of higher claims) and Chinese (Negative PMI) economic data with economic uncertainty providing some renewed flight to quality buying. Fortunately for the bull camp, the latest new high in the dollar index was initially rejected aggressively with some technical analysts suggesting a possible top in the dollar.”

My Brothers and Sisters, we thank you for your business and fellowship. If you have unusual circumstances, need cash or are looking for a special visit – talk to Harry. All our in-house staff have been vaccinated and wear masks. 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

Posted on September 24, 2021September 24, 2021 by Richard

Gold – Pensive and Steady

Commentary for Friday, Sept 24, 2021 (www.golddealer.com) – Gold closed up $2.00 at $1749.70 and silver closed down $0.25 at $22.39. While gold had both a turbulent and tough week psychologically – some short covering going into the weekend was welcomed. It’s puzzling that renewed worries of an Evergrande bankruptcy firmed up the dollar but did not bring gold safe-haven demand into focus. This might suggest that current bearish sentiment is already getting tired, but it is too soon for that much optimism. It won’t be long before traders are again wringing their hands over the next FOMC meeting. Last Friday gold closed at $1749.40 / silver at $22.30 – on the week gold closed up $0.30 and silver closed up $0.09. Hard to believe that both markets are virtually unchanged on the week considering all the ruckus.

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 2 to 4 weeks coming from the manufacturer. My guess, however, is that delays will continue to shorten.

On Monday gold presented another typically complex picture, but one that is very much highlighting the true value of real money. Considering the number of bears in the forest on Friday no one would have expected a swift and rising gold opening today. As worries grow over the solvency of Evergrande – a massive Chinese property development company. There were rumors of Evergrande financial troubles last week, but traders were so focused on the bearish implications of possible “tapering” in the upcoming FOMC meeting held tomorrow and Wednesday that this potential debacle flew under the radar. I believe the People’s Bank of China (the equivalent of our Federal Reserve) would step in to save the day but at this point that remains unclear. What is real is the rising fear factor as Asian stocks tanked. This, of course leads to the inevitable talk of “falling dominos” in the region but this too in overstated.

Gold and the dollar both moved higher. Which might sound counterintuitive, but the dollar is another primary choice is times of uncertainty. The recent drop in gold prices also helped our shiny friend but with Powell’s speech due on Thursday this strength surprise may be short-lived unless the Fed turns dovish, and China does not step in to stop this financial breach.

What makes this pop in gold prices attractive is not so much the actual number on the day which was modest. This kind of action serves to remind everyone that physical gold serves a very important purpose in this new age of high fiat currency finance. Gold bullion continues to have value when things go wrong and represents the ultimate value when things go very wrong.

So regardless of what side of the street you are on today it pays to include gold as a financial anchor. And in doing so remember Robert Burns poem “To a Mouse” (1786) – “The best-laid schemes o’ mice an’ men gang aft a-gley [go often astray].” On the day gold closed up $12.40 at $1761.80 and silver closed down $0.14 at $22.16.

Grant on Gold (Zaner/Chicago) – 1. Gold added to last week’s sharp losses in overseas trading on Monday, setting a 5-week low at $1742.28 before corrective forces emerged. 2. Silver extended to the downside to start the week, establishing a 10-month low of $22.03. 3. Platinum tumbled to a 10-month low near $900 on Monday and it seems like September will end up being the fifth consecutive lower monthly close. 4. Palladium tumbled to a 15-month low as the market increasingly anticipates auto-sector disruptions to extend into next year.

Gold on Tuesday opened choppy but quickly pushed higher even though the Dollar Index seems to have stabilized. The rebound in overseas stocks might suggest the Evergrande fallout will be limited. The FOMC is meeting today, and Chief Powell will speak tomorrow. Higher gold prices today suggest continued safe haven buying.

Zaner (Chicago) – “Obviously, the potential for a financial contagion inside China, ongoing infection issues in China, significant global equity market declines and the potential for Chinese stimulus provides the gold bulls with plenty of ammunition. The bull camp this morning should garner some confidence from news that Swiss Gold exports jumped significantly in August with sales to India jumping by 93% to 70.3 tons from July! In retrospect, the gains in the gold market to start the trading week were especially impressive when one considers the magnitude of the strength in the US dollar. However, the Dollar has now corrected sharply from a 4-day rally and a decline below the first retracement point of the recent swing higher is seen down at 93.00. Therefore, a December Dollar Index slide below 93.00 could result in an acceleration of buying.”

I would still consider the possible Evergrande bond default a new bullish development supporting gold. The Chinese markets are coming back from holiday, the Covid D variant is dangerous, and it now looks like China will step in with stimulus if Evergrande fails.

Still gold remains under pressure because traders believe that the FOMC will develop a hawkish tilt between now and the end of the year. This hawkish inclination is not news, gold has been struggling under this bearish news for months.

And while gold pricing is down about $20.00 this month and $140.00 this year our shiny friend is holding up considering the numbers of bears in the woods these days. An optimist might suggest current gold prices have already factored in mild QE modification.

On the short term the current FOMC meeting has nothing to lose by dragging its feet. They are not worried about inflation and the world is even considering deflation. I’m also sure the Fed watched Monday’s sell off in Asian stocks over the Evergrande mess. And considered its possible impact on Wall Street. Not to overstate this possible default but it makes good sense for them to remain cautious at what might turn into a precarious financial turn in the road.

They have time to tap the brakes before the end of the year. And Powell’s Wednesday speech will give them plenty of opportunity to once again dance around this question. For now, the bulls have regained some technical edge but to keep this fledging uptrend in place safe haven demand must continue higher or the dollar will have to move lower. On the day gold closed up $14.20 at $1776.00 and silver closed up $0.41 at $22.57.

On Wednesday gold opened choppy and waiting for Fed Chief’s Powell’s comments about the last two days of meetings and discussions. It is very quiet out there considering all the speculation about what Powell might to say this afternoon. But the Dollar Index (93.17) has moved steadily higher since last Thursday suggesting the expected news will be hawkish. Most of the governors now favor modification of quantitative easing. But this sentiment was in place at last month’s meeting and while Powell did not disagree, he suggested that there was more work to be done and the Fed would remain accommodative.

The problem with this dialogue is that traders, knowing that eventually the Fed will do something only need a few hints to run with the QE ball. This might be a mistake because the Fed could lay out some sort of timetable but continue to remain vague. Zaner (Chicago) notes this morning that the Bank of China has increased liquidity (a plus for gold) and the recent inflation dialogue may be turning into a combination of inflation/deflation (a negative for gold).

If you are looking for something outside the box, the gold market could yawn over Powell’s wisdom today. This would present the typical “buy the rumor, sell the news” advice from sage Wall Street traders. The potential blowout to the downside never happens, and gold continues to hold a reasonable yet choppy price range. While the rest of world decides to wait on possible outcomes from new variant infections or further fallout from the Evergrande problem.

What did the Fed do? The FOMC left interest rates and bond buying unchanged which accounted for today’s tepid closing numbers. Fed Chair Powell’s upbeat economic remarks however pushed the dollar higher creating pressure in the aftermarket and the gold price lost $10.00 from yesterday’s close ($1776.000. MarketWatch – “Powell’s says Fed officials are eyeing a gradual tapering plan ending “around” middle of next year”. And in a “have your cake and eat it too” moment Powell also says supply bottlenecks pose upside risks to inflation. So, there is enough this time around to give each side (the hawks and the doves) a piece of the cake. I believe the trade will continue to expect an increasingly hawkish FOMC but wait until next month to see if this supposed shift has actually shifted – if you get my meaning. On the day gold closed up $0.70 at $1776.70 and silver closed up $0.30 at $22.87.

Two observations about silver and platinum worth thinking about in the meantime. While the silver bullion market is moving lower most likely because traders believe the Covid D variant will impact its industrial application it remains impossible to keep bullion products on the shelves. There is a growing rumor among dealers who believe lower prices and not near enough physical product for immediate delivery will push premiums even higher. This has to be one of the goofiest anomalies I have seen in 40 years of trading physical metals. And what’s up with the big jump in platinum prices yesterday. This may relate to a CNN news report yesterday making the case that platinum is now too cheap and will recover nicely once this current business cycle further develops as the pandemic recedes and the auto industry refocuses.

On Thursday gold opened firm but quickly sold off, testing session lows in early trading. The genesis of this dip reflects yesterday’s aftermarket weakness. And perhaps increased uncertainty as the perception of a slowing US economy grows, although the numbers paint a balanced yet mixed picture. Gold seemed to ignore the half point swing in the Dollar Index, so my bet is traders have decided the last three days of FOMC pondering was hawkish even though the Fed once again stood pat, buying more decision time.

Today’s gold trade also looks like a modified bear raid, as the short paper tries to push the envelope looking to see if support holds keeping in mind that we saw a recent $1730.00 bottom in early August. It’s also disappointing that gold created no traction in the most recent inflation numbers which are obviously higher than Fed’s target.

I would not read too much bearishness into the most recent trading pattern and hawkish FOMC inclination. Obviously, gold’s fledgling uptrend is out the window today, but I still suspect a longer consolidation pattern is in the cards. It is also worth mentioning that when bearish sentiment is at its height – most sellers have already sold. And the sudden jump in European interest rates will likely stop the bullish dollar trend in place since early September.

From a practical standpoint we still cannot keep immediate delivery products on the shelves – so hard-core gold and silver buyers always embrace cheaper prices. You will likely see further volatility, but I would not be surprised to see the dips become smaller and smaller. On the day gold closed down $29.00 at $1747.70 and silver closed down $0.23 at $22.64.

Gold Friday opened mildly higher but quickly pushed to session lows as the Dollar Index moved above 93.00 most likely on the news that Evergrande will likely file bankruptcy. What is surprising is that gold failed to rally on the news, further evidence that the bulls have taken a vacation. Zaner (Chicago) – “However, a Bloomberg article overnight hit the nail on the head on the action in the gold market recently by suggesting the markets overreaction to bearish drivers reveals weak underlying sentiment. An issue capable of supporting gold next week is this weekend’s German election where it is possible to see another “lurch to left” as that is already resulting in money leaving Germany for Switzerland especially if some of that money decides to seek the safety of gold. At least in the early going today a minor limiting force for gold is seen from a slight upside extension in US treasury yields after yesterday’s large jump. While the technical picture has shifted against the bull camp with the rally early in the day yesterday forged on very low trading volume and a decline in open interest the market has managed to attract buyers in numbers early today. In conclusion, both fundamental and technical signals favor the bear camp, but the Evergrande situation should support gold through the close today as buyers expect weekend fireworks in China.”

So, it’s apparent that gold still struggles going into this weekend. But I’m still not overly bearish for a number of reasons. First, the physical demand for US Gold Eagles and other traditional gold bullion coins is solid. Second, $1750.00 support for gold this past 6 months has held up 4 times – so traders will soon be talking about an oversold gold market. Especially since the Fed has not actually made any changes to its quantitative easing program. There are some traders who believe the FOMC tapering conversation will run out of gas and they will be forced to “put up or shut”. But I disagree they have milked this conversation for 6 months to their advantage and there is no reason they cannot continue this approach well into next year. This leads to a bullish theory that has been around for some time – but is worth considering. There are some credible sources who believe that once the FOMC begins tapering gold prices will actually move higher not lower. Finally, keep this contrarian investment theory in mind. When everyone is bearish there are no more sellers – they have already sold. This then turns into a prime opportunity for hard-line gold and silver bulls – keeping in mind there are still trillions of dollars floating around out there looking for the next big opportunity. On the day gold closed up $2.00 at $1749.70 and silver closed down $0.25 at $22.39.

Platinum closed down $16.30 at $980.90 and palladium closed down $20.70 at $1951.10.

My Brothers and Sisters, we 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

Posted on September 17, 2021 by Richard

Gold – The Bears Return

Commentary for Friday, Sept 17, 2021 (www.golddealer.com) – Gold closed down $5.20 at $1749.40 and silver closed down $0.45 at $22.30. While gold prices look to be stabilizing after yesterday’s big 3% drop there was little bounce in early trading today which is disappointing. The upcoming FOMC meeting this Monday and Tuesday looms large as traders continue to fear early hawkish Fed monetary action in response to improving US economic conditions. We believe the Fed is too optimistic over the US recovery considering the unexpected rise in US Covid infection rates worldwide. This still growing medical tragedy may yet prompt a more dovish FOMC response on the shorter term. In the longer term, the factors supporting the bullish gold scenario are still in place early bargain hunting on large price dips. And the massive yet still growing US debt, now approaching an astounding $27 trillion. Last Friday gold closed at $1789.60 / silver at $23.86 – on the week gold closed down $40.20 and silver closed down $1.56.

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 2 to 4 weeks coming from the manufacturer. My guess, however, is that delays will soon shorten.

On Monday gold moved higher in early trading as the Dollar Index was somewhat weaker. But this trend did not develop, and gold closed almost unchanged with little interest. The monthly consumer price index will be out tomorrow. Perhaps traders are anticipating rising inflation which would stall Fed plans to modify quantitative easing. But as long as the Dollar Index remains strong (there is support going back to June), it will be difficult for gold to break higher.

Reuters “Cleveland Fed President Loretta Mester said on Friday she would still like the central bank to begin tapering asset purchases this year, joining a chorus of policymakers stating plans to begin scaling back support despite weaker jobs growth in August.”

This continued tapering chatter between Fed governors also weighs on the bullish gold scenario. Citi Research maintains a slightly hawkish bias into the September 21^st FOMC meeting. But they claim a dovish surprise could allow gold to break higher ($1900.00).

Zaner (Chicago) still favors a downward bias this morning but notes – “Surprisingly, last week gold ETF holdings increased by 49,422 ounces which is surprising given the trend of outflows. In retrospect, the gold and silver trade discounted a wave of global inflation news last week in a fashion that suggests the expectation of self-perpetuating inflation is not being embraced yet. Instead, the gold and silver trade focus is usually on a combination of the ebb and flow of physical demand views and the impact from the dollar. In fact, recently the Chinese government has instructed businesses to “set commodity prices reasonably”, which is another attempt by Beijing to dampen rising inflationary conditions that is not likely to yield results. In the near term, gold and silver look to remain unresponsive to inflation news despite record readings in components of last week’s US PPI report. While the gold and silver markets may not react to the Japanese producer price index readings for August the cycle of monthly inflation data will continue Tuesday with US CPI for August. We suspect that gold and silver will continue to monitor the ebb and flow of economic sentiment and derive some direction from equities and the crude oil market as both those markets are proxies for the direction of the economy.”

These “upward/downward” swings in gold are a grind, which can lead to mischief as traders push the envelope looking for strength/weakness. On the other hand, stock investors at some point may blink if the FOMC becomes hawkish. These folks would not need much encouragement to take stock profits and choose gold bullion as an undervalued alternative. On the day gold closed up $2.40 at $1792.00 and silver closed down $0.11 at $23.75.

Gold on Tuesday drifted lower on the open. But quickly caught a bid as August underlying US consumer prices increased at their slowest pace in six months, suggesting that inflation numbers have peaked according to Reuters. This soft inflation number pushed the dollar lower as traders once again suspect the Fed will be less hawkish regarding quantitative easing. This is the old “back and forth” logic which has plagued the higher gold scenario for months.

And it most likely will not fade until the FOMC decides the best QE action coming out of the pandemic. But it does somewhat enhance the bullish gold scenario in that soft inflation gives the Fed more room to push their financial envelope without paying the price. It figures that if inflation remains soft the talk of tapering before year may end up on the back burner. Whether this will further embolden gold remains to be seen but it is the first step in the right direction.

Today’s morning surprise created buzz because traders believed that inflation numbers would come in hot. This latest excitement however may be short-lived as professionals hold a negative bias and are apt to sell these rallies, as usual. The Fed will also use the upcoming FOMC meeting (September 21^st and 22^nd) to bang on about tapering, which allows them to have their cake and eat it too. This is beginning to look like the European model. EU Central Bank President Lagarde modestly trimmed bond buying while claiming the EU was not tapering but adjusting to a new reality. This led to the now famous quote that the EU has secured a taper without a tantrum. On the day gold closed up $12.70 at $1804.70 and silver closed up $0.09 at $23.84.

Grant on Gold (Zaner / Chicago) – (1) “Gold has been trading in a lackluster manner after failing to take out chart resistance at $1831.73/$1834.10 early in September. (2) Silver fell to a two-week low of $23.38 to start the week yet remains well within the range established in early August. (3) Platinum remains on the ropes, falling to a 9-month low on Monday of $947.50, just shy of the midpoint of the Covid-era range at $947.65. (4) Palladium has plunged nearly 13% in the past week, setting a more-than one-year low of $2070.84. This puts palladium well below the midpoint of its Covid-era range.”

On Wednesday gold opened flat but soon began to drift lower in what has become a really ho-hum trade. Which is interesting because technically gold still has a slight advantage and fundamentally it looks like a more dovish FMOC will take its time to taper. Gold has also held up nicely just under $1800.00 even when bearish talk was all the rage. Not that the bears are going away anytime soon, but you could make a mild case that this market is simply resting and wants another shot at trying to move above $1830.00. This optimistic opinion is in the minority, but it is still alive and well, looking for fresh bullish news to awake from it slumber. And the bullish view is underpinned by hard asset logic which does not completely trust big government. Not wanting to put all their eggs in one basket as my sweet Mom was fond of saying.

Professionals like Zaner (Chicago) hold an opposite view. “While the gold and silver markets remain within proximity to yesterday’s pulse up highs, we view the charts as vulnerable in both markets. Furthermore, we also see the fundamentals in favor of the bear camp in the wake of yesterday’s surprisingly soft US CPI readings. Not only did CPI fail to confirm surging inflation, but a portion of the trade interpreted the data as a sign that the US economic activity pace was slowed last month due to Covid and reports that businesses are closing because a lack of employees. Additionally, a popular fund manager claimed that severe deflationary conditions were more likely than inflationary conditions. Adding into the potential demand malaise for gold and silver is soft Chinese retail sales and industrial production readings overnight which in turn add to the pre-existing view that China’s economy has also slowed because of the Delta variant. Yet another negative angle for gold and silver is a rising chorus of market dialogue predicting “stagflation”. In conclusion, big picture macroeconomic issues have punctured bullish sentiment and it could take a definitive downside breakout in the dollar to cushion gold and silver against extending the initial slide in prices today.”

In the meantime, traders are watching for anything which might suggest what the Washington deep thinkers have in mind. Today the New York Fed Empire State Survey predicted a strong recovery. The implications here are that the Fed would taper sooner, a negative for our shiny friend. At the same time, Biden is meeting with Manchin, Sinema to discuss the US $3.5 trillion spending bill. More and even more money suggests inflation will not remain benign down the road. A plus for both gold and silver bullion. If this were a Shakespearian play, we are not even in the third act, which is where all the action usually takes place.

On the shorter term the ultimate predictor of gold’s movement will be the dollar. But even here the tea leaves are not clear. Treasury rates are drifting lower suggesting that traders believe the Fed will do little to rock the interest rate boat. Perhaps even through year end. Which suggests the Dollar Index now trading around 92.50 could drift to lows not seen since June (90.00). This would be just what the gold bulls need to revitalize their base. On the day gold closed down $12.30 at $1792.40 and silver closed lower by $0.08 at $23.76.

On Thursday gold got clobbered as the bears took control and the dollar and treasury yields moved higher. Zaner (Chicago) remains pessimistic. “In retrospect, the action in the gold market in the previous two sessions hints at a market unable to sustain rallies even in the face of patently bullish fundamental developments. The inability to rally from previous extremely hot inflation readings highlights markets that are not tracking classic inflation signals. However, it does appear as if this week’s slack US CPI reading has combined with predictions of deflation and stagflation to knock the chair out from under the gold and silver bulls. At this point, we are not even sure if a noted downside extension in the Dollar would turn the tide back in favor of the bull camp, as gold and silver prices declined yesterday in the face of Dollar weakness! In other words, hot inflation evidence last week, a weaker Dollar yesterday, surging grain and energy prices all failed to stimulate buying and instead both gold and silver remained under pressure.”

Professional physical traders worried about gold’s recent double top ($1820.00) and a fading technical edge. Now consider that the bullish gold scenario has failed to gain traction or buzz despite traditional reasoning. You could have made a plausible case that gold prices were just gathering themselves earlier in this week, with the idea of making another attempt at breaking above $1840.00. But the bearish sentiment was too heavy, and the Fed talk of tapering too persistent. The government focused on improving US economic conditions and ignored the growing Covid D variant threat.

With today’s significant loss gold pricing will refocus on the yearly chart and the double bottom in early March ($1700.00). Traders will also look closely at any recovery from today’s low ($1745.00). A significant bounce would be encouraging but a whimper will suggest a market still trying to find its feet. In the meantime, consider that cheaper gold prices always encourage the physical trade. The cheaper gold becomes the more interest, especially in the Chinese and Asian trade. The recent talk of problems with the Chinese economic recovery and the possible impact on their gold trade is overstated. A bad economic day for them would still represent powerful economic activity by any western measure.

Finally, my feeling is that a good blowout is just what this market needs if gold decides to be contrary about moving higher. It will bring in fresh speculative money and refocus a “value” orientated discussion. On the day gold closed down $37.80 at $1754.60 and silver closed down $1.01 at $22.75. Very turbulent out there – be careful.

Gold Friday opened a few dollars higher but lacked any conviction, so the paper traders sold this small rally and gold dipped into the $1745.00 range. The Dollar Index this past week has roared, moving from a low of 92.33 through a high of 93.12. Most likely anticipating a move from the FOMC next week regarding tapering. And while there is some indication using volume numbers on yesterday’s washout which suggest gold may now be oversold, I think the bullish faction is just happy to get into the weekend and have a few days to steady themselves.

Jim Wycoff’s (Kitco) technical look puts the bears in control. “Technically, October gold futures bears have the overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at $1,800.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,700.00. First resistance is seen at the overnight high of $1,765.40 and then at $1,775.00. First support is seen at today’s low of $1,750.70 and then at this week’s low of $1,743.50.”

As far as the physical market is concerned, we are selling everything on the shelves. This is the still curious reaction the real gold and silver market presents when prices get cheaper. And a dynamic which is always good to keep in mind. Clearly the bulls are staggered this week but like I have been saying – conviction on either side of this trade is thin. Traders and the media sound convincing but a blink, one way or the other from the FOMC and price trends evaporate. For the present the bears hold all the cards, but the professional trade is already looking for a bargain hunting entry point. Also keep in mind a kind of tried-and-true aphorism in the metals business. Whatever the Fed finally decides to do with interest rates or bond tapering will already be factored into the price of both gold and silver by the time it become public information. So, deciding whether to buy, sell or stand pat before the fact can be problematical. That being said looking closely at percentages of market retracement from all-time highs can provide important technical clues. So, stay tuned as we all wait to see what the Fed has in mind next week. On the day gold closed down $5.20 at $1749.40 and silver closed down $0.45 at $22.30.

Platinum closed up $7.30 at $932.50 and palladium closed down $37.70 at $1981.20.

Posted on September 10, 2021 by Richard

Gold – Tapering Worries

Commentary for Friday, Sept 10, 2021 (www.golddealer.com) – Gold closed down $7.80 at $1789.60 and silver closed down $0.27 at $23.86. Gold finishes the week under a “tapering” cloud as commercials lose interest. And gold remains left footed even in the face of rising inflation numbers. But to say the bears rule is an overstatement as the Fed considers options and possible next moves between now and the end of the year. Still the world is a big place, and the pandemic continues to rage so there is little room for complacency. But these demand crosswinds do present choices which include extra time to make sure you are on the right side of this trade. Yearly EFT holdings are on the anemic side, off 7% but considering a hawkish FOMC things could be worse. And while the paper trade is turning sideways with a modest negative tilt the physical market remains hot. We are selling everything which is not nailed down. As gold’s 30-day price trend continues to consolidate between $1780.00 and $1800.00 the daily buzz continues to fade. So, the bulls are looking for something besides cheaper prices to refocus core support and stop drifting negativism. Last Friday gold closed at $1830.90 / silver at $24.76 – on the week gold closed down $41.30 and silver closed down $0.90.

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 2 to 4 weeks coming from the manufacturer. My guess, however, is that delays will soon shorten.

On Monday the domestic markets were closed for Labor Day.

Gold on Tuesday opened flat but quickly dropped lower moving on both sides of $1795.00. The reason being that the Dollar Index, trading at 92.00 this past Friday has moved to 92.50. That is not a monthly high (93.5) but it is a big step in the hawkish direction.

Considering the big jump in gold before the long holiday today’s trade will be a disappointment to the bullish scenario. Yet gold’s significant drop is surprising considering the disappointing employment news released by the Labor Department Friday. The higher Covid D variant numbers could upset the world’s economic apple cart. It is also troubling that the domestic aftermarket yawned after today’s loss, suggesting traders may not be eager to buy this dip. The technical picture, a big plus for gold on Friday may not hold much water by the end of the week.

If you attribute this latest drop to profit taking due to economic jitters, consider that the price region between $1780.00 and $1800.00 allows paper traders to “continue buying the dips and selling the rallies”. But a drop below this support level would be bad news. And as usual your Uncle Sam is hovering in the background. Which does not help matters as the FOMC will again meet later this month. Allowing, or should I say encouraging all sorts of speculation.

While the dollar reached a 3-month low in June, helping the bullish scenario, the green back is notoriously cyclical, and its subsequent recovery has created the usual headwinds. And as long as the FOMC continues to talk about tapering the dollar will remain strong hindering gold.

Zaner (Chicago) – “The gold market was presented with bullish and bearish news overnight, but clearly embraced the bear side of the equation. From the bull side of the equation, Indian gold imports for August jumped by nearly 50% last month and reached the highest level since the first quarter reportedly from restocking, bargain-hunting buying and festival interest. In fact, on a year-over-year basis India saw its gold imports of 121 tons dwarf the 63 tons seen one year earlier. However, the trade expects a dollar rebound this week, investment interest in Gold ETF remains very poor (total ETF gold holdings at the end of last week are 6.8% lower on the year), US Treasury yields have jumped this morning and Chinese official gold holdings declined by 0.6% last month versus July. We suspect part of the weakness in gold this morning is a classic “give back” of an overdone reaction to the Fed’s likely on hold stance following a serious “miss” on the August US payroll report. It should be noted that December gold after breaking out above its 200-day moving average on Friday has fallen back below that average today at $1817.40. While not significantly overbought in spec categories, the most recent positioning report probably understates the size of the net long given the post report rally of $18. The August 31st Commitments of Traders report showed Gold Managed Money traders added 4,273 contracts to their already long position and are now net long 98,865. Non-Commercial & Non-Reportable traders are net long 253,987 contracts after net buying 8,819 contracts. Like the gold market, the silver market has also posted significant declines in a classic “give back” of an overreaction to the likely delay in US tapering because of the slack jobs report last Friday. Fortunately for the bull camp in silver the net spec and fund long is near the lowest levels since June 2019.” On the day gold closed down $35.00 at $1795.90 and silver closed down $0.43 at $24.33.

On Wednesday gold consolidated in early trade but eventually sold off continuing yesterday’s downward momentum. The good news is that the paper market caught a bid at the important $1785.00 level and trended higher, perhaps on a short-covering rally. It is too soon to call this a short-term bottom, but it does support the other notion that gold at levels under $1800.00 creates bargain hunting. Which keeps a leash on the short trade and helps lessen volatility as the FOMC tries to balance quantitative easing to meet the needs of this changing pandemic.

Now while it may appear the FOMC is holding all the cards – keep in mind this financial mess is far from over and a reasonable solution is elusive. Reuters – “U.S. Treasury Secretary Janet Yellen on Wednesday again urged Congress to tackle the nation’s debt ceiling, saying it was unclear how long Treasury’s efforts to temporarily finance the U.S. government would last and citing ongoing economic worries over the pandemic. The “most likely outcome is that cash and extraordinary measures will be exhausted during the month of October,” Yellen wrote in a letter to lawmakers regarding the limit on U.S. government borrowing. Democrats and Republicans are staring down a historic fiscal crisis if they do not act, which could trigger a catastrophic default on debt repayment obligations or a temporary shutdown of some federal operations. Leaders of the Democratic-led Senate and House of Representatives are expected to force votes to lift the $28.4 trillion debt limit in late September. The nation’s current limit was technically breached on July 31, but the Treasury Department circumvented any default by taking what it called “extraordinary measures.” The likelihood of a government shutdown is zero, they have enough troubles on their hands. The important part of her message is that our $28.4 trillion dollar debt limit is not enough. The plus for gold today is that treasury yields have fallen from yesterday’s highs. The negative being that a 4-week uptrend has been reversed in one trading session suggesting that gold has once again failed to translate rallies into sustained uptrends. On the day gold closed down $5.20 at $1790.70 and silver closed down $0.32 at $24.01.

On Thursday the gold bulls first smiled, then frowned and finally scratched their heads. So goes today’s gold trade as perceived bargain hunting pushed prices higher ($1800.00) which then turned into bearish route as the short paper sold the rally. And after the smoked cleared gold pricing finished the day in the green. The Dollar Index has been steady around 92.5 since Tuesday so this gold volatility did not much relate to dollar strength. ECB’s Lagarde claim that lower bond purchases amount to recalibration – not tapering, may have set the mood. Atlanta Fed President Bostic’s comment that weaker US economic activity will likely push back the Fed tapering helped intensify the turbulence.

Zaner (Chicago) does not sound happy. “Perhaps the gold market is benefiting from the 13-year high in Chinese Producer prices as that has sparked talk that China may have to abandon its efforts to squash raw material prices or risk tripping up their recovery. With the recent short covering/delayed tapering rally extending the gold market into an overbought condition at the end of last week, the reversal down this week is justified. Fortunately for the bull camp, the dollar is showing signs of retrenching from yesterday’s spike high and while we doubt currency action today will benefit gold and silver, it may not be as much of a weight hanging on the back of the markets. However, fundamentals justify further corrective action as strength in the dollar looks to have legs, a deflationary vibe is creeping back into many commodity markets and equities are beginning to show consistently vulnerable action.”

Reuters this morning offered up a stock warning: “Banks including BofA, Morgan Stanley, Citi and Credit Suisse this week told clients to trim exposure to stocks. Some are predicting a sharp fall in prices.” This is of course an old bullish gold argument – that stock prices would correct and support gold. But the reality here is that stocks may correct, and real tapering measures will continue to pressure gold prices. So, no winners for either side.

Gold’s inability to forge higher prices over dovish information remains troubling. But our shiny friend continues to hold up at $1780.00. While the bearish tapering scenario holds the most water at this time, gold’s ability to hold up below $1800.00 suggests that traders are not 100% sold on this latest FOMC version of truth or dare. If you believe the dollar is overvalued or the stock market is overheated, you will continue to buy price weakness in both gold and silver bullion. If you are turning hawkish on FOMC choices stand aside and be patient. It’s likely the metals will continue to be dogged over tapering – real or imagined. It’s also possible we see another washout. But the FOMC will likely drag its feet into 2022. Supporting reasonable safe haven demand and the notion that gold and silver bullion provides an important financial anchor in turbulent times. Gold closed up $6.70 today at $1797.40 and silver closed up $0.12 at $24.13.

Gold Friday opened mildly lower despite the fact that the Dollar Index is a half point off its Wednesday highs and has turned choppy. Inflation data continues hot which suggest that the Fed will be forced to raise interest rates (yawn) an old argument that still holds sway.

Zaner believes the most recent US daily infection rate of 163,164 will spark some safe haven demand perhaps reflected in the modest rise in the latest ETF holdings. But for gold to rekindle its uptrend the Dollar Index would have to continue to weaken. Gold would also have to move above its 200-day moving average ($1816.00). They also like the notion that gold is at least holding up in light of the recent news that the ECB is planning to curtail its asset purchases.

I think gold represents a heavy trade but until the FOMC does something this market will likely remain rangebound. Reuters notes that Fed officials claim the August slowdown in job growth would not throw off plans to reduce asset purchases this year. This is not as significant as it might first appear. Their move might be ceremonial if the reduction is a token amount. And the Fed has plenty of room considering they purchase $80 billion worth of Treasury securities and $40 billion of mortgage-backed bonds each month. This emergency response to the pandemic has helped balloon the Fed’s balance sheet to a whopping $8 trillion, or double what it was at the beginning of 2020. Also keep in mind that President Biden’s social agenda is not slowing down – he still has big plans which require big borrowing.

It is likely the “taper” will begin with baby steps and the US will continue its more than generous quantitative easing programs to forestall any panic over the rising infection numbers. This will support the bullish scenario but it’s unlikely the bulls will be dancing in the streets. At the same time, I believe the possible damage to the bullish gold scenario is overstated. Simply because bargain hunting will roar at lower prices. On the day gold closed down $7.80 at $1789.60 and silver closed down $0.27 at $23.86.

Platinum closed down $17.10 at $956.70 and palladium closed down $16.80 at $2123.00.

Posted on September 3, 2021 by Richard

Gold – Jobs Miss / Gold Higher

Commentary for Friday, Sept 3, 2021 (www.golddealer.com) – Gold closed up $22.20 at $1830.90 and silver closed up $0.88 at $24.76. The bulls finished the week with a smile as the US jobs number “missed” and the Dollar Index moved lower pushing gold higher. Still, traders have talked “tapering” into the ground. The sad fact is there are still too many moving parts and unanswered questions when it comes to US quantitative easing. Remember that not too long ago most governors favored “tapping” the economic brakes. And that conviction is still alive and well. But when Chief Powell chose a less aggressive stance waiting for more economic data traders continued to embrace the idea of buying the dips and selling the rallies. Today’s failed jobs data has now added some zip to the party. The “print” was 235,000 jobs versus an expected number of 720,000 so the miss added to the bullish gold scenario, at least for this week. But gold must forge higher prices next week or this latest good news will turn into what Roman statesmen Marcus Cicero would call a tempest in a tea pot. Last Friday gold closed at $1816.60 / silver at $24.06 – on the week gold closed up $13.40 and silver closed $0.70 higher. Both still holding a surprisingly tight range considering all the whoopla from the Washington deep thinkers.

We will be closed Labor Day. The Post Office and commodity markets are also closed.

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 2 to 4 weeks coming from the manufacturer. My guess, however, is that delays will soon shorten.

On Monday the gold market looked a bit defensive. Typical these days above $1800.00 as traders continue to buy the dips and sell the rallies. So, expect a round of profit taking on the short to medium term. At the same time last week’s drop in the Dollar Index has steadied and is moving higher (92.75). The fact that the dollar did not continue to sell off will present gold with further challenges. But for now, the technical picture remains sound as gold consolidates.

Reuters – “Overall, (the) monetary policy background will remain accommodative and there are uncertainties around COVID-19 Delta variant, Chinese slowdown concerns, geopolitical tensions. All these factors sort of provide bullish backdrop for gold prices,” said Harshal Barot, a senior research consultant for South Asia at Metals Focus. “Powell laid out a clear distinction between tapering of bond purchases and interest rate hike, even though tapering might start this year, a rate hike is far away,” Barot added. In a virtual speech at the Jackson Hole economic conference on Friday, Powell offered no signal on when the central bank plans to cut its asset purchases beyond saying it could be “this year” and indicated it would remain cautious in any eventual decision to raise interest rates.”

Trading opinion is mixed but many are still worried about gold’s inability to break above its double top ($1830.00). Still the recent forceful surge from $1730.00 through $1820.00 suggests a brighter technical picture and modest safe haven buying. This bullish picture however must continue to perform by bringing in fresh speculative money or risk losing the small buzz that was created just last Friday.

Of course, the problem with the bullish scenario is consistent. After last week’s Jackson Hole conference, the academics and professionals seem content with Powell’s notion that “tapering” is on the table but “when” has once again “drifted into the future” to use a Zaner phrase.

Goldman Sachs believes the dollar will become more stable as the FOMC has once again taken a somewhat dovish stand (Rajan Dhall / Kitco). This new position suggests the dollar might depreciate because Chief Powell has taken the “taper” off the immediate table. Lower inflation rates and slowing economic growth might also allow the Fed to drag its feet perhaps into 2023 before making any changes in its quantitative easing program.

I think 2023 is a bit much but who knows in this wacky world of high finance fiat money. On the short term consider two important dynamics. The now low Treasury rate (1.25%). Any rise in this number will indicate a hawkish shift which could drive metals lower. And the upcoming US jobs report this Friday. Good news in this sector may also prompt a hawkish FOMC shift. Keep in mind the Fed is masterful at the art of financial dialogue, but sooner or later will have to modify its in-place programs assuming that Covid does not reinvent itself. On the day gold closed down $7.60 at $1809.00 and silver closed down $0.10 at $23.96.

Gold on Tuesday dipped on the open ($1802.00) but recovered nicely with some chop to both sides of unchanged. The Dollar Index is down a half point from Friday’s high and remains steady around 92.50 which contributes to gold’s narrow trading range. Reuters claims some investors are staying on the sidelines awaiting jobs information Friday because taper doubts linger. Which is true, as this quantitative easing argument has changed sides a number of times for months creating that wide trading range between $1720.00 and $1830.

Grant on Gold (August 30, 2021) 1. Gold rose 2% last week, closing back above the $1800 level for the first time since August 5. The yellow metal has now posted gains for three consecutive weeks and needs to close above $1811.98 on Tuesday to score a second consecutive higher monthly close. (2) Silver posted a 4% gain last week, the first in the past four. Yet the white metal still seems poised to notch a third consecutive lower monthly close on Tuesday. (3) Platinum closed modestly higher last week, but August is still likely to mark the fourth consecutive lower monthly close. (4) Palladium appears poised for a fourth consecutive lower monthly close, despite solid gains last week and upside follow-through on Monday.

Zaner (Chicago) – “In Asia gold prices overnight climbed near 4-week highs and the US gold market looks to start on a slightly positive note perhaps because of the fresh downside extension in the US dollar. While the gold and silver markets have not garnered notable lift from inflationary developments, seeing 10-year highs in inflation readings in the euro zone is certainly a potential bullish catalyst for the gold and silver trade. In fact, because of weak Chinese manufacturing and nonmanufacturing data overnight, several economists are now expecting the Chinese to implement fresh stimulus programs for their economy. While ascertaining the focus of the gold and silver trade can be difficult at times and the focus can shift without notice, we think the focus of the trade is currently on any news that contributes to the pushing back of tapering timing. Furthermore, the gold market is once again showing signs of tracking inversely with the Dollar which is being cushioned against more significant declines by disappointing US data and persistent increases in the US daily infection rate. In the near term, gold and silver prices are also being restrained by persistent all-time highs in equities as that downplays uncertainty buying of gold and silver and creates competition for investment dollars! As opposed to last Friday where gold and silver posted significant gains on a jump in trading volume, the higher highs for the move and corrective action from those highs yesterday failed to result in significant trading volume and that in turn suggests to us that bullish buzz in precious metals remains modest.”

So, where is the beef? It is missing in action – which is the problem. The expected higher prices in gold have melted somewhat but the technical picture remains positive. The gold bulls are not happy, and neither is anyone else as Reuters points out that US consumer confidence dropped to 6-month lows in August. The public is worried about the rise in Covid-19 infections and higher inflation has dampened the economic outlook.

At the same time stocks both here and in Europe are doing just fine because the Fed has been consistent about pouring fiat money into a closed system. Wall Street does not expect any change in the current “tapering” sentiment because the Treasury yields remain cheap (1.28%). There are plenty of reasons to support bullish gold sentiment, but this market continues to struggle with overhead resistance. Which might suggest that while gold still holds an edge, it may be less significant than it was last Friday. Our shiny friend will need fresh buzz to push higher. On the day gold closed up $6.00 at $1815.00 and silver closed unchanged at $23.96.

On Wednesday the gold market opened choppy on both sides of $1815.00 even though the Dollar Index drifted lower. This tight holding pattern is the result of two factors. First, the lack of follow through after Friday’s jump to higher ground. Second, traders may be nervous over the jobs outlook which will come into focus Friday. This data is expected to be good but if the numbers exceed expectations it might lead to a stronger dollar and pressure gold lower according to Reuters. The US markets will be closed this Monday for Labor Day so expect some squaring or accounts going into the long weekend.

It looks like gold is tired on the short term. Still with the 200 DMA at $1808.00 and the 50 DMA at 1797.00 there does not appear to be much downside. And it’s curious that traders cannot remain convinced of the Fed’s QE intention given inflation numbers in China and the EU are running hot. And the latest US Covid numbers look dangerous. At the height of the pandemic in early January our 7-day average infection average was 253,946 cases. By June that number had dropped to 11,878. By August we were back 158,946 cases and climbing. This looks grim to me considering that 53% of the US has already been vaccinated. But Wall Street is roaring – which subtracts from the bullish gold scenario. It is troublesome that public Covid worry is not growing as we approach the winter months. On the day gold closed down $1.90 at $1813.10 and silver closed up $0.22 at $24.18.

On Thursday gold opened choppy, lacking conviction, and holding a narrow $10.00 range in another day of quiet trading. This is not unexpected as traders ponder tomorrow’s jobs report. The mildly lower weekly dollar has supported gold around its 200-day moving average but has not created trading buzz. This suggests the price of gold remains defensive even though its technical picture remains bullish on the shorter term. And gold prices have remained in a nice uptrend since early August. The problem however is that gold continues to face a very hard overhead ceiling, featuring a double top at $1830.00 in place since July. This puts the gold bulls, behind this most recent runup in the unfortunate position of answering an old trader’s question. “What have you done for me lately”. I’m not calling this latest jump a fizzle, but gold is higher by $100.00 short term which suggests that if the graph flattens out we may see profit taking. I suspect, however that unless gold pushes above these old roadblocks the bullish scenario will remain in neutral, worrying about the Fed’s next quantitative easing move. Gold closed down $4.40 at $1808.70 and silver closed down $0.30 at $23.88.

Gold Friday pushed higher ($1830.00) in early trading as US payroll numbers missed. According to Neils Christensen (Kitco) – The U.S. Labor Department said that 235,000 jobs were created last month. The data was weaker than expected as consensus forecasts called for jobs gains of 720,000. The idea here is that if these latest numbers came in hot the Fed would expedite tapering plans, a negative for gold. They came in cold and so the tapering plan, whatever that may be is once again on hold, a positive for the gold bulls. President Biden painted a positive economic picture this morning inferring that the Covid D variant would not stand in the way of economic recovery. But most traders believe this miss is important. And may lead to further trouble if infection numbers continue to rise. The Dollar Index hinted at further trouble in River City by moving to weekly lows (92.00), underpinning today’s gain.

It is too soon to say that higher gold prices today are merely a “relief rally”. I believe too much emphasis has been focused on jobs all week because traders are still unsure of what the Fed might do on the short term. Given the combination of the Covid and rising inflation. It is possible that while the D variant is virulent it has a shorter shelf life, but if this is true why aren’t the numbers decreasing. And in the longer run the “transient” inflation idea might hold water.

Zaner (Chicago) claims that some traders believe a push-back in the tapering timeline could allow inflation more time to entrench and intensify, and that could also undermine the dollar. A possible very bullish “C’ change in this still dynamic trade. At the same time, they note that gold ETF investors have been moving to the sidelines this last year, with the world’s largest gold ETF seeing its holdings decline below 1,000 tons. Its lowest level since April of last year. And adding to bearish woes Perth Mint gold coin and minted gold bar sales declined by 24% in August.

My sense however is that even after today’s rise gold is still confused and trying to find its feet. An acceptable price which allows both the bearish and bullish scenario to spar while the Fed tries to unwind at least some quantitative earning without bringing down this house of cards. Central banks around the world have faced similar problems for decades and have managed to make most happy except the savers. The gold “insurance value” argument is always difficult to see on the short term and only becomes obvious over decades. To some degree this market has already priced in quantitative easing. I don’t see gold moving radically higher in the short term unless this train comes off the tracks. Perhaps a gradual rise in prices relative to the decline in the dollar is in the cards. This bullish argument would never hold water with investors who are heavily engaged in the stock market looking for gains to bolster low interest rates. But even these good folks should consider a balanced investment plan which includes gold and silver bullion and call it a “just in case bet”. On the day gold closed up $22.20 at $1830.90 and silver closed up $0.88 at $24.76. It may be too soon to say that silver has recaptured its mojo but silver bullion sales are picking up nicely.

Platinum closed up $27.30 at $1021.20 and palladium closed up $17.00 at $2414.40.

Posted on August 27, 2021 by Richard

Gold – No Tapering Timeline, Yet

Commentary for Friday, Aug 27, 2021 (www.golddealer.com) – Gold closed up $24.40 at $1816.60 and silver closed up $0.51 at $24.06. The bulls welcomed good news today as Fed Chief Powell closed the Jackson Hole get together with a cautious tapering view. The dollar moved lower, and gold challenged $1800.00. Powell talked more about transient inflation than anything else. But also noted there was work to be done on the employment front and brought the virus infection surge into the dialogue. I would not call his message dovish, but it did manage to strike a nice balance countering the more aggressive governors. While not taking any “tools” off the table concerning what the Fed might do through year end. Last Friday gold closed at $1781.00 / silver at $23.11 – on the week gold closed up $35.60 silver up $0.95.

On Monday the gold market surged higher in early trading as the Dollar Index lost a half point and safe haven demand once again came into focus. Also reinforcing this higher move in gold is the jump in the price of crude oil now reversing last week’s trend of lower prices.

All of this interest of course is prompted because of the rising concerns created over the contagious Covid D variant. Significantly higher infection numbers, both here and abroad may alter the Fed’s much talked about tapering intentions. The FOMC governors have been turning more hawkish in their comments about quantitative easing for months. But these rising infections have risen to the point of concern. Some traders believe this argument is strong enough that the Fed will make no QE changes until this picture becomes into focus.

What makes this “transition” difficult is that not long ago FOMC decisions were based on a post-pandemic view. Yet even that optimistic stance was uncertain. The Fed discussed “tapering” but were divided over “when” these modifications might take place. And it is worth noting that the Aug 27^th Jackson Hole symposium will be held virtually. Using current rising infection numbers, traders might now make the case that the FOMC will simply consider options at Jackson Hole. After all they were probably not going to “taper” until next year anyway.

With this shift in psychological thinking both gold and stocks moved higher. Lukman Otunuga (Reuters) – If economic data expected this week “paints a positive image of the U.S. economy, this could fuel Fed taper expectations – ultimately boosting the dollar while weakening gold”.

This “see-saw” will likely continue perhaps because professionals are “reluctant bulls” looking for that sell off. Today’s move above the important $1800.00 psychological level will improve gold’s short-term technical picture. But the prize here remains something above that stubborn channel between $1800.00 and $1820.00 established last summer.

Gold must push above these numbers before the bulls can reclaim any significant buzz. Dollar strength is the elephant in the living room. The Dollar Index (93.00) would have to break down at 92.00. This does not seem plausible considering a bright post-pandemic future, but any roadblock will support the bullish gold scenario. The index last summer was trading around 90.00. On the day gold closed up $22.20 at $1803.20 and silver closed up $0.54 at $23.65.

Gold on Tuesday opened mildly higher, struggling against overhead resistance but helped to a small degree by a somewhat defensive dollar. Reuters – “Gold prices held steady on Tuesday above the $1,800 per ounce level, helped by speculation that a spike in coronavirus cases may prompt the U.S. Federal Reserve to defer its tapering of monetary stimulus.”

This from Zaner (Chicago) – “In our opinion, the rally in the gold market yesterday was more than simple technical buying with the market likely inspired by talk that the US Fed might not be as close to tapering as the market has recently feared. Unfortunately for the bull camp, the subject of tapering is likely to waffle in both directions in the coming days and until a large portion of the Fed Symposium has taken place. Gold and silver might be poised to receive outside market support from firming coal and Iron Ore prices in China, as that suggests the foundation of inflation remains in place despite the recent let down in commodity prices. In the near-term, action in the dollar is likely to dominate the ebb and flow of prices, but to spark another large day of gold gains probably requires a definitive extension down in the dollar index. In the meantime, the $1,800 level will likely remain a key pivot point for the bull camp with the next resistance zone pegged at $1,817.90.”

Obviously, the Fed Symposium (Jackson Hole) may push this market one way or the other later this week, but I don’t think it will carry as much weight as some believe. There will likely be no surprises. The Fed governors have made their hawkish thoughts clear and the subsequent surge in Covid D infections has given them reason to reconsider. There are still traders who believe economic progress will not materially change because of the Covid D variant. This is what remains of a very misplaced pipe dream and the winter months are right around the corner.

The current plus for the bulls is that gold is holding steady at or above the important $1800.00 level. It would not be there if this pandemic picture continued to improve. And while some professionals are still behind this learning curve things are slowly turning bullish.

The latest CFTC gold numbers suggest hedge funds are closing their short positions and to some degree betting on higher prices. This amounts to a classic reversal in thinking considering that not long ago a hawkish Fed convinced traders that “shorting gold” was sensible.

Goldman Sachs remains bullish, noting that gold “popped” back nicely after its recent massive washout, notes resistance at $1835.00 and looks for higher prices before year end.

Still, I am worried about gold’s inability to push convincingly above $1800.00. There is more than enough “press” out there suggesting that the Fed will remain cautious about changes in quantitative easing. And there is enough light buzz to keep gold tracking around $1800.00. But not enough to excite the momentum players. Technically gold is experiencing a nice bullish uptrend but is still dealing with the larger question of how it might deal with rising interest rates. So bearish sentiment is lurking around the edges. Sitting on the sidelines to test support if this latest price surge cannot gather itself and push to higher ground. The inflation scenario is losing traction which is beyond my pay grade. In earlier times would have created this reaction would have created a great Twilight Zone episode. On the day gold closed up a sleepy $2.40 and silver closed up $0.24 at $23.89.

On Wednesday the domestic market opened flat, pushed higher but found little interest. So the paper trade decided a test of current support was in the cards. This is typical of a “trading market” with consolidation – both the bulls and bears have something to say.

This sell-off will test current support at 1780.00 providing great insight into whether this latest push above $1800.00 is a “flash in the pan” or the real thing – relative to safe haven demand and the Covid D variant. Also keep in mind the current push from $1720.00 through $1800.00 happened quickly so today’s profit taking round makes sense.

The weakness in gold today was initially helped by a stronger dollar. But this trend reversed itself later in the trading day which resulted in traders buying the dip at $1785.00. Nothing like a short covering rally in a defensive market to bolster damaged bullish sentiment.

This whoopla should enforce the notion that the gold bulls are penned in by dollar strength. But keep in mind that the Dollar Index is now trading at weekly lows (92.82) and was traded as high as 93.5 last Friday, so the dollar trend is weaker and favors the bullish gold scenario. As long as the Fed deep thinkers do not upset the apple cart at Jackson Hold later in the week.

Zaner (Chicago) – “The precious metals are finding moderate pressure coming into this morning’s action, but they remain clear of their recent lows in front of Fed Chair Powell’s Jackson Hole Fed Symposium speech on Friday. If global markets can regain a risk on mood before then, gold and silver could be in a good position to climb back to the upside. The precious metals were able to shake off early pressure and come through choppy midsession action on Tuesday that featured a 3-week high for gold and a 2-week high for silver, both finishing in positive territory. While global markets are relatively subdued, due in part to late summer trading conditions, better than expected results for German GDP and US new home sales strengthened global risk sentiment, providing gold and silver with underlying support.” On the day gold closed down $17.40 at $1788.20 and silver closed down $0.12 at $23.77. While gold holds a bullish technical edge the silver market is struggling. Perhaps because traders are worried that infections numbers may slow down industrial usage. But investors should seriously consider silver bullion and ignore this noise. The downside is likely small, and I love the upside bang.

On Thursday gold opened choppy to unchanged, dipped to $1780.00 but managed to finish in the green even with negative press. Traders are still worried about the Powell speech Friday at Jackson Hole. Any suggestion that the Fed will taper could send gold lower perhaps testing recent support between $1740.00 and $1780.00. Should the FOMC continue dovish because of the resurgence in Covid infections, the US is now averaging more than 1000 Covid deaths daily for the first time since March. Or slowing economic indicators – gold would likely push higher once again trying to break above the tough $1800.00 through $1820.00 region.

Fed Chair Kapan said that after reviewing the impact of the Delta variant he wants the Fed to push ahead with the taper, beginning as soon as October and November. Kansas City Fed President George said it’s time to start dialing back its policy stimulus according to CNBC. And the Dollar Index today is above 93.00, suggesting traders may listening to this hawkish tilt. So our shiny friend is facing some mounting headwinds.

At the same time, Bullard admitted on CNBC price inflation is “higher than we expected” and the terrorist attack at the Afghanistan airport may refocus safe haven buying.

What makes this call difficult is that gold posted a significant gain since the $1720.00 wash out in early August. So, traders will anticipate profit taking if the Fed suggests tapering should soon be in the cards. Gold closed up $4.00 at $1792.20 and silver closed down $0.22 at $23.55.

Gold Friday opened choppy in early trading but pushed higher over Fed Chief Powell’s comments from the Jackson Hole meeting. Reuters – “Powell signaled the U.S. central bank will remain patient as it tries to nurse the economy back to full employment, repeating that he wants to avoid chasing “transitory” inflation and potentially discouraging job growth in the process – a defense in effect of the new approach to Fed policy he introduced a year ago.

On the potentially imminent decision by the Fed to begin reducing its $120 billion in monthly asset purchases, Powell said the weeks since the Fed’s policy meeting in July “brought more progress” towards repairing the jobs market, with nearly a million positions added, and that progress should continue.

But it also coincided with “the further spread of the Delta variant. We will be carefully assessing incoming data and the evolving risks,” Powell said, signaling that Fed discussions about exactly when to begin reducing the bond-buying program remain unresolved, and now must be squared against the health and economic risks posed by the highly contagious coronavirus strain.”

Most of Powell’s speech talked about why the Fed considers current inflation numbers to be transitory but he gave no signal as to when it might begin “tapering”. The notion that the Fed will continue to be “patient” with quantitative easing pushed the Dollar Index from 93.16 through 92.67 and this significant drop encouraged the gold bulls.

Zaner offered a number of gold pricing options, but I favor their bullish “economy versus Covid” argument. And since the FOMC is no longer stonewalling either inflation or the rapid infection rise and has, once again decided to stand pat gold has pushed above $1800.00.

This latest FOMC insight is enough to at least gather the bulls who just a few days ago were considering what damage might ensue over a hawkish statement. But this “when will tapering be appropriate” conversation will not go away. The Fed will continue to monitor employment, it continues to improve relative to early Covid days, but Powell is still not satisfied.

I suspect that gold prices will remain firm but likely will continue to consolidate on both sides of $1800.00 with a cap around $1830.00. If these markets break above this long-standing overhead resistance, it suggests that traders are convinced that “tapering” is on hold. But I think this unlikely. The Fed has made “tapering” a cornerstone of their recent discussion.

Longer term gold gains will have to wait on a definitive higher inflation picture. Or the Dollar Index will have to substantially weaken. Which was the expected but never realized outcome when the Fed originally opened up the fiat currency floodgates at the being of this pandemic. On the day gold closed up $24.40 at $1816.60 and silver closed up $0.51 at $24.06.

Platinum closed up $30.80 at $1005.80 and palladium closed up $15.70 at $2402.20. Our across the counter sales of palladium remain quiet but platinum action is picking up.

Posted on August 20, 2021 by Richard

Gold – Quiet/Strong Dollar

Commentary for Friday, Aug 20, 2021 (www.golddealer.com) – Gold closed up $0.80 at $1781.00 and silver closed down $0.11 at $23.11. Again, this week there was the usual round of opinions. Worth noting however is that the Dollar Index is trading at 10-month highs and gold still maintains its bearing ($1781.00). The bears will claim this dollar strength is either the result of expected Fed tapering or “safe-haven” worry. But no matter, for gold to still “hold up” should be encouraging. The reason being that many believe once tapering begins this removed fear will support higher gold prices. Any strength suggesting that $1900.00 is back in the cards could reinvent that old mojo the bulls have been missing. Now before you hock the house remember that the bigger longer term technical picture for gold since last summer has been bearish. There have been three attempts at pushing the bullish envelope at or above $1800.00. All have failed but the Fed is still dragging its feet, inflation moving higher and the pandemic turning cloudy, so the longer-term bullish scenario remains alive and well. Last Friday gold closed at $1775.20 / silver at $23.77 – on the week gold closed up a quiet $5.80 and silver was off $0.66.

On Monday gold opened flat, disappointing considering Friday’s big close and I was hoping for a big push above $1800.00 to put some of the naysayers to sleep. And while the domestic market did gather itself, pushing towards $1800.00 even as the Dollar Index remained flat, traders will criticize this lack of momentum follow through. Zaner (Chicago) – “A couple of key inflation indicators this week showed the highest year over year increases since the recovery off the Great Recession in 2008, and this prompted expectations that it would accelerate any Fed tightening moves, but the gold market appeared to ignore it. It seems the market already accounted for this when it sold off in the wake of the strong jobs report last week. Some are of the opinion that Fed tapering is already “baked in the cake” and that the next focus will be on interest rates. The trade will have another chance to react when the Fed meets in Jackson Hole next week. Countering Fed tightening fears are Covid caseload increases, as any economic damage resulting from new shutdowns could postpone any Fed move. As if on schedule, ETFs increased their gold holdings yesterday by 41,641 ounces after declining for five straight sessions.”

Gold seems to be ignoring the human tragedy as Biden pulls out of Afghanistan and the Taliban seize control. But I remain seriously worried about that region and wonder what happened to the days when any large Middle East problem would make the gold trade nervous.

For sure the lower US Treasury yields today helped gold remain firm, which suggests Wall Street does not soon expect any FOMC monetary modification. Gold’s technical picture is now a push between the bulls and bears which is significant considering how bearish this picture looked just a week ago. Still, gold sentiment remains negative, and it must show some strength above $1800.00, or risk losing focus and consolidating while waiting for the next FOMC move.

Fed Chief Powell and the crew will meet Tuesday and Wednesday this week so we won’t have long to wait and any hint of continued dovishness or returning hawkishness will be reflected in this week’s pricing after the news is released after the market close on Wednesday.

Reuters suggests gold moved higher today for two reasons. Higher Covid numbers in Europe are contributing to renewed safe haven demand. And the gold paper trade is experiencing a short squeeze. These “short” positions, accumulate when traders were worried about the taper are now being covered, pushing prices higher. On the day gold closed up a modest $11.70 at $1786.90, which is good but still no cigar. And silver closed almost unchanged up $0.01 at $23.78.

Gold on Tuesday opened stronger, pushing toward $1800.00. But once again, this overhead resistance proved troublesome as the Dollar Index pushed above 93.00. According to Reuters the dollar is being bolstered by safe-haven demand, rising political tension over Afghanistan and fear of potential lockdowns as the Covid Delta variant numbers continue higher.

The inability of gold to move above $1800.00 given last week’s dovish tapering news seems to indicate that traders remain unsure of the Fed’s “unwinding” intentions. Sharper than expected decline in Tuesday’s US retail sales curbed gains in the dollar, a plus for the gold market. Still this picture remains a mixed bag. Which produces a typical bouncing ball market, favoring the daily paper trade – “buy the dips and sell the rallies”.

I expect some clarification after the Federal Open Market Committee comments this week after Wednesday’s close. And there might also be fireworks at the Jackson Hole Symposium late next week as central bank officials and academics gather at their annual meeting. On the day gold closed down $1.90 at $1785.00 and silver closed down $0.13 at $23.65.

Grant on Gold (Zaner) – “(1) Gold started the week on the bid, setting a one-week high at $1789.26, just shy of the 20-day SMA. The yellow metal has gained more than 6% since a 4-month low was established at $1680.23 a week ago. (2) Silver saw some modest upside follow-through on Monday, adding to the gains seen at the end of last week. However, price action remains confined to the broad range established last Monday. (3) Platinum has recovered somewhat after falling to a 7-month low of $959.09 last week. That low was shy of the COVID range midpoint which stands at $947.65. (4) Palladium remains contained within the $3017/$2452 range established earlier in the year, underpinned by a persistent supply deficit.”

On Wednesday the domestic gold market opened flat drifting lower over mild profit taking, tapering concerns and a stronger dollar. A bit of economic uncertainty might also have Wall Street worried suggesting less risk-attitude when it comes to stocks. Sustained higher prices in gold, while choppy support this small shift to safe haven choices like the dollar and gold. A weaker dollar after the close pushed gold back into the green, waiting for the Powell speech.

The latest FOMC minutes from July indicate a willingness to start reducing asset purchases before the end of the year. Officials stressed that there is no link between tapering and potential interest rate hikes. Some members expressed concern over inflation, though opinions vary widely according to CNBC. For now, the gold bulls and bears continue to squabble, and while the news remains mixed the bull camp can add a few pluses to its toolbox. This from Jim Wycoff (Kitco) – “Technically, gold bulls have gained the slight overall near-term technical advantage. Bulls’ next upside price objective is to produce a close above solid resistance at $1,800.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,700.00. First resistance is seen at today’s high of $1,795.00 and then at $1,800.00. First support is seen at Monday’s low of $1,769.80 and then at $1,760.00.”

Palantir Technologies, a publicly traded company is seeing media attention for its unconventional $50.7 million dollar purchase of gold bars in August (Barron’s). COO Shyam Sankar tells Bloomberg “You have to be prepared for a future with more black swans events.”

This kind of purchase in gold bullion is no big deal but it suggests an important point which is overlooked in today’s gold commentary. A Black Swan is a metaphor describing an event which is unpredictable and carries severe consequences – something unexpected and out of the blue. Today most are so old school that a Black Swan is not even considered. Even as the world is staggered in a monstrous pandemic which ushered in record amounts of fiat currency expansion.

There are also a few loose ends which are worth considering. The first is how serious to take the “flash crash” gold experienced two weeks ago, which collapsed prices in the overseas paper market ($1677.00). By the time our domestic market opened Monday most of this loss was recovered. And while there was obviously technical damage, the psychological damage remains part of this equation even though bullish sentiment is pushing gold again towards $1800.00. The big plus gold argument is that the physical market aggressively bought this dip. The negative being a suspicion that pricing may eventually test this blow out number if the FOMC turns aggressively hawkish. A reasonable middle ground would be to say that gold overreacted to this wash-out and traders expect a value orientated physical trade which supports bargain hunting. Which suggests consolidation might continue given inflation remains tame.

The second issue – growing pandemic numbers. World Covid D infections show a third pandemic wave forming – approaching 600,000 infections using a 7-day average. US infections are also moving in the wrong direction. LA County down to a few hundred cases 3 months ago are approaching 4000 cases using the 7-day average. Worse, the last day of summer June 22 is this coming Sunday. Winter months bring higher infections. Zaner’s (Chicago) sad comments about the gold market are noted “Slow grinding gains as delta virus offsets tapering talk”. On the day gold closed down $3.40 at $1781.60 and silver closed down $0.24 at $23.41.

On Thursday gold moved nicely higher approaching $1790.00 but this move was stopped by a stronger dollar. The Dollar Index has moved from 92.50 through 94.50 this week which might suggest traders do not consider the FOMC dialogue as dovish as it was a few weeks ago. It’s clear the Fed is considering “something” related to quantitative easing simply because they continue to highlight the subject. I thought initially this was just part of keeping everyone on the same page, but our strengthening recovery will eventually require a definitive answer. But this pandemic picture has never been easy or especially clear even to the medical trade because few in this generation even considered this monstrous possibility.

Now we may be seeing a slight shift in sentiment between FOMC governors. For example, the Fed’s Kashkari says he will reconsider tapering if delta variant slows down hiring. This is a big change because surprisingly the initial variant threat was dismissed. The rising infection numbers cannot now be ignored because the University of Oxford is showing diminished effectiveness from coronavirus vaccines to the delta variant.

This possible change in the pandemic view is still not fully understood but it has created an increase in safe-haven demand especially in other countries. And Wall Street is nervous but data from the labor department today showed weekly unemployment claims at a 17-month low, further supporting the view that a job market recovery was underway.

For now, the gold plus created from increased physical demand meets the minus created from continued planning for the eventual FOMC of modified quantitative program. These opposing forces allow gold to hold recent gains but cap it from moving above the important $1790.00 overhead resistance. I don’t see any chance of new recent highs if the Fed continues to rattle on about quantitative easing. But this dynamic has a lot of moving parts so stay tuned. Gold closed down $1.40 at $1780.20 and silver closed down $0.19 at $23.22.

Gold Friday continued rather flat with lower highs and lower lows into this last trading day of the week. The bulls still hold a technical advantage short term, but the very strong dollar has capped gains and may be suggesting that the bulls will have to be satisfied with a channel trade on both sides of $1780.00. Waiting for additional Fed or economic information which might come to light at the Jackson Hole confab next week.

This week gold has benefited from rising safe haven demand over concerns with the rapid spread and more virulent Covid D variant. At the same time the Dollar Index has moved from 92.5 through 93.5 (10-month highs), which might sound counterintuitive but confirms the notion that during times of uncertainty the dollar remains a popular safe haven choice.

Crude oil has moved from $75.00 through $63.00 in about 40 days, perhaps the result of the variant worry but also offering a whiff of deflation. This may offset the reasonable inflationary scenario which has been in place since last November when crude was trading at $40.00 a barrel.

It is also interesting that traders now see a divergence between the price of gold and silver favoring gold. Zaner (Chicago) points to the so-called “death cross” as the silver 50-day moving average crosses below its 200-day average. They also note that silver ETF holding are moving in the wrong direction. While all of this is true the physical silver market is still behind the production curve as illustrated with continued high premiums on new product. Judging by the numbers Wall Street believes this recovery is intact, perhaps challenged but moving forward. If you belong to this group silver would be an aggressively bought as it moves lower considering its widespread application in industry and technology.

According to Reuters there are two primary forces working on the price of gold. For the bulls there is the continued and perhaps growing safe demand created over the Delta variant. For the bears there is the slowing economic recovery and possible tapering from the Federal Reserve. On the day gold closed up $0.80 at $1781.00 and silver closed down $0.11 at $23.11.

Platinum closed up $22.90 at $993.50 and palladium was down $21.40 at $2274.70. .

Posted on August 13, 2021 by Richard

Gold at Weekly Highs / Worry Grows

Commentary for Friday, Aug 13, 2021 (www.golddealer.com) – Gold closed up $26.20 at $1775.20 and silver closed up $0.66 at $23.77. This week will leave both paper and physical traders scratching their heads as the sentiment guru switched sides. And is likely still not satisfied. The week began dominated by negative sentiment as the paper trade made plans for early Fed “tapering”. This pushed the dollar higher, the metals lower. The bears roared. The bulls managed to “stabilize” prices by mid-week, but bearish sentiment won the day. By Friday, a surprise collapse in consumer sentiment, inflation worries, and a weak dollar sent the “short” paper to the sidelines. The technical picture moved from “bearish” to “mixed”. A close above $1800.00 next week and the bulls are in charge. Amazing. Last Friday gold closed at $1760.00 / silver at $24.31 – on the week gold closed up $15.20 and silver closed down $0.54.

To understand Monday’s gold close let’s consider what happened to the overnight paper trade after the markets closed on Friday. Last Friday both gold and silver took a drubbing, gold closing down $45.10 at $1760.00 and silver down $0.97 at $24.31. These markets reacting to the now likelihood that the Fed will adjust quantitative easing perhaps even this year as our economy bounces back from the pandemic.

This past weekend presented a quiet trade Saturday, but something went off the rails Sunday. Zero Hedge claims that $4 billion dollars in Sell Orders or 24 thousand contracts created a spectacular flash crash as gold dropped to $1677.00, losing $100.00 from Friday’s close.

This represents the largest 2-day drop in gold prices since the March 2020 debacle. Professionals view these massive trades with suspicion believing they are an attempt to control or disrupt overseas trading when markets are typically thin.

Today’s domestic trade, while technically bearish is realistic considering gold’s bounce back and stabilization. We opened around $1745.00 and drifted lower – moving to what might become a short-term bottom ($1725.00). From the longer-term perspective that would place gold down $225.00 this past year. Silver is also weak, approaching an 8-month low at $22.50.

Keep in mind that we are looking at the short-term picture – a reaction to how the Federal Reserve might react as unemployment moves lower and job creation continues strong.

For the present the metals are dealing with this fallout – and will likely remain left footed on the shorter term. Still, as Reuters points out gold’s price dynamic is fickle and subject to a lot of moving parts. There are trillions of fiat dollars to be accounted for and the pandemic still presents huge dangers. If subsequent jobs reports fail to meet expectations, the Asian market strengthens because of lower prices, or the inflation scenario reclaims the headlines – both gold and silver could easily be seen as oversold during this transition.

In the meantime, we continue to sell much more than we buy – which has been typical in these turbulent times. This might be the best indication that while the paper trade remains dicey because of its huge leverage, the physical market seems to be saying that the public is just not ready to completely trust big government with all their treasure. On the day gold closed down $36.60 at $1723.40 and silver closed down $1.05 at $23.26.

Gold on Tuesday continued to steady itself after the Friday and Monday collapse, but it is too soon to say if these levels will eventually turn into support for the bulls. The problem gold faces is that traders believe the Fed will soon turn even more hawkish by actually making meaningful changes to its long standing quantitative easing programs. Foreshadowing this conviction is the rise in the Dollar Index, moving over 93.00 this past week, and rising Treasury yields, now approaching 3-week highs at 1.33%. It will be difficult for gold bulls to stage any sort of rally if these much-watched indicators remain strong.

What makes this transition to lower gold and silver prices more difficult to gauge is that there are at least two growing problems with might alter this “immediate tapering” scenario.

The first and more immediate reason is the Covid D variant numbers are disturbing. They may present a shock to the recovering economic systems by the winter months. The reason I would not become complacent here is that only about 51% of the US is fully vaccinated. This number drops to 15% when considering the world population and our winter months are not far off.

The second and more benign reason is that inflation is still a big loose end.

The great thing about the physical market is that at some point “cheaper is better” for the rank and file. Lower prices encourage fresh money. But this week’s drop was dramatic – enough to slow this process down. It could take a week or two before any new bottom should be considered reliable. In the meantime, the technical pictures for both gold and silver remain bearish.

I believe gold’s recent spike down ($1677.00) was a trading gimmick, but technical analysts cannot simply dismiss this number – it will remain part of the support conversation. Today’s higher close adds credibility to the notion that we are working with a short-term bottom. But this small bounce in prices will be considered weak by professional traders and subject to bear raids.

In the meantime, the Senate has passed the trillion-dollar infrastructure bill which moves on to the House which wants to sweeten the pot with an ambitious $3.5 trillion social policy bill this fall. So, while hawkish FOMC talk stymies the metals, a bipartisan Congress continues to spend money like a drunken sailor.

The Dollar Index today approached yearly highs (93.0+). Its yearly cyclical trading pattern suggests a reversal towards 90.00 may be in order. Especially if the FOMC does not officially begin to “taper” until next year. This would obviously sweep away some of these bearish clouds. On the day gold closed up $5.40 at $1728.80 and silver closed up $0.12 at $23.38.

On Wednesday gold trended higher as the latest inflation news trended lower. Today’s Consumer Price Index came in cool which is surprising but in keeping with the FOMC’s feeling that rising inflation numbers are transitory. The reason gold moved higher in this wacky world of quantitative easing is that low inflation numbers give the Fed more options. They can adopt a wait and see attitude and feel less pressured to change quantitative easing.

Perhaps even refocus on their original primary objectives of full employment and pandemic recovery. Helping this updraft in gold today is a weaker Dollar Index, obviously reacting to the notion that interest rates may not be going higher anytime soon if inflation remains benign.

Today the gold bullish scenario, beaten down early this week gets some breathing room. But our shiny friend remains in the shadow of a rising dollar and strong stocks. Still, we have a welcomed-up day and perhaps a bottom is now in place. But gold is not “going up” in the larger sense of the word. This enlightened phrase would be an overstatement until gold moves above its 200 Day Moving Average ($1835.00). Still there are bright spots – we sold the house down Monday and Tuesday when gold was falling like a rock, blowing through a few new US Mint boxes of US gold Eagles. The rank and file were not hiding, they were buying.

The same is not true for silver but I think this lag presents opportunity. As soon as the public gets back on its feet silver bullion will be an obvious choice at today’s discount prices. Silver was trading for $20.00 an ounce in early 2008 before it moved to $60.00. If the Fed is worried enough about a superheated economy to talk about “tapering”, the required industrial demand for silver and a push towards “green” may bring in new speculative money.

The metals went into this downward spiral over “tapering”. Now that the “news” is out consider the Wall Street adage – “buy the rumor, sell the news”. Gold is now factoring “tapering” into its price before the FOMC makes changes. As these changes headline, gold prices will yawn or move higher – it will be old news. Picking a “bottom” is difficult, close enough is good enough.

Keep in mind Milton Friedman’s famous quote “inflation is always and everywhere a monetary phenomenon”. While the hyperinflation and safe-haven arguments which so favored gold’s rise are on the back burner – they are never more than an inch or two away from being reinvented when you are talking about still unaccounted for trillions of dollars. On the day gold closed up $21.60 at $1750.40 and silver closed up $0.09 at $23.47.

Grant on Gold – (1) Gold ended last week on the ropes with the definitive close below $1800 on Friday setting the stage for downside follow-through to start this week. The yellow metal closed down 2.8% last week and at one point on Monday was down an additional 4.5%! (2) Silver breached short-term support at $24.49 on Friday, leaving the more important $23.77 low (31-Mar) vulnerable to a test. In early trading on Monday the white metal dove below the latter as well, establishing an 8-month low at $22.06. (3) Platinum fell below the important $1000 level on Friday, opening the door to a downside extension toward the halfway back point of the entire rally from $558.00 (Mar 2020 low) to this year’s peak at $1337.30. That level is $947.65. (4) Palladium is holding up well so far, still within the range established in the May/June period.

On Thursday the overnight trade remained firm ($1750.00) but the domestic market turned choppy to mildly lower, testing $1743.00 before firming into the close. Gold prices slipped as the Dollar Index pushed back over 93.00 but the notion that the Fed will not soon “taper” because inflation appears tame continues to support current pricing. I think, however this working scenario of what the FOMC might have in mind is subject to change with the wind.

Next week Fed Chairman Powell will speak at the Jackson Hole Economic Symposium (what a great name) and everyone will be looking for new hints. But this entire conversation is beginning to look like a dog and pony show even among the governors. Barkin claims it may take a few months to hit the taper benchmark, while Evans claims that inflation data should not induce tapering. Still, the “tapering” argument carries bearish weight, now behind closed doors.

Trading academics are just as divided, offering a wide interpretation of where we stand as gold claws its way back to $1750.00. Some remain skeptical claiming that physical gold is no longer necessary now that the pandemic is winding down. Still others, like Bloomberg Intelligence claim that gold’s recent weakness is simply a dip in a still intact bullish trend.

Technically both gold and silver remain bearish. But the surprise bounce back in gold is puzzling. Will this bounce eventually be called a short covering rally or was gold simply oversold? Traders will likely remain cautious but respectful. Watching for change in dollar direction and listening carefully for any new FOMC slant. Silver pricing is taking a bit more heat, but I expect pricing here to be less volatile given the difficulty of getting new product. Gold closed down $1.40 at $1749.00 and silver closed down $0.36 at $23.11. Trading within the CNI Building slowed considerably today, still busy but not crazy. The public is also selling more today. Nothing from large holders, they are still believers. But this most recent drop has created mid-range sellers ($50,000 / $200,000).

Gold Friday was typically contrary, pushing through tough overhead resistance and surprising bearish sentiment. This is a great example of just how short sighted this trade has become in its minute-by-minute assessment of what the FOMC might do with quantitative easing. The bullish culprit today was Consumer Sentiment from the University of Michigan. Its most current reading collapsed – coming in 70.2, down from 81.2 last month.

It would seem the public is worrying over inflation and the rise in Covid D inflections. While this report surprised, the discussion is overdue. The somber realization that the pandemic might not be ready to go away quietly and could impact economic expectations is healthy. I would not overreact here, “worry” is probably the wrong word, vaccination programs worldwide are effective and moving forward. But consumer sentiment has fallen to its lowest level since the height of the pandemic in April of 2020. On the day gold closed up $26.20 at $1775.20 and silver closed up $0.66 at $23.77.

Platinum closed up $8.20 at $1025.50 and palladium closed $32.60 at $2656.10.