Gold Heats Up?
Commentary for Friday, June 14, 2019 – Gold closed up a disappointing $0.90 at $1340.10 today. Itopened flat but quickly moved immediately higher breaking above $1350.00 but short term profit taking quelled the rally – bears held sway and the trade settled for almost a draw as the market closed. This is however a nice progressive pattern which will encourage the technical picture but leaves the door open to short-term profit taking. How gold recovers from this type of choppy trade will paint a telling picture.
Most of the buzz created these past few days has been over the escalation of tension in the Gulf as oil tankers were attacked supposedly by Iran. Frankly this area has always scared me – it has traditionally been an ignored tinder box – which says a lot about the world’s ambivalence today.
It’s impossible to say how this problematical situation will develop as relations between President Trump and Iran deteriorate, but historically everyone knows the danger so I expect diplomatic connections will prevail even if they are done under the table.
Still the price tension builds – looking at the 30 day gold chart. We have moved from $1280.00 through the challenging $1350.00 top before settling lower.
While this is encouraging technically I have to wonder if this will turn out to be “too much too soon” – in other words is gold now over bought? Perhaps but the choir singing for higher prices is getting louder so it will be interesting to see how today’s mild rebuke plays out next week.
It is worth noting that our across the counter gold bullion business has suddenly woke up – really out of nowhere – as more than a few major bullion buyers have shown up. This is not 10 or 20 grand action but legitimate “big boy” buying from the public. A public I want to point out which has been a complete seller this past month.
So I’m hedging a bit here but this is a great reminder that there are plenty of buyers who have been sitting on the sidelines since early January – watching gold move higher then lower then higher – some waiting for a breakout some for a breakdown, hoping for cheaper prices.
Still, gold is trading at 14 month highs and so the profit taking scenario has to be part of everyone’s thinking.
On the other hand the reasons supporting higher gold prices create more conviction. Trade tension between the US and China, the talk of rate cuts of the Federal Reserve before year end, troubles in the Gulf which threaten oil.
But all of this also encourages safe-haven buying in the dollar – look at the Dollar Index today moving from 97.00 through 97.50. And if any really dangerous developments happen over the weekend my bet would be that the dollar would easily move above 98.00.
This could slow gold’s progress and encourage more profit taking because recent gains have happened over such a short time. So there are plenty of things for the gold bullion community to keep track of these days.
One thing is sure – the old “ho-hum” physical marketplace is definitely a thing of the past. The gold and silver market has once again become a great topic of conversation.
And make no mistake about this; the American public is once again ready to jump in with both feet if any of these bullish trends gain further momentum. The key here however especially in the short term is pricing – gold must show strength above $1350.00 and be able to push higher – not an easy task but well within reach under the circumstances.
This from Zaner (Chicago) – “Global equity markets overnight were mostly lower with Chinese stocks down by almost 1%. Economic readings released overnight included Chinese Industrial output which declined to the lowest level in 17 years while Chinese retail sales came in better-than-expected. Other reports included Italian industrial orders and industrial sales which contracted and Italian consumer prices which continued to climb but at a slower than expected pace. The North American session will start out with May retail sales which is expected to have a moderate uptick from April’s -0.2% reading. May industrial production is forecast to have a moderate uptick from April’s -0.5% reading. May capacity utilization is expected to have a minimal uptick from April’s 77.9% reading. April business inventories are forecast to have a modest uptick from March’s unchanged reading. A private survey of June consumer sentiment is expected to have a modest downtick from the previous 100 reading.
Despite a short term overbought condition the path of least resistance looks to remain up into the last trading session of the week. Clearly the list of supportive geopolitical flashpoints has expanded from the beginning of the week with the Iranian situation the foremost on the list. On the other hand geopolitical tensions between the US and China were stoked by US pressure on the Chinese President to meet at the G20 “or else tariffs will be raised”. The potential support for gold from the Middle East events this week was given added impetus by US State Department claims yesterday that Iran was responsible for the attacks and the mining of Gulf of Oman shipping lanes. In another fresh bullish development for gold, famed investor/trader Paul Tudor Jones has turned bullish toward gold with a price projection of $1,700. We would also suggest that the potential for further rate cut inspired gains in gold prices have been improved by low price/inflation data from a number of US economic data points this week. Furthermore, one could argue gold has continued to see a slow increase in economic uncertainty because of numbers showing deceleration in the US and the markets will be looking closely at US retail sales today to render a final economic judgment on the week. While the gold market has not paid that much attention to the long term pattern of declining South African gold production, South Africa again this week posted significant (-19.5% year-over-year decline) production losses. It should also be noted that a prior month of declines in South African gold production was revised down. In conclusion without a very definitive risk on environment to end the trading week, significant gains in the dollar and or stronger-than-expected US retail sales/industrial production results the path of least resistance looks to remain up.
While one might have expected platinum to lead the PGM complex higher this week because of the potential for strikes over wages, it was the palladium market that ranged up impressively and has extended a very uniform June rally pattern again today. Perhaps the palladium market is benefiting from bullish Paul Tudor Jones views toward gold as many see palladium as a cheaper alternative investment than gold. The bull camp in palladium could also suggest that a lot of the same bullish fundamentals present in gold apply to palladium particularly the benefit of any US rate cut action. The palladium market might also be catching a lift from favorable coverage on a strong performing palladium ETF which has reportedly gained more than 11% this year as that suggests stellar 2018 gains in that ETF are extending straight away and that creates bullish buzz for palladium. It is also possible that long palladium/short platinum spread interest has returned, thereby giving palladium some fresh additional buying. We continue to think near term upside targeting in September palladium is seen at $1,459.10, and we would remain bullish toward the metal as long as it maintains closes above $1,398.
As indicated already, the bullish forces from the beginning of the week in gold remain in place and there are signs that investors/money managers are now turning more bullish toward gold. From our perspective economic uncertainty has been expanded this week because of slack data but also because of US claims that Iran is behind the shipping attacks. While many still doubt the Fed will cut rates next week the probability of a US rate cut in the coming months continues to climb. However, the dollar action has become somewhat limiting but perhaps unimportant given the growing list of other bullish forces. Critical pivot point support moves up to $1,345.90, resistance is obviously $1,362.20 but the bull camp probably needs to close above the $1,350.00 level to avoid another failure at that psychological level.”
Silver closed down $0.09 at $14.78. Steady eddy here – the public likes this cheap price range and remains a steady buyers of the usual bullion products.
Platinum closed down $4.70 at $803.30 and palladium closed up $23.10 at $1452.70.
Our Patented Employee Survey – Gold’s Direction Next Week?
Of course it’s not really patented but we do have some fun along the way. This is what the GoldDealer.com employees think: 9 believe gold will be higher next week 1 thinks gold will be lower and none think it will be unchanged.
Our Patented Customer Survey – Gold’s Direction Next Week?
Like the employees our customers were given three choices – up – down – unchanged. We limited the survey to a random sampling of 100 transactions – unscientific but worth considering because these people took action: 58 people thought the price of gold would increase next week – 22 believe the price of gold will decrease next week and 20 think prices will remain the same.
Precious Metal Closes & Dollar Strength – June 10 – June 14
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