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Gold – No Third-Party Obligation Works

Gold – No Third-Party Obligation Works

Commentary for Friday, Sept 16, 2022 (www.golddealer.com) – Today gold closed up $6.30 at $1671.70 and silver closed up $0.12 at $19.30. Gold and silver prices were ambushed this week, so few are happy. But honestly the fuss being made by the bulls may be a bit of exaggeration. With negative sentiment and a negative technical picture, expecting a darker trader outlook is normal. I would say however that this stormy weather never lasts as long or is as turbulent as the bears would suggest. Today we saw some mild short covering and perhaps even a bit of bargain hunting. This kind of pricing only works well for the dedicated longer-term buyer. (CNBC) “To reduce inflation down to a benchmark target rate of 2%, the Federal Reserve has already implemented four interest rate hikes in 2022, including two consecutive “jumbo” rate hikes of 0.75% in June and July. The federal funds rate is currently 2.25% to 2.50%.” Most expect the September rate hike to be another 0.75%. I am cautious but not overly pessimistic, even on the short term. This bear market looks tired. I would not be surprised to see the bulls reinvent themselves before the holiday season. Last Friday gold closed at $1716.20 / silver at $18.66 – on the week gold lost $44.50 and silver gained $0.64.

Important Notice – FedEx is no longer having people sign for packages, they are scanning IDs. We have complained to FedEx, but they remain resolute. Scanned identification is safer, but if you have a problem with this decision, please make your feelings known to FedEx. Unfortunately, the present delivery time for the USPS alternative is 2-3 weeks.

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 understanding.

On Monday gold moved substantially higher in the overnight Hong Kong and London markets threatening $1735.00. This rally gave up some steam in the domestic trade, but gold still finished with a nice upward bounce into the new week as the Dollar Index moved lower by almost a full point. The Consumer Price Index for August will be published Tuesday and should provide further inflation insight to traders looking for fresh information.

There was a significant rise in the price of silver today. More than a dollar an ounce which suggests some “catch-up” trade but primarily a short covering rally. Still, it is too soon for the bulls to celebrate. Higher interest rates and recession talk is not good for silver. I doubt that you will see increasing momentum or higher prices on the short term. But today was a plus for a bullish longer-term scenario. Because it reminds everyone that silver is always a “sleeper” and taking advantage of lower price trends makes good planning sense.

Some thoughts on the CPI relating to gold. If it comes in hot it would likely encourage talk of stronger Fed action in raising interest rates. Because a hot reading is expected the weekly pricing action might be small, even boring, like last week. On the other hand, if the CPI comes in weak, the price of gold could rally. This might suggest the Fed will have more latitude (time) to make sure Wall Street traders do not get too nervous. This too may create little change in the price of gold because pricing remains capped by a strong dollar. In the short term, gold pricing may remain flat, looking for fresh, actionable information. The positive side of all this confusion is that gold remains relatively stable in price, in spite of a progressing Fed policy of higher interest rates. Whether this will hold up remains to be seen but, in the meantime, I believe it is one of the bigger positives for the physical market.

Reuters – “Economists around the world, from the most liberal free-spenders to fiscal conservative deficit hawks, largely agreed the coronavirus pandemic required a go-big, go-fast policy response to avoid an outright global depression. They’ve also reached a rough consensus on another point: The hangover is real.” This too may support gold and silver prices. Even though the price swings may become larger on the short term.

On the day gold closed up $11.90 at $1728.10 and silver closed up $1.10 at $19.76.

Zaner (Chicago) – “With the dollar extending last week’s reversal/slide and reaching the lowest level since August 26th this morning the precious metal markets clearly start the week with support from currency market action. In our opinion, the markets this morning are upbeat in anticipation of evidence on Tuesday that US inflation might be coming under control. In other words, both commodities and equities are hopeful that jumbo rate hikes from the US Fed are over or will be over after next week’s FOMC meeting. In fact, metals, equities, and other commodities are tracking positive today despite the promise of more quantitative tightening from the European Central Bank. Therefore, the bull camp in gold and silver is factoring in expectations for a decline in CPI of 0.1%. The gains in commodities this morning is impressive given the additional Chinese Covid city lockdown announcements over the weekend. While some traders suggest that gold and other metal markets might be poised to benefit from Chinese Mid-Autumn Festival demand, the economic condition inside China remains suspect and the yuan is trading at the weakest level since the beginning of the pandemic, thereby eroding Chinese purchasing power. Furthermore, Chinese August CPI and PPI readings last week weakened significantly which in turn gives credence to views that the Chinese economy is contracting. Furthermore, investor sentiment toward gold and silver remains negative with gold holdings last Friday declining for the 10th straight session and reducing holdings last week by 442,722 ounces. Similarly, silver ETF holdings on Friday declined by 711,955 ounces and reduced their holdings last week by 2.5 million ounces! With the most recent COT positioning report showing a net spec and fund gold long near the vicinity of the lowest levels since May 2019, some gold buyers saw the markets respect and ultimate rejection of the $1,700 level as a sign of fundamental value. The September 6th Commitments of Traders report showed Gold Managed Money traders net sold 19,509 contracts and are now net long 1,217 contracts. Non-Commercial & Non-Reportable traders net sold 17,752 contracts and are now net long 112,977 contracts. Under further declines in the dollar and if the odds of a jumbo US rate hike next week decline, the October gold contract might regain the $1,750 level. With the silver market in the most recent COT positioning report posting a “net short” we suspect last week’s gap higher upside extension was primarily the result of short covering. The September 6th Commitments of Traders report showed Silver Managed Money traders net sold 3,573 contracts and are now net short 24,632 contracts. Non-Commercial & Non-Reportable traders are net short 4,309 contracts after net selling 4,207 contracts.”

On Tuesday gold looked stronger in the overnight Hong Kong and London markets ($1730.00) but the domestic trade weakened over August inflation news. I think this is an overreaction – yes inflation is rising, and some traders are calling the August numbers “hot”. But I think this is a bit of an exaggeration, which has been driving this bearish scenario for months.

Barron’s most recent assessment suggests an improving inflation outlook. But traders remain fixed on Fed bearishness, so August’s CPI numbers were strong enough to push gold and silver lower. Wall Street also reacted negatively but if you look at the record, the Fed is famous for pushing stocks to the breaking point and then reversing direction.

Still, today’s drop in prices was typical of a still defensive market, looking for value. The cash New York market fell from 1730.00 through 1695.00 before bouncing higher and settling between $1705.00 and $1710.00 on the day.

This bounce was a combination of bargain hunting and short covering. Yes, cheaper prices continue to move the needle in the physical world of gold and silver bullion. For most of the last 10 trading days we have been net sellers to the public.

Surprisingly enough, what made this latest pricing action in gold noteworthy was not the inflation data. The rug was pulled out from underneath many savvy traders. Because prior to the Consumer Price Index they were growing more optimistic about higher gold prices.

On the day gold closed down $23.10 at $1705.00 and silver closed down $0.37 at $19.39.

On Wednesday the early gold trade turned choppy between $1702.00 and $1707.00 so there is some interest. But the market broke down later in the day and finished just below $1700.00, as interest faded. It is difficult to make a positive case on this dip because higher prices are capped by rising yields and a stronger dollar. And gold could be subject to follow through momentum selling if this weakness is not bought by bargain hunters.

The Dollar Index these past 5 trading days has been erratic, losing 2 full points and then jumping back to recent highs (110.00) on yesterday news of solid inflation numbers. Traders are still looking for fresh news, expecting a ¾ percent hike in interest rates by late next week. Actually, there are some who believe that a full point might is in order. Increasing the bearish tilt but the Fed should be careful here, too much inflation push equals recession.

Gold pricing on both sides of $1700.00 today is not a confidence statement it is a holding pattern. Higher interest rates are not good news, but it remains to be seen if the Fed will kill the golden goose. Wall Street is trying to recover after its worst trading day since June of 2020.

In some ways stocks and gold are interrelated. Both are suspicious of a hawkish Fed. Yet both see some advantage in lower prices. In other words, gold and stock bulls are not running for cover. Both sectors obviously dislike lower prices, but each is patient enough to see if the Fed can get lucky with this latest attempt in trying to at least control inflation numbers.

On the day gold closed down $8.50 at $1696.50 and silver closed up $0.08 at $19.47.

Zaner (Chicago) – “Gold and silver prices deserved some liquidation pressure yesterday in the wake of inflation news that is unlikely to discourage the US from a jumbo rate hike next week, but in our opinion the washout in most markets yesterday was excessive. An example of the market’s need for softer inflation to avoid a jumbo rate hike next week was seen in a Bloomberg report which labeled the +0.1% CPI result as “a shockingly hot inflation report”. Unfortunately for the bull camp, the recovery in the dollar was very impressive and could have some “legs”. In fact, if the dollar manages to take out contract highs today October gold is likely to fall below the September low of $1,689.80. Gold ETF holdings were reduced yesterday by 79,024 ounces while silver ETF holdings saw an outflow of 1.2 million ounces. On the other hand, the markets will be presented with additional inflation measures from the US later today and that could result in follow-through selling in both gold and silver. Market expectations for today’s producer price index reading matches the trades expectations for the US CPI report yesterday which increases the odds of gold and silver price posted more declines. The bias is down, with a full retracement of the September rally likely without a contraction in the month over month producer price index reading. Obviously, with silver managing a low to high September rally of $2.60, it is very vulnerable to further significant downside corrective action. The first retracement target from the September rally offers an initial target of $19.00 in December silver.”

On Thursday gold increased in bearishness even though the Dollar Index turned flat shy of 110.00. Yesterday’s breakdown encouraged the bears and today’s increased momentum selling should find the bulls hiding under the bed. Reuters – “This sell-off into September, October has really been just on rate adjustments, rates came off pretty hard and now they’re right back up again and pushing gold lower. Prices had briefly pared losses as investors took stock of data that showed U.S. retail sales unexpectedly rose in August, while separate data showed U.S. weekly jobless claims fell 5,000 to a seasonally adjusted 213,000 last week. Markets have fully priced in an interest rate hike of at least 75 basis points at the end of the Fed’s policy meeting next week, possibly even as high as 100 basis points. Although gold is considered a safe bet during economic uncertainty, interest rate hikes increase the opportunity cost of holding non-yielding bullion. Meanwhile, International Monetary Fund chief Kristalina Georgieva said on Wednesday central bankers must be persistent in fighting broad-based inflation.”

I can’t say that lower prices in gold and silver are unexpected. But it is interesting that the decline in stocks and gold were about the same this week (4%). Still, weaker gold and silver prices today are discouraging because we did not see much short-term bargain hunting.

Waiting out the rocket fire is no fun but, in the meantime, remember that the price of gold on the short term is a function of interest rates. For the time being it will not act like an inflation hedge. The origin of “a bull in a China closet” is not known but the affirmation comes to mind and was first used in Frederick Marryat’s novel Jacob Faithful (1834). The more Powell “huffs and puffs” using increased rhetoric, the more important gold and silver bullion becomes in the longer term.

The faithful were not standing in line this morning to buy the latest weakness. Sudden drops usually produce a day or two of decreased volume. But physical buyers will take advantage of this latest drop as soon as they believe gold and silver are oversold.

Look for a short-term bounce, this market is probably already oversold. The bounce will be a combination of bargain hunting and short covering. “Good Grief” Charlie Brown. I’m glad the weekend approaches. It will give these markets time to settle down, even as worry mounts.

On the day gold closed down $31.10 at $1665.40 and silver closed down $0.29 at $19.18.

On Friday we began to see mild bargain hunting across our trading desk as the Dollar Index moved lower, losing ¾ of a point in early trading. No one likes these more dramatic swings in price and frankly I’m surprised. A few days ago, I had envisioned a more stable market with less volatility. But Fed rhetoric rained on my parade. This is not to say that the FOMC is not sincere in its resolve to raise interest rates. I’m suggesting they may not have enough gas in the tank to put up with the expected economic push back. You could very well see higher inflation become their longer-term plan to move away from the pandemic model.

We are members of a national dealer network and most of the time the information and news is boring. But today I got a laugh from one of its more pessimistic dealers. HAPPY LEHMAN BROS BANKRUPTCY ANNIVERSARY! “The bankruptcy of Lehman Brothers on September 15, 2008 was the climax of the subprime mortgage crisis. After the financial services firm was notified of a pending credit downgrade due to its heavy position in subprime mortgages, the Federal Reserve summoned several banks to negotiate financing for its reorganization. These discussions failed, and Lehman filed a Chapter 11 petition that remains the largest bankruptcy filing in U.S. history, involving more than US$600 billion in assets. Got Gold? Got Silver?”

Dealers do not like lower prices any more than their customers. But the best dealers always manage to keep things in perspective. Even when it’s raining outside.

On the day gold closed up $6.30 at $1671.70 and silver closed up $0.12 at $19.30.

Platinum closed down $4.50 at $900.50 and palladium closed down $33.20 at $2098.10.

My Brothers and Sisters, thank you for your business and friendship. If you have unusual circumstances, need cash or a special visit – talk to Harry. All our in-house staff have been vaccinated and have the booster! We continue to enforce ridged safety standards between people and product. Be careful, the contagious Omicron variants remain dangerous. At the same time trust that God will soon get us back to normal and our traditional business model.  As always, thank you for your patience. Richard Schwary

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

 

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Gold – Interest Rate/ Labor Market Mess

Gold – Interest Rate/ Labor Market Mess

Commentary for Friday, Sept 9, 2022 (www.golddealer.com) – Today gold closed up $8.20 at $1716.20 and silver closed up $0.33 at $18.66. Gold jumped higher in early trading ($1730.00) but quickly settled for modest gains on the day. The Dollar Index was on the erratic side with a full point swing in the first four hours of trading. I don’t think this is a “good” or “bad” story. But it does suggest volatility even after the Fed Chief assured the faithful yesterday that rising interest rates are the reality payment for stopping inflation. Before further damage to the economy becomes the reality. This looks like the old conundrum of “higher interest rates versus recession” is still with us. Which suggests that traders “heard” what Powell said yesterday but are not convinced of his veracity. Well, I’m convinced. Which leads to another complication. Higher interest rates and higher gold do not work well. Is it finally time for gold to break free from this worrisome relationship? A small test of this speculation will happen early next week as investors view the latest inflation numbers for August. Last Friday gold closed at $1709.80 / silver at $17.78 – on the week gold was up $6.40 and silver was up $0.88.

Important Notice – FedEx is no longer having people sign for packages, they are scanning IDs. We have complained to FedEx, but they remain resolute. Scanned identification is safer, but if you have a problem with this decision, please make your feelings known to FedEx. Unfortunately, the present delivery time for the USPS alternative is 2-3 weeks.

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 understanding.

On Monday the domestic markets (and us) were closed for Labor Day.

On Tuesday gold opened weak, drifted lower and eventually closed on daily lows. With virtually no aftermarket bargain hunting. This suggest that Friday’s gain was an anomaly, perhaps the result of a short-covering rally into a long weekend. Traders have again moved to their default position that the Fed would not waver on its interest rate policy. The dollar moved to fresh 20-year highs. Treasury yields climbed as Fed funds futures are pricing in a 75% chance of a 75-basis point hike at its September 20th and 21st policy meeting. Aggressive interest rate policy is also supported by an expected ECB rate hike of 75-basis points this week (Reuters).

Obviously, anything which might suggest less aggressive rate hikes would be bullish for the gold scenario, but this remains wishful thinking. That is the bad news, the good news is that we will have a decision by the FOMC in a couple of weeks. It is hard to imagine anything changing much in such a short time. So, I suspect gold will drift lower on the short term.

It is a good bet that by the time traders are sure of the FOMC changes gold will already reflect the shorter-term pricing model. And this fixation over higher interest rates will reinvent itself anticipating the next Fed rate hike.

What makes this call difficult is that the world is also judging gold’s value by its own parameters, including inflation, safe haven buying, and bargain hunting relative to individual currencies. This confused economic picture, however, should help support the medium to longer term view of gold pricing. If you are looking for an “outside the box” view, consider this minority opinion. As more is known about central bank interest rate intentions, world uncertainty should decrease. And relative gold pricing may become less volatile. Perhaps even boring. If such a thing is possible in the modern world of uber finance.

On the day gold closed down $9.40 at $1700.00 and silver closed up $0.02 at $17.80.

Zaner (Chicago) – “The dollar is higher this morning as worries about recession in Europe (driven by an energy crisis) and expectations for higher interest rates US lend support, and this has pulled gold off its earlier highs. The euro fell to a 20-year low overnight after Russia cut off natural gas supply to Germany. Gold did find support in India as the worsening energy crisis in Europe appeared to spark safe-haven demand, but that strength has not held, and the market is back near unchanged. We maintain that Friday’s rally in gold, silver, platinum, and palladium were driven by technical short covering, which puts last week’s lows in doubt. The dollar has a macroeconomic edge over the other currencies, and we think it would be premature to expect a sustained slide. Other major economies (Europe and UK in particular) are not likely to raise rates as aggressively as the US has, as they face significant headwinds because of high energy costs. ETFs cut gold holdings by 102,684 ounces on Friday and silver holdings by 649,264 ounces. Gold holdings are up 1.8% on the year and silver is down 13%. Friday’s Commitments of Traders report showed managed money traders were net sellers of 9,600 contracts of gold for the week ending August 30, reducing their net long to 20,726. In silver, these traders were net sellers of 5,425 contracts, increasing their net short to 21,059. Funds are almost flat in gold and approaching oversold in silver, but the selling trend is short-term negative. ETF liquidation is also negative. We do not hold out for sustained upside action today in gold or silver.”

On Wednesday gold drifted lower on the open but caught a bid at $1700.00 and surprisingly pushed to highs on the day ($1712.00). The Dollar Index came off daily highs (110.75) and moved a half point lower. The reasoning for the small bounce is difficult to pinpoint. But clearly gold is finding support from perhaps a combination of short covering and bargain hunting. China is resorting to stimulus to help a sagging economy, and this may also help support higher prices. (Reuters) – “China’s exports and imports lost momentum in August with growth significantly missing forecasts as surging inflation crippled overseas demand and fresh COVID curbs and heatwaves disrupted output, reviving downside risks for the shaky economy.”

Gold sentiment remains bearish as traders brace for higher interest rates. And watching crude oil prices fall from $95.00 to $82.00 a barrel these past few weeks does not encourage the bullish scenario. Rajan Dhall (Kitco) comments on the monthly picture. Gold has moved back in recent weeks and looks to be testing an important zone. The price is currently very close to the consolidation low. If this low breaks, it would make a lower high lower low formation and potentially become the start of a new longer-term trend down. This is a monthly view so on the lower timeframes there will be waves that need to confirm the move but the recent weakness in the yellow metal cannot be ignored. Most central bankers have confirmed they are willing to do what it takes to improve the high inflation rates. This means fixed income yields could rise further causing more havoc to the precious metals complex. On a more technical note, the green support line confluences with a 50% Fibonacci retracement. This level was also used as a consolidation support back in 2012 and might be useful again. All of this is based on if the current consolidation low of $1676/oz breaking again and the price closing below the area. The month of September looks pivotal for the safe haven asset class.”

On the day gold closed up $14.90 at $1715.30 and silver closed up $0.34 at $18.14.

On Thursday gold remained defensive as Chief Powell had a question-and-answer session at the Cato Institute’s annual monetary policy. This was the inside “peak” that everyone was looking for and Jerome did not disappoint. He reiterated the Fed is independent of outside pressure and will follow the Congressional mandate to control inflation. He was also specific in his use of the word “control”. It does not mean manipulation; this is serious business and he suggested that all his cohorts are on the same page. He said now is the time to act decisively. Waiting will raise the overall cost to the American people and create more long-term damage to the economy.

I think everyone now believes the Fed will raise interest rates ¾ of a point in a few weeks and keep that pressure on until it sees a meaningful drop in the inflation numbers. The ECB raised interest rates ¾ of a point today – no problem. This kind of unilateral action diminishes the talk of a dovish “pivot” to avoid recession. Today was not uplifting for the bulls. But you should give the Fed credit for being consistent moving forward. Which avoids earlier confusion.

I’m a little bit surprised at the hawkishness of Powell’s comments in that he did not give the FOMC much leeway early into an inflation battle that could take a few years to accomplish.

I’m really surprised at gold’s initial reaction. Yes, it’s lower but not falling out of bed. Traders bought the dip at $1705.00, and the market remained at lows moving sideways into the close. With the Dollar Index bouncing around 110.00 I would have expected a larger drop in prices.

On the day gold closed down $7.30 at $1708.00 and silver closed up $0.19 at $18.33.

Zaner (Chicago) – “The gold market appears to be on a short covering rally from an oversold condition, as traders are on both sides of the fence regarding how far the Fed will have to tighten. The dollar has set back after another move to new highs yesterday and another 20-year high, and this is supporting gold. While the trade seems to be expecting a 75 basis-point hike this month, some are of the opinion that hikes will not continue at that pace into the new year. When the Fed is aggressive, it is hard to be bullish gold, but the threat of recession and/or persistent inflation makes it an attractive safe haven. Fed Chair Powell speaks today, and he is expected to continue with the hawkish talk. In what may have been a preview, Fed Vice Chair Brainard said yesterday that monetary policy would “need to be restrictive for quite some time,” indicating they are still not convinced that the worst of inflation is over. October gold held above last week’s low on its early break yesterday and recovered to close higher on the day. The market had gotten oversold, presenting a bargain-hunting opportunity. It could draw some fundamental support with the approach of wedding season in India. Gold could rally another $45 and still be in a downtrend. Like gold, silver has gotten oversold and vulnerable to a rally. ETF holdings saw a slight decline of 42,202 ounces in gold (less than 0.1%) yesterday and slight increase of 347,068 ounces of silver (also less than 0.1%). Gold holdings have declined for eight straight sessions.”

On Friday gold finished essentially choppy. But did get off to a reasonable start as the confusion factor rises into another uncertain weekend. Rising interest rates clobbered the bullish gold market in 1980 and obviously still holds mighty sway in today’s trade. I appreciate that today’s trade is happening in a much different environment than those early days. But interest rates are still a primary key to price direction. And want to suggest that even professional economists are not on the same page here, so caution is the best approach.

Yesterday’s Reuters comments should have created a serious discussion but The Band Played On. “The U.S. unemployment rate may need to reach as high as 7.5%, double its current level, to end the country’s outbreak of high inflation, according to new estimates from a team of researchers including two staff economists from the International Monetary Fund.”

On the day gold closed up $8.20 at $1716.20 and silver closed up $0.33 at $18.66.

Platinum closed up $10.80 at $876.00 and palladium closed up $30.80 at $2162.70.

Zaner (Chicago) – “Uncertainty has taken a big jump over the last 24-48 hours, and gold seems to be responding. The passing of Queen Elizabeth, a new UK Prime Minister, and an expanding energy crisis in Europe that has been described as the worst crisis since World War II appear to have sparked safe haven buying in gold. It also helps gold’s case that the dollar gapped lower overnight to its lowest level since August 31. The selloff was spurred on by the ECB raising its key interest rate by 75 basis points, its largest increase ever. This sent the euro sharply higher. ECB members did not rule out another large increase next month. Gold’s upside is limited by a stalwart Fed that is showing no signs of backing off from its hawkish stance. Chair Powell said on Thursday that the Fed remains strongly committed to bringing inflation down. Fed Funds futures on Thursday were pricing an 85% chance of a 75 basis-point hike in September. Initial jobless claims fell to their lowest level since May last week, which is another indication of the strength of the labor market and which gives the Fed comfort in raising rates. From a technical perspective, October gold pushed through a steep resistance line overnight, which puts it on course for a more significant correction of its oversold condition. Should the market fail to do so, the thrice-tested $1,700 level would be a key support area. ETFs reduced gold holdings for the ninth straight session on Thursday, with a decline of 103,749 ounces or 0.1%. Gold holdings are up 1.6% year to date. They also reduced silver holdings by 1.277 million ounces, a 0.2% decline. Silver holdings are down 13% year to date.”

My Brothers and Sisters, thank you for your business and friendship. If you have unusual circumstances, need cash or a special visit – talk to Harry. All our in-house staff have been vaccinated and have the booster! We continue to enforce ridged safety standards between people and product. Be careful, the contagious Omicron variants remain dangerous. At the same time trust that God will soon get us back to normal and our traditional business model.  As always, thank you for your patience. Richard Schwary

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

 

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Gold – Fighting for $1700.00

Gold – Fighting for $1700.00

Commentary for Friday, Sept 2, 2022 (www.golddealer.com) – Today gold closed up $13.20 at $1709.80 and silver closed up $0.23 at $17.78. Gold was firm going into the weekend, using the reasoning that the jobs report was slightly off, and the dollar was weaker. The Dollar Index trended ¾ of a point lower, reflecting weaker treasury yields. The key here is that traders see these latest numbers as good enough but not too good. Which gives the Fed more latitude relative to its near-term interest rate goals. This idea is not new but carries some trading weight in an uncertain environment. I believe that the bounce was strong enough to suggest gold below $1700.00 becomes an increasingly oversold trade in short order. There is some hint that the Fed is considering its old decreasing inflation scenario on the short term. But this may be permanently branded a “fantasy” if the FOMC raises the interest rate an expected ¾ of a point later this month. We likely have the same old scenario in which traders will buy the dip and sell the rally until a more complete short term interest rate becomes clear as gold settled off highs on the day. Last Friday gold closed at $1736.10 / silver at $18.74 – on the week gold was down $26.30 and silver was down $0.96. We will be closed Monday for Labor Day.

Important Notice – FedEx is no longer having people sign for packages, they are scanning IDs. We have complained to FedEx, but they remain resolute. Scanned identification is safer, but if you have a problem with this decision, please make your feelings known to FedEx. Unfortunately, the present delivery time for the USPS alternative is 2-3 weeks.

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 understanding.

On Monday gold traded relatively flat in the overnight Hong Kong and London markets. But woke up in the domestic New York trade as the dollar weakened. The Dollar Index topped out in the morning trade (109.50) and began to slide, reaching 108.50 before settling somewhat lower on the day (108.70), once the latest “panic” wave subsided.

At one point the cash market pushed to $1750.00. But gold finally settled unchanged on the day turning into a mild combination of light bargain hunting and short covering.

This is not a big deal; the dollar is massive and will tend to correct in either direction depending on perceived Fed interest rate direction. Which seems to be split between the interest rate hawks and doves. This story is getting old, but it holds up until it does not – as they say.

No one completely understands how the Fed will handle the inflation problem. They have the most insight but will play this hand with a combination of bravado and stealth. Powell will watch the Europeans as closely as the Europeans are watching us – this is not rhetoric it is serious business. Central bank rates vary but they are more closely related than each side is willing to admit because a unified front is the best protection for the US and Europe.

Keep in mind that gold is at a one month low because interest rates are at monthly highs. Some analysts believe this trend will continue as the FOMC pushes the interest rate envelope battling inflation. Should this conviction falter (the so-called pivot) the process would likely reverse itself and gold would move proportionally higher. At the same time the yield curve remains inverted which hints at the feared recession, which would stop the Fed from raising interest rates.

Notice I use the word “should” because many traders believe the Fed will not budge until they have something tangible pointing to lower inflation rates. The problem with this whole mess is that this process could last a year or two. Which would present the investor with the unique “military solution” to their questions. Hurry up and wait for those who have not served.

On the day gold closed up $0.50 at $1736.60 and silver closed down $0.18 at $18.56.

Zaner (Chicago) – “With a fresh new contract high in the dollar in the early going today, the reverberations of hawkish global central bank dialogue have extended into the new trading week. Therefore, it is not surprising to see both gold and silver off sharply, with gold posting a new low for the month and seemingly poised for a slide to $1700. While gold ETF holdings on Friday increased by 23,447 ounces, last week investors pulled 187,681 ounces from holdings. Certainly, the strength in the dollar is the primary bearish focus of the gold trade, but most physical commodity markets have also seen buyers rush to the sidelines from Fed commentary indicating tightening policy will remain in place for some time. Sentiment toward gold and silver is so negative that sharp declines in global equity markets are not resulting in flight to quality buying interest. In fact, the gold and silver markets failed to embrace flight to quality buying in the wake of a 1,000-point Dow slide Friday and in the face of a downside follow-through this morning. Furthermore, the Fed made it very clear that they are willing to take the risk of recession to rid the economy of a spiraling inflation scenario. However, the net spec and fund long positioning in gold has moderated recently, but the net spec and fund short is large enough to mitigate stop loss selling and perhaps help October gold show some respect for the late July lows at $1,717.40. Gold positioning in the Commitments of Traders for the week ending August 23rd showed Managed Money traders were net long 30,326 contracts after decreasing their long position by 15,910 contracts. Non-Commercial & Non-Reportable traders were net long 140,153 contracts after decreasing their long position by 17,185 contracts. While the silver market in the latest COT report did not hold a “net short” as in the gold market, the net spec and fund long is near the “lowest levels” since June 2019! Like the gold market, the silver market has extended sharply lower today and appears on track to retest $18.00. Unfortunately for the bull camp, silver ETF holdings saw a large withdrawal last Friday of 2 million ounces resulting in a net outflow on the week of 10.3 million ounces! The Commitments of Traders report for the week ending August 23rd showed Silver Managed Money traders were net short 15,634 contracts after increasing their already short position by 9,868 contracts. Non-Commercial & Non-Reportable traders were net long 4,319 contracts after decreasing their long position by 8,589 contracts.”

On Tuesday gold remains defensive testing recent lows ($1720.00) as traders fear an aggressive Fed interest rate policy remains on the front burner. Gold’s 30-day pricing picture illustrates this continuing negative shift in sentiment which began in early August. This most recent $1720.00 low sets up another test of support.

I’m not a big options guy but the professionals note a large increase in “put” options, meaning traders are betting on lower prices in stocks. CNBC notes the “comeback” is off, meaning the latest Powell hawkishness has convinced traders that things will get worse before they improve. This does not mean we are talking about catastrophe right around the corner, but the continued threat of higher interest rates is making everyone nervous. Even today’s drop was not a big deal in the relative sense, but it would have been nice to see some bargain hunting or buzz created as gold drifted lower – today’s aftermarket was snoring.

Jim Wycoff (Kitco) – “Technically, October gold futures were poised to close at a four-week low close today. The gold futures bears have the firm 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 the July low of $1,686.30. First resistance is seen at today’s high of $1,743.10 and then at $1,750.00. First support is at this week’s low of $1,722.50 and then at $1,715.00.”

“December silver futures prices hit a six-week low today. The silver bears have the solid overall near-term technical advantage. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $20.00. The next downside price objective for the bears is closing prices below solid support at $17.50. First resistance is seen at this week’s high of $18.70 and then at $19.00. Next support is seen at the July low of $18.175 and then at $18.00.”

On the day gold closed down $13.40 at $1723.20 and silver closed down $0.40 at $18.16.

Grant on Gold (Zaner) – “(1) Gold ended last week down 0.5%. It was the second consecutive lower weekly close as dollar strength continues to inhibit the upside for the yellow metal. (2) Silver is certainly being weighed by the soaring dollar, but mounting recession risks are hitting the white metal as well. (3) Platinum closed down 4% last week as the PGMs continue to succumb to growing recession risks and promises of higher interest rates. (4) Palladium remains consolidative in the lower half of the COVID-era range.”

On Wednesday gold continued to struggle in that region between $1710.00 and $1725.00 looking for fresh news, either bullish or bearish. And the official threat of higher interest rates was again reinforced today by Loretta Mester. Reuters – Fed’s Mester: interest rates need to rise ‘somewhat above’ 4% – “The U.S. Federal Reserve will need to raise interest rates somewhat above 4% by early next year and then hold them there in order to bring too high inflation back down to the central bank’s goal, Cleveland Federal Reserve Bank President Loretta Mester said on Wednesday. “My current view is that it will be necessary to move the fed funds rate up to somewhat above 4 percent by early next year and hold it there; I do not anticipate the Fed cutting the fed funds rate target next year,” Mester said in prepared remarks to a local chamber of commerce in Dayton, Ohio.

The Fed currently targets its policy rate in the 2.25%-2.5% range. Mester also repeated previous comments that she will be basing her decision on whether to back a third straight 75-basis point interest rate hike next month primarily on the inflation outlook, rather than the closely watched monthly jobs report. The Cleveland Fed chief said that the Fed has to guard against “wishful thinking” and it was far too soon to conclude inflation has peaked. Bringing inflation back down to the Fed’s 2% target would take a lot of fortitude, Mester added. “This will be painful in the near term but so is high inflation.”

There may be a silver lining however in this higher interest rate mess. It is hard to imagine negative sentiment getting worse. With all the bad news, up front and personal it may be time to consider the weak hands have already sold.

The remaining core are long term believers both in the US and the rest of the world. Gold and silver bullion are holding up considering this powerful interest rate assault. In other words, the bulls are weak but have not capitulated.

This offers encouragement and bargain hunting. It is not what gold does when it’s popular that matters. It is what it does when it is not popular that will be a more reliable guide to value.

On the day gold closed down $10.40 at $1712.80 and silver closed down $0.40 at $17.76.

Zaner (Chicago) – “With the dollar poised for new contract highs, noted crude oil weakness and fresh definitive damage on the gold and silver charts, the trade extends recent bearishness into another trading session. At the risk of sounding redundant, the fear of higher rates from many global central banks remains a significant weight on the back of the gold and silver markets. In fact, as was seen yesterday, gold and silver fell precipitously despite a lower trade in the dollar and that suggests no single theme is predominant in the precious metal trade. However, with interest rate chatter focused on “jumbo rate hikes”, it is not surprising to see longs race to the sidelines. In addition to recent outflows from gold, silver, platinum, and palladium ETF holdings, investors yesterday also vacated investments in major gold mining companies. Unfortunately for the bull camp, gold ETF holdings yesterday declined 141,323 ounces with holdings on the year reduced to only +2.2%. In a more damaging development, silver ETF holdings continue to fall aggressively with a decline yesterday of 1.4 million ounces raising the year-to-date outflow to 13%. In the current condition, soft scheduled data from around the world is likely to be discounted with economists and traders instead focused on price/inflation measures. In other words, the Fed and other central banks have acknowledged their intention to accept slowing (pain) until inflation is definitively brought under control. In our opinion, significant slowing or economic uncertainty is likely to prompt selling of gold and silver from demand fears with flight to quality buying interest likely to remain off radar. With additional declines in global equities and broad risk off psychology again today we project October gold down to $1,700 and September silver to the next price pivot of $17.70.”

On Thursday the bad news was that gold broke down at $1700.00, which figures as the Dollar Index surged higher, at one point touching 110.00, before settling around 109.50. The good news was that traders bought the dip at $1688.00, and gold settled off lows on the day.

Obviously gold’s technical picture remains a wet blanket to the bulls. And professionals are wondering if this latest dip is the beginning of capitulation. And much lower prices as the Fed’s aggressive interest rate agenda creates a headache for Wall Street and the metals.

But this is typical thinking, at least in the metals business. When things look bad, and interest rates are moving higher the default position is to question an investment strategy that holds non-interest-bearing gold bullion. The fact that gold bullion does not pay interest is not a liability, it is an asset to the holder. It provides quiet protection with no third-party obligation.

Like I said the bearish sentiment can’t get much worse and so I would suggest that today’s small bargain hunting below $1700.00 is the dim light at the end of the tunnel. And that light will grow stronger as gold adjusts to that defensible price support between $1650.00 and $1700.00. Even in the face of rising interest rates, as investors consider limited options.

Am I worried about higher interest rates for the gold market? You bet, but I’m not concerned enough to consider capitulation. The cheaper gold becomes the better it looks for investors who keep in mind that reducing government debt is a fantasy.

The Democrats can never get enough of a free ride, and when the Republicans had the opportunity to make a meaningful spending statement, they fumbled the ball within their own party. I feel that without old fashioned fiscal restraint in Washington owning gold and silver bullion is not an option, it is a generational responsibility. Take advantage of lower prices and keep your eye on the big picture over the longer term.

On the day gold closed down $1696.60 and silver closed up $0.36 at $17.85.

On Friday a lot was made of the jobs report and weaker dollar. But the notion that the jury is still out as to the real short-term value of gold and silver bullion continues to support gold prices as traders wait for the reality of the next Fed interest rate hike. There is a subtle silver lining here as the public, generally, is not a gold bullion seller at these current levels. This longer-term attitude may not change if there is capitulation because there is a large number of interested buyers, even in the country still waiting on the sidelines. And the cheaper silver bullion becomes the faster the public buys new products. The “wait” for particularly prized fresh one-ounce rounds is still months from the manufacturers. But curiously the demand for “old” 100 oz bars is much shorter, which makes them a better deal in my mind.

On the day gold closed up $13.20 at $1709.80 and silver closed up $0.23 at $17.78.

Platinum closed up $13.20 at $1709.80 and palladium closed up $29.50 at $2012.30.

Zaner (Chicago) – “While the dollar continues to consolidate, it remains near contract highs and a headwind for gold and silver prices. However, with an upside breakout in US treasury yields again this morning rates are creeping higher and should add to the bearish tilt in precious metal prices. The bearish tilt in gold and silver is further manifest in the markets inability to benefit from flight to quality from another emerging Chinese lockdown threat at two major Chinese cities. Yet another negative for the markets is an extension of the capital exodus from gold and silver ETF holdings. Yesterday gold ETF holdings declined by 118,994 ounces and are now only 2.1% higher year-to-date. Furthermore, silver ETF holdings declined by 300,228 ounces and remain 13% lower year-to-date. In retrospect, recent price weakness was facilitated by extremely hawkish US Federal Reserve dialogue and therefore today’s wave of US jobs related data could have a fleeting but large impact on prices. In other words, if today’s jobs readings depict softening of the US economy that could be seen by some as a possible tempering of the Fed’s need/desire to hike interest rates aggressively this month. Unfortunately for the bull camp, the Fed is focused on price/inflation instead of growth/jobs. In our opinion, the gold market has a very narrow bull case, with the bull case almost exclusively tied to weakness in the dollar. However, it appears the dollar is in fundamental and technical rally mode, and the bull camp is fortunate the dollar has waffled this week or gold and silver prices would probably be trading significantly lower. With October gold down nearly 3% in the month of August and the most recent net spec and fund long in gold at 140,153 contracts, the potential for additional stop loss selling remains high. Given current conditions, the best hope for the bull camp is a significant washout in prices followed by improved economic sentiment which in turn fosters improved physical demand prospects. In the meantime, the path of least resistance remains down with October gold targeting seen at $1,698 and then again down at $1,677. Obviously, the silver market charts are much more bearish than the gold charts with key support in the September contract not seen until $17.25.”

My Brothers and Sisters, thank you for your business and friendship. If you have unusual circumstances, need cash or a special visit – talk to Harry. All our in-house staff have been vaccinated and have the booster! We continue to enforce ridged safety standards between people and product. Be careful, the contagious Omicron variants remain dangerous. At the same time trust that God will soon get us back to normal and our traditional business model.  As always, thank you for your patience. Richard Schwary

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

 

 

Posted on

Gold – Powell – Some Plus Some Minus

Gold – Powell – Some Plus Some Minus

Commentary for Friday, Aug 26, 2022 (www.golddealer.com) – Today gold closed down $21.60 at $1736.10 and silver closed down $0.37 at $18.74. Fed Chief Powell’s Jackson Hole speech was actually short but contained enough warnings about the dangers of inflation to push gold lower. He was not overly hawkish, a plus for the longer-term bullish gold scenario. And the jury is still out as to whether the Fed will raise interest rates a half point or three quarters of a point next month. Another plus for the gold enthusiast. All things considered I think the Chief did a lot to clear up some of the fear factor which always comes with a major shift in monetary policy. Don’t get me wrong here, the bears still own the technical picture. But Powell’s latest comments will not encourage the short paper. It is a bit early to see if traders buy this dip, but if they do it would also be a plus for gold bulls. Last Friday gold closed at $1747.60 / silver at $19.06 – on the week gold was down $11.50 and silver was down $0.32.

Important Notice – FedEx is no longer having people sign for packages, they are scanning IDs. We have complained to FedEx, but they remain resolute. Scanned identification is safer, but if you have a problem with this decision, please make your feelings known to FedEx. Unfortunately, the present delivery time for the USPS alternative is 2-3 weeks, but that should soon be improving.

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 understanding.

On Monday gold was weak in the overnight Hong Kong and London markets and when the domestic trade opened it also sold off. Traders finally showed some interest at $1728.00 as New York bounced higher ($1740.00) before turning choppy. So, the bears continue to rule as the Dollar Index pushed towards a massive 109.00. This will notch a one month low for gold and a fresh 5 week high on the Dollar Index.

Economists believe the Fed will go with a modest half point increase in September, which would be welcomed news for bullish gold traders. But the paper trade believes the upcoming Jackson Hole central banking conference later this week will give Fed Chair Jerome Powell the opportunity to reinforce the US central bank’s hawkish stance on inflation (Reuters). This is the most recent reason for a stronger dollar and therefore weaker gold.

Personally, I believe gold and silver bullion are now oversold when you consider world demand. They figure to be as central banks line up to raise interest rates over the fear of inflation. We have seen this dynamic many times because of the confusion factor over rising interest rates. But as long as traders believe the Fed will overshoot rather than undershoot relative to their inflation expectations this market will remain defensive.

I’m looking forward to Powell’s appearance at the Jackson Hole conference. Could his comments push the price of gold lower? Sure, they could, but keep your eye on the bigger picture. The price of gold is cheap relative to the number of fiat dollars created since the beginning of the pandemic.

The Fed has been huffing and puffing since they began to raise interest rates. If they now decide to roar, they can only do so for a short time. Keep your powder dry, look for bargains.

On the day gold closed down $13.60 at $1734.00 and silver closed down $0.19 at $18.87.

Zaner (Chicago) – “With the dollar index forging another new high for the move and the 3rd highest daily trade of 2022, the initial weakness in gold and silver is fully justified. While gold ETF holdings on Friday increased by 69,512 ounces, last week gold ETF holdings declined by 307,558 ounces. Similarly, silver ETF holdings on Friday fell by a very significant 1.8 million ounces, with a weekly reduction of 1.38 million ounces last week. Chatter regarding the magnitude of the next US interest rate move (more news on that front is expected from the Fed symposium on Friday) and an established uptrend in the dollar leaves the bear camp in gold and silver in control. Granted, some Fed members have contrasting views, and therefore action in equities is likely to be the best proxy of the market’s expectations on the magnitude of next month’s hike. Fortunately for the bull camp, both China and India recently showed positive jewelry import demand. Indian gold imports up by 6.4% during the 2nd quarter and Chinese imports were up 7% in the first 4 months of 2022. With the recent COT net spec and fund long overstated (because of the $30 slide after the report was measured) the net spec and fund long remains low compared to readings since June of 2019. Gold positioning in the Commitments of Traders for the week ending August 16th showed Managed Money traders were net long 46,236 contracts after decreasing their long position by 6,561 contracts. Non-Commercial & Non-Reportable traders reduced their net long position by 3,339 contracts to a net long 157,338 contracts. In the end, the most reliable focus of the gold trade has been action in the dollar and the dollar appears to be poised for new contract highs later this week and will likely weigh heavily on gold prices in the meantime. The bias is also pointing down in silver but a very low net spec and fund long positioning (which is overstated due to the $1.15 break since the report was compiled), the market retains stop loss selling capacity. The August 16th Commitments of Traders report showed Silver Managed Money traders were net short 5,766 contracts after decreasing their short position by 463 contracts. Non-Commercial & Non-Reportable traders were net long 12,908 contracts after decreasing their long position by 1,354 contracts.”

On Tuesday gold was its unpredictable self, as the New York market drifted lower on the open and then surged, moving to $1755.00 before settling at the upper end of its trading range. The jump to higher ground was encouraged by a sudden drop in the Dollar Index of nearly a full point as traders saw some something, perhaps ominous in the European business model.

This morning Reuters claimed that euro business activity is in crisis. As weakening economies in Germany and France pile more pressure on markets as decades-high inflation and surging gas prices drag Europe towards recession, pushing the euro to a 20-year low against the dollar.

The idea of European recession is not new but for some reason the possibility now seems more important. It could be the reality that 6 months of Russian carnage in the Ukraine is not stoppable and not reversible. This realization may be seen in the recent UN and European attitude shift towards Russia. Both parties may realize that sanctions against Russia have not attained the desired outcome. And perhaps a practical political dialogue may save lives and treasure in what looks like a prolonged war with no winners on either side. This is a guess in complex situation.

The jump in gold could also just be the result of an oversold market and short covering rally.  Fueled by real bargain hunting in China over the recent dip in prices.

The talk of European business trouble should also be given weight. It may suggest a “pivot” or shift in Fed hawkishness over the coming Jackson Hole get together. There is some talk that the Fed may be in an ideal situation of having its cake and eating it too if inflation numbers are moving lower and only minor adjustments in interest rates are necessary. This is a minority opinion but helps explains the sudden weakness in the US dollar.

What do we really know early in this week? Not much, except the reality that gold and silver are moving higher. I would not place too much emphasis on this move, you have seen that plenty of times during this transition period. And the technical picture still favors the bears. So be patient and wait for Jackson Hole results. Anything less and you are simply punching around in the dark.

On the day gold closed up $12.80 at $1746.80 and silver closed up $0.14 at $19.01.

On Wednesday gold opened choppy between $1745.00 and $1755.00 which suggested an early mild upward bias. This was supported by the Dollar Index which topped out this morning at 109.7 and suddenly lost a full point, either on dovish Fed rumors or an overbought position. The gold trade at these higher levels remains typically quiet for summer. There was some light bargain hunting, but higher prices were eventually capped by a rebound in the Dollar Index and gold closed virtually unchanged on the day.

Traders continue to focus on Chief Powell’s Jackson Hole comments later in the week. Wells Fargo this morning warned about “sticky inflation”. A prolonged inflation in certain important sectors that could be with us through next year. This warning is not new but is worth noting because it will help support the gold scenario regardless of interest rate direction.

Reuters – “Another dramatic spike in natural gas prices appears to have ended any hopes that Europe’s inflation battle is set to ease, with financial markets now bracing for higher prices, a faster pace of interest rate hikes and a deeper economic downturn.” Natural gas prices are up a whopping 12% this month. Russia is playing hardball and Europe has limited options.

On the day gold closed up $1.00 at $1747.80 and silver closed down $0.11 at $18.90.

Zaner (Chicago) – “While the gold market did not make a fresh higher high for the move overnight, prices have managed to consolidate above $1,750 and sit just under this week’s highs. Similarly, the silver market has extended a sideways consolidation around $19.00 and forged a quasi-side double low starting at $18.65. However, investment money continues to drain from gold and silver ETF holdings, with gold seeing a substantial outflow of 145,509 ounces and silver ETF holdings posting an outflow yesterday of 1 million ounces. Surprisingly, gold mining shares jumped yesterday along with gold futures prices, which suggest investor sentiment toward gold is not completely negative. However, despite a new contract high and sharp downside failure in the dollar index yesterday, the uptrend in the dollar from a fundamental perspective shows no sign of moderating. In fact, economic uncertainty in Europe from the ongoing war and talk of OPEC+ output reductions appear to have increased the appeal of US instruments, which in turn should pull even more money into the dollar! With gold and silver over the last 8 months failing to benefit from obvious flight to quality conditions, we are hesitant to suggest traders get long gold and or silver. If flight to quality interest was the source of yesterday’s rally in gold, that should have been confirmed by an influx of money into gold and silver ETF holdings yesterday and it was not. Unfortunately for the bull camp, the flight to quality buying arguments in gold and silver is not fully justified by a single day of strong upside action. From a technical perspective, the October gold contract did respect the Monday low yesterday and looking back, the slide off the mid-month high did not produce an increase in trading volume as is usually the case when fundamental value has been found. We prefer to sell a rally in October gold up to a 6-month-old downtrend channel resistance line of $1,797.75, with that short entry price falling to $1,792.85 on Friday. Clearly, the silver market did not benefit as much as gold from yesterday’s rally window and we attribute that to a distinct pattern of falling silver ETF holdings. We prefer to sell September silver on a return to a downtrend channel resistance line drawn from the April and August highs up at $20.37 today, with that resistance level falling to $20.23 on Friday.”

On Thursday gold presented another day of tight trading ranges with a mild upward bias. As the Dollar Index turned choppy at the upper end of its recent trading range (108.00 / 109.00). A strong dollar continues to cap gold gains, but the market remains defensive. Waiting for comment from Chief Powell this Friday.

The Jackson Hole conference carries big sway with traders and has in the past provided reliable guidance to the markets. But I’m not so sure this time around that much can be gained. The Fed playbook is transparent, and traders are ready for a hawkish approach to interest rates hikes.

If anything, I’m getting a bit optimistic about the bullish gold scenario. Because a light hand here figures. The Chief wants to create smooth action while keeping Wall Street away from the panic button. But this position is in the minority, traders figure the Fed will continue to bag away.

I’m hopeful for the best outcome which would include modest interest rate hikes over the next few years. In this scenario gold prices would not surge higher, but support would calm the metals markets. This approach would also give the world a better feel for what the economic picture will look like in the longer term. And it might even help the Fed avoid the kind of defensive stimulus package now be amped up in China as her economy slows.

Obviously, the big obstacle to higher gold prices is the strong dollar. But it is easy to lose track of how massively strong the US greenback has become this past year. This time last year the Dollar Index was trading around 92.00. With Europe going into the tank and the euro moving even lower the disparity between their currency and ours will crush trade. So, some sort of adjustment must be made, and this will likely be the so-called Fed pivot. If you believe the US is heading for recession next year, this likelihood of a weaker dollar is already baked into the cake and would result in a hundred or even two hundred dollar increase in the price of gold.

On the day gold closed up $9.90 at $1757.70 and silver closed up $0.21 at $19.11.

On Friday the gold market reacted to Powell’s comments as expected. Gold moved lower because interest rates are moving higher. But I think the definition of “higher” or “lower” is worth considering. “Lower” in a generally lower market is always exaggerated. And so is “higher” in a generally higher market. That is how momentum works psychologically. The trick is to hold both “higher” and “lower” in perspective. Easy to say, not so easy to accomplish.

An aggressive bear would have you believe gold will be trading at $1500.00 in the next few years, just consider interest rates. An aggressive bull would claim $2500.00 is a cinch, just look at growing inflation.

It makes more sense to embrace both a deteriorating world situation and higher interest rates – neither of which will be fixed anytime soon. I expect gold prices to move on either side of $1700.00, higher numbers will be sold. Lower numbers will create important bargain hunting.

I like the $1600.00 to $1800.00 trading range in place since 2020. Nothing much has changed and there is no reason to assume gold will collapse even if interest rates approach 3%.

That is still cheap money relative to inflation numbers worldwide. Do not speculate on paper positions and ignore “get rich” schemes which come out of the woodwork when the precious metals are in the headlines. Hold quality physical product for the long term. This approach won’t make you rich, but it will provide a quiet “secret” that insulates the family in case of emergency.

On the day gold closed down $21.60 at $1736.10 and silver closed down $0.37 at $18.74.

Platinum closed down $18.70 at $854.60 and palladium closed down $17.90 at $2120.40.

Zaner (Chicago) – “Seeing gold and silver prices start out weaker today is not surprising given the “feared” Federal Reserve chairman speech later this morning at the Jackson Hole symposium. In fact, most markets have already factored in some form of aggressive hawkish statements from the Chairman with action earlier this week! On the other hand, US scheduled data this morning could preempt the reaction to the Fed speech, with the Fed’s favored inflation gauge PCE, scheduled for release early today. Furthermore, the markets will be presented with personal income and spending readings both of which are expected to show strength. In other words, a soft PCE reading could mitigate the impact of hawkish policy views, while a hotter than expected reading could magnify hawkish Fed dialogue today. Unfortunately for the bull camp gold ETF holdings yesterday declined by 19,443 ounces and are now only 2.4% higher year-to-date. Silver ETF holdings managed a small inflow of 18,070 ounces and are 12% lower on the year. In retrospect, the recovery this week in gold and silver prices has gained some credibility with the markets ability to sustain gains over several trading sessions. Obviously, the gold and silver markets remain hypersensitive to the ebb and flow of dollar price action and likely will remain vulnerable to any further gains in US treasury yields. Therefore, action in gold and silver will continue to take significant direction from big picture/macroeconomic developments with little regard for classic internal physical supply and demand issues. However, an increase in mainland Chinese gold imports from Hong Kong provides a very small measure of fundamental support going forward. In today’s action, the edge should sit with the bear camp as the US Federal Reserve chairman is unlikely to allow inflation expectations to go unchecked with distinctly dovish statements. In conclusion, we suggest fresh short entry positions in October gold with a return to a 5-month-old downtrend channel resistance line at $1,785.40. Similar downtrend channel line resistance in September silver today is $20.23.”

My Brothers and Sisters, thank you for your business and friendship. If you have unusual circumstances, need cash or a special visit – talk to Harry. All our in-house staff have been vaccinated and have the booster! We continue to enforce ridged safety standards between people and product. Be careful, the contagious Omicron variants remain dangerous. At the same time trust that God will soon get us back to normal and our traditional business model.  As always, thank you for your patience. Richard Schwary

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

 

Posted on

Gold – Adjusting to Higher Interest Rates

Gold – Adjusting to Higher Interest Rates

Commentary for Friday, Aug 19, 2022 (www.golddealer.com) – Today gold closed down $7.70 at $1747.60 and silver closed down $0.39 at $19.06. Gold continues to adjust to the coming higher interest rate scenario. So, until the FOMC plan to tackle inflation changes we would expect these markets to remain defensive. Meaning that higher prices from possible increased safe haven demand will be capped by higher interest rates. Last Friday gold closed at $1798.60 / silver at $20.68 – on the week gold was down $51.00 and silver was down $1.62.

Important Notice – FedEx is no longer having people sign for packages, they are scanning IDs. We have complained to FedEx, but they remain resolute. Scanned identification is safer, but if you have a problem with this decision, please make your feelings known to FedEx. Unfortunately, the present delivery time for the USPS alternative is 2-3 weeks, but that should soon be improving.

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 understanding.

On Monday gold sold off on the open as traders remained defensive. A stronger dollar and China lowering interest rates has added tension to an already nervous trade. While the bears still hold the cards there is a promising short-term rising uptrend which began in late July.

And made highs above $1800.00 by mid-August. Good news for the flagging bullish sentiment but this happy spot also presents the paper traders with their usual option – buy the dips and sell the rallies. A particularly nice option today considering gold’s strong overhead resistance between $1800.00 and $1850.00 in place since May.

I would not be concerned about today’s drop. Nothing much has changed, and this looks like the typical fire drill. Still the Fed’s next move is dangerous to the bullish scenario – but uncertain.

Is inflation rising or falling? They have messed with typical inflation standards so badly that even those informed folks cannot seem to agree. Crude oil continues to tank, a negative for the inflation scenario. But the reasoning behind these lower prices is also confusing. Are oil prices moving lower because economic conditions in China seem to be deteriorating? Or is the world getting ready for recession. Or stagflation (high unemployment, inflation, and recession).

There is more economic and geopolitical noise today than there was at the beginning of the pandemic. And the Russian madness continues to rearrange the economic deck chairs.

Ignore the headlines and wait for our Uncle Sam to take the next step in his interest rate plan to save the US from recession or worse. The Fed could move at any time, but I think they will keep their powder dry until the next official “important” meeting (Summary of Economic Projections) – September 20th and 21st. They will use the time remaining to get a better feel of “appropriate action”. Do not make fun of such terms, this is serious monetary business. I wish them luck.

If they decide a heavy hand is necessary against inflation gold will move lower. But I suspect a moderate approach which will support current gold and silver pricing. The longer they take to implement higher interest rates, the more likely we will see higher gold and silver prices. In the meantime, we are seeing typical summer action for the metals. Steady but not too exciting.

On the day gold closed down $17.20 at $1782.40 and silver closed down $0.43 at $20.25.

Zaner (Chicago) – Gold set back overnight after a brief fling with the upside on Friday. While Friday’s move higher in the face of a stronger dollar was impressive, it could not maintain in the face of another move higher in the dollar overnight. The disappointing economic data out of China and China’s central bank cut unexpectedly cutting its key interest rate shows a weaker than expected economy, which lowers demand expectations for gold. Chinese industrial production rose 3.8% from year ago in July, well short of the 4.5% expected. The July Fed meeting minutes release this could provide a hint to whether the Fed will increase 50 or 75 basis points in September. After last week’s inflation data suggesting it had peaked, there was some talk the hike would only be 50 bp. Richmond Fed president Barkin said Friday that the central bank needs to keep increasing rates until the inflation rate falls back to 2%. Gold ETF holdings fell 85,891 ounces (-0.1%) to 100.740 million in the most recent session, while silver holdings increased by 127,956 to 798.52 million, a gain of less than 0.1%. Friday’s Commitments of Traders report showed managed money traders were net buyers of 24,898 contracts of gold for the week ending August 9, increasing their net long to 52,797. Non-commercial and non-reportable traders were net buyers of 20,612, increasing their net long to 160,677. In silver, managed money traders were net buyers of 2,167, reducing their net short to 6,229. Non-commercial & non-reportable traders were net buyers of 4,853, increasing their net long to 14,262. All these positions could be defined as “flat” relative to their historic levels.”

On Tuesday gold New York spot remained choppy between $1772.00 and $1780.00 so no surprises here as the Dollar Index is also choppy trading between 106.5 and 107.00. The metals remain a sleepy trade with tension right under the surface waiting for the next headline.

To be better suited to this market you may need a bit of stoic philosophy. And it might help you sleep better at night. Running the Fed’s “might do” list on a regular basis is not the best use of your time. The fact that they favor higher interest rates to fight inflation has been gold’s sword of Damocles since the Fed decided to take the monetary punch bowl away from Wall Street.

Yes, higher interest rates have capped the price of gold, but to what extent? We are still holding up nicely between $1700.00 and $1800.00. Pricing is surprisingly firm if you think about the tons of rhetoric that has been released from Uncle Sam. This past month the DOW seems happy enough moving from 31000 through 34000. So, the threat of higher interest rates, while a drag on some Wall Street sectors may become less of a concern. I’m not a big stock man but it would seem that lately they are not staying up nights worrying about interest rates.

I have mentioned this before, but I am a big fan of the Efficient Market Hypothesis (EMH). It states that in any given trade all information known is already price reflected. As this applies to gold, today’s price already reflects all known information. My usual comments about investors ignoring all the “noise” continues to make sense. Enjoy a relatively quiet summer until the Fed does something meaningful. You will have plenty of time to pivot.

Christopher Lewis (FX Empire) – Gold Market Technical Analysis “Gold markets rallied a bit during the trading session on Tuesday but gave back gains near the $1820 level. The market forming this candlestick does show just how much there is in the way of negativity in this market. Pay close attention to the US dollar, because it shows a significant negative correlation to this market. If we break down below the bottom of the candlestick, the market is likely to drop down to the $1775 level. If we break down below that level, then the $1750 level will more likely than not end up being a nice target.

On the upside, if we were to break above the 200-Day EMA, then it’s likely that we could go to the $1875 level. Ultimately, this is a market that I think will continue to be noisy and move not only based on the US dollar, but the interest rate markets as well. Ultimately, this is a market that I think will continue to see a lot of noisy behavior in it, but as we are near an area where we had a lot of “market memory” in this scenario at this level, it does make a certain amount of sense that we have a bit of a pullback. Whether or not gold sells off drastically is a completely different question, but a pullback makes so much sense.”

On the day gold closed down $8.20 at $1773.20 and silver closed down $0.18 at $20.07.

On Wednesday gold drifted lower as the Dollar Index continued firm, treading between 106.00 and 107.00 since Monday. Reuters – “Gold is slightly down due to stronger dollar and yields. The high UK inflation number has raised concerns that central banks around the world will be more aggressive,” said David Meger, director of metals trading at High Ridge Futures. UK inflation jumped in July to the highest since February 1982, surpassing economists’ forecasts in a Reuters poll and fueling investor bets that the BoE would keep on hiking interest rates quickly. “The main focal point of the day is Fed minutes. There are expectations that Fed would be reinforcing a hawkish stance, which could lead to additional pressure on gold.”

Grant on Gold (Zaner) – “(1) Gold ended last week up 1.5%, setting a 5-week high of $1807.96. It was the fourth consecutive higher weekly close. (2) Silver posted a 4.6% gain last week. The white metal eked out a 6-week high at $20.87 on Monday before succumbing to selling pressure. (3) Platinum ended last week with a gain of 3.4%, setting an 8-week high of $973.52. It was the fourth consecutive higher weekly close. (4) Palladium remains in the lower half of the COVID-era range as recent gains faltered ahead of the 100-day SMA.”

Jonathan Da Silva (Kitco) “The triangle pattern in gold we had suggested favored a break to the topside has failed. We had also suggested that should the pattern fail, bulls would put up a fight in the $1740 – 50 area.” The minutes release contained nothing new, so gold continues in a defensive pattern, and traders are still trying to get a feel for what the FOMC has in mind for the September meeting. Most believe a ¾ point hike is in order, anything less would confirm short-term thinking that the Fed is worried about recession. Most of today’s loss in gold was made up in the aftermarket after the minutes release, but it could not hold the gains. We are still looking at a surprisingly froggy trade with a short fuse, in these “typically quiet” summer months.

The Jackson Hole Economic Symposium will be held August 25 -27. There is talk that the Fed will use this venue to reinforce its hawkish attitude toward inflation. If that happens expect gold to continue defensive and choppy. But I think it’s more likely the FOMC will use Chief Powell to calm the waters over rising recession fears. If his live address is seen as a dovish pivot, it would encourage the bullish scenario.

On the day gold closed down $12.90 at $1760.30 and silver closed down $0.36 at $19.71.

On Thursday gold enjoyed a mild early rise but the strong dollar capped gains and it drifted towards unchanged on the day. There really is not much news that will push the gold needle at the present time. But there are plenty of rumors, including recession worries. Just stick to the FOMC playbook and you likely will be on the right side of this metals market. The Fed will continue to raise rates until it sees something tangle in lower inflation numbers.

The most optimistic bullish scenario centers on two points. The first is that the best traders can hope for is that the FOMC will approach rate hikes with caution. There is growing fear that in their hawkish approach they may overshoot their goal and create damage. The second and probably the most important is a minority opinion but worth considering. Some traders believe rate hikes are already reflected in today’s prices. Which would assume the Fed will soon turn very dovish and the metals will trend higher.

Gary Wagner’s (Kitco) technical comments are interesting if you are looking for something outside the box which also supports the bullish gold scenario. “The reader asked about a pattern called a “cup and handle”, and if recent price action in gold futures has resulted in the formation of this pattern. I agree with reader in his identification that the rounded bottom in gold followed by a period of consolidation with a downward biased can be correctly labeled as a “cup and handle” pattern. This pattern was created by William O’Neill who founded a stock brokerage company firm before launching the business newspaper, “Investor’s Business Daily” in 1984. He is the author of, “How to Make Money in Stocks”, 24 essential lessons for investment success. It was in this publication he first revealed his pattern. William O’Neill’s “Cup with Handle” pattern is a bullish continuation pattern. This pattern identifies a period of consolidation which is the precursor to a breakout to the upside.” No promises here but this is the kind of information that could easily slip by most. If gold is consolidating for another up leg, it would be no big deal. But if the long-term bull market which began in 2018 ($1200.00) was confirmed, those sitting on the sidelines could not get their money out fast enough.

On the day gold closed down $5.00 at $1755.30 and silver closed down $0.26 at $19.45.

On Friday the stronger dollar again hemmed in the price of gold in a typically choppy trade. But the pricing spread was narrow if you consider the Dollar Index pushed above 108.00. The unrelenting strength in the good old greenback has stayed with us because the Federal Reserve is on a mission to lower inflation by raising interest rates. And at this point at least, no one is sure what they might do between now and next year. I believe insiders are split – some believe the Fed will remain aggressive and the metals will move lower. Some believe the FOMC cannot afford such an aggressive policy. It is really that simple.

And what makes this picture more complicated is that Powell knows how to play the various push/pull forces to his public advantage. Which is a good thing in that it gives him and the FOMC more time to really figure out how to best handle this mess.

The probability of recession has moved from roughly 30% in June to 48% in July. But this type of odds making is rough and it’s easy to pick out sectors that support your idea. Real estate is a great example, prices are softening because financing rates are excluding new buyers. And houses take more time to sell. But is this recessionary?  A home down the block from us went up for sale and it took 2 months to sell. It used to take two days, but it went for more money than the original owners could have imagined. My point being that I do not think there is anything structurally wrong with stocks or real estate. They will simply adjust to a new environment.

The world is not coming to an end and the government will finance this latest “free money” escapade in the usual way. By inflating the fiat money supply. Not to the degree that the machine will blow up. But to the extent that owning physical metals, outside the normal financial system makes sense. Even without a safe-haven fear factor ask yourself what the price of gold and silver bullion will be a decade from now and continue to avoid the day-to-day financial noise.

On the day gold closed down $7.70 at $1747.60 and silver closed down $0.39 at $19.06.

Platinum closed down $16.70 at $886.90 and palladium closed down $18.00 at $2129.00.

Zaner (Chicago) – “With an upside breakout above the 107 level in the dollar putting the index at the highest level since July 18th it is not surprising to see October gold post a lower low and approach the $1750 level this morning. In addition to pressure from a strengthening dollar gold has also encountered fresh hawkish dialogue from the Fed with two different members voicing interest in a 3rd straight 75 basis point rate hike next month. The main takeaway from the FOMC minutes appears to be that we can expect more rate hikes and that they could be aggressive. The sentiment seems to be leaning towards a 75 basis-point hike in September, although San Francisco Fed President Mary Daly said on Thursday that either a 50 or a 75-basis point hike would be appropriate. There are some who are worried about tipping into recession, but that may be the point. Initial jobless claims fell 2,000 from the previous week, the first decline in three weeks and contrary to expectations for an increase of 12,000. The Philly Fed survey increased for the first time in three months, which was another surprise to the market. All of this suggests the Fed would be more inclined towards a 75-basis point hike next month. Not surprisingly, investors continue to flee gold with ETF holdings reduced for the 5th straight session yesterday with an outflow of 82,875 ounces of gold, which lowers the year-to-date gain in gold holdings to only 2.6%. However, in a positive note, silver ETF holdings saw an inflow of 569,890 ounces. While the information is “old” India reported gold imports increased 6.4% in April through July relative to year ago levels ported because of healthy jewelry demand. It should also be noted that Swiss gold exports to China reached 80.1 tonnes, their highest level since December 2018. These are bullish demand numbers, but the market is also worried about China’s problems with Covid and their severe heatwave.”

My Brothers and Sisters, thank you for your business and friendship. If you have unusual circumstances, need cash or a special visit – talk to Harry. All our in-house staff have been vaccinated and have the booster! We continue to enforce ridged safety standards between people and product. Be careful, the contagious Omicron variants remain dangerous. At the same time trust that God will soon get us back to normal and our traditional business model.  As always, thank you for your patience. Richard Schwary

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

 

 

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Gold – Firm but Cautious

Gold – Firm but Cautious

Commentary for Friday, Aug 12, 2022 (www.golddealer.com) – Today gold closed up $8.90 at $1798.60 and silver closed up $0.35 at $20.68. It is a positive that gold managed mildly higher prices today even though a large jump in the Dollar Index capped gains. Current gold prices are also supported by continued short covering and light bargain hunting into the weekend. It is however too soon to claim traders bought the recent dip in prices. This is the fourth straight weekly gain in gold as Treasury yields dip and investors took stock of the recent inflation data out of the United States (Reuters). It is also interesting that Fed’s Barkin says it is too soon to gauge the size of FOMC September rate increase. Traders might assume by this comment that the Fed is looking for wiggle room on the interest rate front because recent inflation data appears to be cooling. Last Friday gold closed at $1772.90 / silver at $19.84 – on the week gold was higher by $25.70 and silver was up $0.84.

Important Notice – FedEx is no longer having people sign for packages, they are scanning IDs. We have complained to FedEx, but they remain resolute. Scanned identification is safer, but if you have a problem with this decision, please make your feelings known to FedEx. Unfortunately, the present delivery time for the USPS alternative is 2-3 weeks, but that should soon be improving.

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 understanding.

On Monday you would have to call gold’s pricing pattern “interesting” because traders likely figured that last Friday’s job number was a “game changer”. Encouraging bearish gold sentiment. The theory being that the large number of jobs created last month would encourage FOMC’s aggressive rate hikes in their effort to slow inflation.

This morning gold should have moved lower, perhaps considerably lower and the dollar should have moved higher. Instead, the Dollar Index lost ¾ of a point in three hours and gold moved higher by almost $20.00, again threatening the psychologically important $1800.00 price level.

The bearish threat is still there – “gold will have a tough time if Fed hawkishness is emboldened”.  But treasury yields are moving lower which suggests the public is expecting a “balanced” or “nuanced” FOMC reaction as the latest inflation numbers are made public.

The July consumer price index is due out this Wednesday. A hot inflation reading will encourage hawkish FOMC action, a cool reading will give the bulls more breathing room. At any rate the CPI will be used by traders to judge future FOMC rate hikes.

But this is all still a moving target. There are professional sources which claim that inflation has peaked. Traders might infer that this slowdown will be used in a new way. The Fed may choose to extend this process into next year, avoiding recession and allowing for continued job growth.

If inflation has peaked, why is gold moving higher? It is possible that safe haven demand is being reinvented as the world reconsiders traditional inflation hedges in light of perhaps dramatic changes created in Europe over the Ukraine catastrophe. And China’s hostile actions in the South China Sea designed to remind Taiwan who is running the show. Which has created tension in the Philippines. President Joe claims he is “not worried” about China’s military exercises around Taiwan which reflects a deliberate American strategy of not responding to Chinese bellicosity with equally hot saber rattling (CNBC).

On the day gold closed up $13.90 at $1786.80 and silver closed up $0.75 at $20.59.

On Tuesday gold was firm as the Dollar Index flattened out (106.00) and the New York domestic trade has turned choppy between $1790.00 and $1800.00. Traders will be looking for the latest on inflation news this coming Wednesday (CPI) and Thursday (PPI). But the fact that gold settled off highs might suggest a still defensive market.

It is interesting that a New York Federal Reserve survey showed on Monday that U.S. consumers’ expectations for where inflation will be in a year and three years dropped sharply in July (Reuters). Crude oil these past 3 months has dropped from $120.00 through $90.00 which also does not support higher inflation and the bullish gold scenario.

Typically, geopolitical tension is transitory, so traders are faced with an anomaly. Gold at two-month highs, so perhaps there are fundamental changes at work. Gold’s technical picture is improving. Bearish sentiment is moving lower and there are some which claim that positive momentum will reinvent the bullish scenario for both gold and silver bullion.

I am less optimistic, but improvement is welcomed. The plus for the bulls and the technical guys looking for a shift is that gold has put in a solid short-term bottom at $1700.00. And the latest push to higher ground seems to have rallied the base. Caution, however may win the day for even the bullish crowd fears the long-established overhead resistance at $1850.00.

On the day gold closed up $7.20 at $1794.00 and silver closed down $0.13 at $20.46.

Zaner (Chicago) – “With October gold approaching 30-day highs without support from a weaker dollar suggests the focus of gold has rotated again. Obviously, ongoing tensions between Taiwan and China are likely responsible for some of the minimally positive early track today especially with Taiwan claiming Chinese live fire military exercises are part of an invasion plan. While October gold spent most of the Monday trade within the prior 2 days ranges, the charts this morning favor the bull camp again and project a rally back above $1,800 today. Unfortunately for the bull camp in gold and silver, both gold and silver ETF holdings declined for the 5th straight session with a decline in gold of 12,004 ounces and an outflow of 709,190 ounces in silver. According to the World Gold Council global gold ETF instruments saw a record net outflow of $4.5 billion last month! It is possible that some strength in gold this week is the result of hope that the rate of US interest rate hikes will slow if the Wednesday US CPI report comes in at a very low estimate of +0.2%. On the other hand, the ultra-strong US July payroll reading probably allows the US Fed to remain aggressive without as much threat to the US economy. In addition to residual US/Chinese geopolitical anxiety, the markets were presented with economic uncertainty following reports that a Ukrainian nuclear facility had been bombed. With October gold from the last COT positioning report gaining nearly $34, the net spec and fund long is likely approaching the 200,000-contract level. Given the constant shift in fundamental focus by the gold market, predicting direction off this week’s global inflation reports is more problematic than usual. In today’s action, gold and silver might be hesitant to track in a single direction given the beginning of a sweep of global inflation readings starting on Wednesday morning Asian time. Expectations for those inflation readings call for a gain in Japanese producer prices for July of 0.4%, a gain of 0.5% in Chinese consumer prices, a gain of 0.9% in German consumer prices and a gain of 0.4% in Italian consumer prices. As for the 0.2% gain projection in US CPI, that estimate is probably a “low bar reading” which could produce a surprise reaction from an above estimate reading.”

On Wednesday gold pushed to $1808.00 in early New York trading but again sold off touching $1790.00 before closing almost unchanged. Defensive but encouraging. This lighter trade was encouraged by a significant drop in the Dollar Index. Which opened around 106.5 and dived to 104.75, a loss of almost 2 full points in the early trade.

This somewhat crazy action was created by traders reacting to the latest inflation numbers (CPI). Inflation did not rise in July, suggesting the FOMC might be less aggressive pushing treasury yields substantially lower. The problem with these dynamics is that the inflation was modest because the price of gas is moving lower. Reflecting the large drop of $30.00 in crude oil prices these past two months. I would be suspicious because crude oil prices are notoriously volatile, subject to supply and recession fears, so caution is warranted.

A cheaper dollar makes gold more attractive to world buyers in dollar terms. And its improving technical picture attracts safe haven and momentum players so some optimism is warranted.

World politics remain a mess supporting physical gold ownership. Reuters – “Russian shelling killed 11 people in Ukraine’s central Dnipropetrovsk region overnight, governor Valentyn Reznychenko said, as Britain said Russia had “almost certainly” established a major new ground force to support its war.” “China’s military has “completed various tasks” around Taiwan but will conduct regular patrols, it said, potentially signaling an end to days of war games but also that Beijing will keep up the pressure against the island. China has withdrawn a promise not to send troops or administrators to Taiwan if it takes control of the island, an official document showed.”

But the pricing channel between $1850.00 and $1900.00 looks dauting if the expected interest rate questions remain unresolved. Pricing chop could become aggressive, in either direction.      

Reuters – Goldman Sachs, meanwhile cut its three, six and 12-month gold price forecasts to $1,850, $1,950 and $1,950 an ounce from $2,100, $2,300 and $2,500, respectively, and said “structurally, gold is likely to remain range-bound as growth and tightening factors continue to offset each other.”

On the day gold closed up $1.60 at $1795.60 and silver closed up $0.26 at $40.72.

Grant on Gold (Zaner) – “(1) Gold has traded above $1800 for the first time since July 5th , after posting a third consecutive higher weekly close last week. (2) Silver set a 5-week high at $20.74 on Monday. (3) Platinum rose 4.6% last week, notching a third consecutive higher weekly close and returning to the upper half of the COVID-era range. (4) Palladium closed down a scant 0.08% last week, ending (barely) the run of higher weekly close at two.”

On Thursday weakness in the dollar continues to support gold prices and professional paper traders see a bit of optimism in both gold and silver prices. But the continued background talk from the Fed suggesting more rate hikes are on the way continues to tame the metals.

Whether you are optimistic or pessimistic about the price of gold or silver on the shorter term will depend on whether you believe the bulk of rate hikes are already priced into both metals.

The plus here is that minor optimism will develop if gold holds up between $1760.00 and $1800.00 and silver continues to trade on both sides of $20.00.

Professional paper traders hold that these ranges are defined enough that divergent trends between gold and silver might be turned into profitable trade. I’m not a big fan of paper trading because of the large leverage involved but this kind of dialogue might suggest that extreme negative bias in both metals is easing. And more spec money may enter the paper market.

The Producer Price Index (PPI) declined 0.5 percent in June, another sign of slowing inflation (CNBC). This decline was the first month-over-month decrease since April 2020 which was the first month after Covid 19 was declared a pandemic. The PPI is watched carefully because it highlights wholesale prices reported by the Bureau of Labor Statistics. The Wall Street rallied on this information especially in the aftermarket and create a nice “risk on” day for stock investors.

The modest price drop in gold and silver prices, should not be seen as a negative. Obviously, an increase in downward momentum early next week would reinvent the not so old bearish argument. But I think insiders will be looking for traders to buy this dip and confirm that world geopolitical problems and woes on the Russian front will provide safe haven interest.

Reuters – “Satellite pictures showed devastation at a Russian air base in Crimea, hit earlier this week in an attack that suggested Kyiv may have obtained new long-range strike capability with potential to change the course of the war.”

On the day gold closed down $5.90 at $1789.00 and silver closed down $0.39 at $20.33.

Zaner (Chicago) – “With the gold market only temporarily extending the July and August rallies in the wake of yesterday’s softer than expected US CPI reading, (all CPI component readings registered softer inflation) and the October contract settling back below $1,800, the bounce has stalled. While the dollar is slightly supportive with the index sitting just above yesterday’s low this morning, but hawkish dialogue from the Fed’s Kashkari overnight has put gold and silver on a back foot to start today. Apparently, the Minneapolis Federal Reserve bank president reiterated the likelihood of a long inflation battle ahead and indicated the US economy could be in recession soon. Kashkari also indicated that significant slowing concerns would not deter the Fed from finishing its objective of bringing inflation back to targeted levels. On the other hand, inflation at the producer level is expected to come in relatively benign today at +0.2% and that could provide temporary support for both gold and silver prices. Fortunately for the bull camp, the latest South African gold output reading posted a decline of 28.6% in June versus year ago levels. Furthermore, gold ETF holdings continue to decline (down 129,219 ounces yesterday for the 7th straight daily decline), Goldman Sachs has recommended exiting previous long gold-related positions, they also suggested to implement a short long-term straddle and they also reduced gold and silver price forecasts. Fortunately for the bull camp, Goldman Sachs still expects gold to rally over the long term but targeting levels were reduced by nearly $300 per ounce. Goldman Sachs also cut silver price forecasts by $9.00, $7.00, and $5.00 in near term, intermediate, and long-term forecasts. From a technical perspective, the net spec and fund long in gold adjusted into the high yesterday (a $50 per ounce rally from the last COT mark off) has likely put spec positioning back into the bottom of overbought positioning levels. Silver on the other hand remains near liquidated net spec and fund positioning with the last two COT reports registering net longs of only 2,001 and 9,409 contracts. Therefore, the net spec and fund long in silver (excluding last week’s reading) is likely at the lowest level since May 2019. In conclusion, the bull camp in gold will need to hold October gold above $1,784 today or a top is likely in place already. In silver, the trade is presented with bearish news of a 1.2% year-over-year gain in Pan American silver production with the top end of annual production estimates sitting at 20.5 million ounces. Silver ETF holdings also declined yesterday by 968,171 ounces bringing this year’s net sales to 96.7 million ounces However, given the very low net spec and fund long positioning in silver the silver market will lag gold in the event gold works lower.”

On Friday gold’s pricing pattern looked like traders were settling accounts going into the weekend. Few want to be short even though the technical picture belongs to the bears.

Our across the counter business remains firm – typical for the quiet summer months. I believe there has already been a shift in Fed sentiment which makes Wall Street happy. The Dow Jones Industrial Average has gained almost a 1000 points these past three days, so folks are encouraged enough to again consider stocks. But will decreased inflation expectation push gold prices lower? The next official FOMC policy meeting is a few weeks away (Sept 20-21). Not long ago a full point increase was a sure thing. Today insiders are looking for something modest (¾ point or less). If the Fed punts with a half point rise in interest rates the bullish scenario will continue to grow. Some traders believe a ¾ point hike is already reflected in the current price of gold. If they decide a more inflation hawkish hike is necessary, and the price of gold does not fade it will also encourage the bullish gold scenario. This speculation is my opinion, but this reasoning might help explain why premiums on physical gold and silver bullion remain high.

On the day gold closed up $8.90 at $1798.60 and silver closed up $0.35 at $20.68.

Platinum closed unchanged at $958.30 and palladium closed down $69.00 at $2216.80.

Zaner (Chicago) – “Despite a $128 rally in July and August the gold market so far has not suffered a severely damaging reversal from this week’s high. On the other hand, the charts have shifted bearish, the dollar did not extend downward off the PPI report as it did after the CPI report and recession fears have not been altered markedly. However, seeing June South African gold production come in 28% below year ago levels should help underpin gold prices against the recently established corrective tilt. Fortunately for the bull camp, gold ETF holdings ended a 7-day string of outflows yesterday with an inflow of 52,771 ounces. Certainly, the gold and silver markets are relieved with the potential the US Fed is now expected to slow (not halt) rate hikes. Even though treasury market action since the middle of June has been supportive of gold and silver, that support has turned into pressure with treasury yields overnight reaching up to the highest level since July 21st. From a technical perspective, October gold has a key pivot point today from a 3-week-old uptrend channel support line at $1,792.30. In our opinion, to return control of the trend in favor of the bull camp requires a close today in October gold above $1,804. Critical support in September silver today is $20.02 with a trade back above $20.61 needed to turn the charts back to the upside.”

Jim Wycoff (Kitco) – “Technically, the October gold futures bears have the overall near-term technical advantage. However, a price uptrend is in place on the daily bar chart to suggest a market bottom is in place. Bulls’ next upside price objective is to produce a close above solid resistance at $1,850.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at the July low of $1,686.30. First resistance is seen at $1,800.00 and then at this week’s high of $1,814.40. First support is seen at Thursday’s low of $1,788.50 and then at this week’s low of $1,776.20.

September silver futures bears have the near-term technical advantage. However, bulls are working on a price uptrend on the daily bar chart. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $22.00. The next downside price objective for the bears is closing prices below solid support at $19.00. First resistance is seen at Thursday’s high of $20.60 and then at this week’s high of $20.83. Support at $20.19 and then at $20.00.”

My Brothers and Sisters, thank you for your business and friendship. If you have unusual circumstances, need cash or a special visit – talk to Harry. All our in-house staff have been vaccinated and have the booster! We continue to enforce ridged safety standards between people and product. Be careful, the contagious Omicron variants remain dangerous. At the same time trust that God will soon get us back to normal and our traditional business model.  As always, thank you for your patience. Richard Schwary

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

 

Posted on

Gold – Ignore the Noise for Now

Gold – Ignore the Noise for Now

Commentary for Friday, Aug 5, 2022 (www.golddealer.com) – Today gold closed down $15.60 at $1772.90 and silver closed down $0.28 at $19.84. The possibility of no recession was reflected in lower gold prices Friday. The Bureau of Labor Statistics noted that the July numbers beat expectations with 528,000 jobs created. Robust jobs creation gives the Fed more options in controlling rising US inflation, so traders sold Thursday’s significant rally and gold moved lower reaching $1765.00 before catching a solid bid. Gold’s developing positive buzz went out the window, but it is still too soon to figure longer term gold pricing. I’m not so concerned with today’s action if pricing stays above the most recent rising trend line because it would seem our shiny friend is still climbing that wall of worry. But today is a great reminder that being “all-in” on either the bullish or bearish scenario is probably not a good idea. Across our trading desk the action slowed so the public is watching the current pricing, but it is a good idea to remember that this past month, with all the drama gold is higher by less than $30.00. A good indicator that this market still reflects a slow summer trade so ignore all the background noise.

Last Friday gold closed at $1762.90 / silver at $20.16 – on the week gold was higher by $10.00 and silver was off by $0.32. Another week featuring a lot of noise and not much action.

Important Notice – FedEx is no longer having people sign for packages, they are scanning IDs. We have complained to FedEx, but they remain resolute. Scanned identification is safer, but if you have a problem with this decision, please make your feelings known to FedEx. Unfortunately, the present delivery time for the USPS alternative is 2-3 weeks, but that should soon be improving.

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 understanding.

On Monday gold moved higher ($1775.00) in the overnight Hong Kong and London markets but in typical fashion the New York trade sold the rally. Higher gold this morning reflects a weaker dollar, the Dollar Index today has moved from over 106.00 through 105.25 in early trading. This weakness is the result of a perceived pivot in the Fed’s interest rate agenda.

But a lighter interest rate hand by Chief Powell remains speculation as the next FOMC get together will not happen until November. So, for now “out of sight” / “out of mind” at least hinders the bearish gold scenario. But does not eliminate the threat. Still, recent gains in gold and silver are encouraging – but their modest size suggests trading caution.

A weakening in US economic data, renewed Covid concerns worldwide, and more problems in the Ukraine help safe-haven demand. Continued short covering and perhaps light bargain hunting is also helping to encourage the beginning of a new gold trading week.

Gold’s technical picture is bearish but improving, there is a hint of optimism in the bullish gold scenario for a change. I would not say our shiny friend is out of the woods, but a few weeks ago insiders feared that the metals were circling the drain in reaction to a fierce Fed interest rate environment. This Monday morning the short paper is at least worried over an interest rate pivot. There is also anecdotal evidence that the Fed may be turning less aggressive as stock prices rally.

On the day gold closed up $6.10 at $1769.00 and silver closed up $0.16 at $20.32.

Jim Wyckoff (Kitco) – “Technically, October gold futures prices hit a three-week high early on today. Short covering and bargain hunting were featured. The gold futures bears still have the overall near-term technical advantage. However, recent gains have negated a price downtrend on the daily bar chart and last Friday’s bullish weekly high close is another clue that a market bottom is in place. 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 $1,781.80 and then at $1,790.00. First support is seen at today’s low of $1,764.10 and then at $1,750.00.”

“September silver futures prices hit a four-week high today. September silver futures bears have the overall near-term technical advantage. However, a price downtrend has been negated and last Friday’s bullish weekly high close are clues that a market bottom is in place. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $21.50. The next downside price objective for the bears is closing prices below solid support at $19.00. First resistance is seen at today’s high of $20.51 and then at $20.75. Next support is seen at $20.00 and then at last Friday’s low of $19.825.”

On Tuesday gold began rising in the overnight London market and threatened $1790.00 in the New York cash market before traders sold the rally and gold settled. Increasing world tension has pushed the other safe-haven asset (the dollar) higher. The Dollar Index gained almost a full point from daily lows as Biden claimed responsibility for killing Al-Qaeda leader al-Zawahiri in a Kabul drone attack. The search for this Osama bin Laden’s replacement has been going on for 20 years and President Joe presents a warning “Justice has been delivered”.

Some believe gold has gathered support from the tension created by Nancy Pelosi’s visit to Taiwan. I’m perplexed as to what she might be considering. The talk of military response from China is nonsense, but the so-called relationship between us and China remains a merry-go-round. The reality is that both China and the US have common goals in a complicated world.

Is gold climbing the wall of worry or just biding its time hoping for that much touted dollar weakness? You will probably see a bit of both scenarios work on the short term. Still, higher gold prices encourage the bullish base and there must be some world safe haven demand.

A perhaps important development for gold would be the latest release from the Dallas Fed – US Likely Didn’t Slip into Recession Despite Negative GDP Growth. What exactly this means is still not clear. Actually, calling an official recession is complex, and sometimes it’s not official until after the fact. But if the FOMC decides that recession is less likely it would give them more latitude and a more powerful hand at controlling inflation with higher interest rates. Don’t jump out the window on any of these changes. You might find that the Fed will take their good old time to settle this mess. My guess, well into 2023, but we will dodge the bullet.

The short-term trade and the possibility of higher prices in gold is turning into a numbers game. The paper traders will ride the roller coaster between $1750.00 and $1800.00, happy to buy the dips and sell the rallies. Look for sell-offs, out of nowhere. The more astute technical guys will not sit up and take notice until gold pushes above $1800.00 with momentum. So, expect the continued rocky ride at the consumer’s expense.

On the day gold closed up $2.10 at $1771.10 and silver closed down $0.21 at $20.11.

Zaner (Chicago) – “While gold and silver prices continue to climb without broad fundamental support, fresh lower lows in the dollar again overnight have provided gold and silver with consistent buying interest especially since the dollar reversal on July 14th. With pattern breaking inflows to gold and silver ETFs yesterday it is possible that the three-week rally in gold futures has inspired some investment interest. Yesterday gold ETF holdings saw an inflow of 89,042 ounces raising the year-to-date gain to 3.7%. Silver ETF holdings yesterday saw an inflow of 281,822 ounces but holdings remain 11% lower year-to-date. While gold and silver prices delinked with inflation psychology into the March highs, widespread acceptance of a track toward global recession could introduce a measure of long profit-taking. The gold market is probably drafting support from a Reuters article suggesting that investors, traders, fund managers and others are attempting to remove Russian gold bars from their holdings. While some traders suggest the Pelosi visit to Taiwan has fostered some flight to quality buying, we discount that prospect. A limiting force in today’s action is the 50-basis point rate hike overnight from the Royal Bank of Australia. With the rise back above $1,775 in October gold, the next target begins at the bottom of a gap from December 2021 at $1,787. The silver market has yet to regain a past consolidation low support point up at $20.60, but the market could claw its way back to $21.00.”

On Wednesday gold pushed higher on the New York open ($1773.00) but again moved lower as traders sold the rally and the Dollar Index strengthened (107.00). The markets are yawning over Pelosi’s world tour. China does not like the attention. Their military drills are threatening but really just a show of strength. Whether the market will react remains to be seen.

The rise in dollar strength is the result of the latest comments by Fed officials Mary Daly and Charles Evans. “The Fed is “nowhere near” being done in its fight against inflation, said Mary Daly, the San Francisco Federal Reserve Bank president, in a CNBC interview. (MarketWatch)

There is really no news here. US inflation is looking at 41-year highs, but there is a reasonable division between the Washington deep thinkers. Some are plainly inflation hawks with no equivocation. When you hear from these folks you get down drafts in the price of gold.

Others realize the better path resides with the middle ground. Fight inflation but draw out the process to create as little damage as possible. These folks support current gold pricing, and they may eventually create a bullish windfall.

The professional paper trade favors the bearish gold scenario during this interest rate transition. Their default position will follow the technical indicators. But their conviction is thin because they are not sure the Fed can pull this “adjustment” off without creating damage. They are content to trade this “push” and “pull” market until a definable, longer-term trend appears.

With this many variables it makes sense to consider the larger picture. The first question centers around understanding longer term dollar strength or weakness. This is not a tough call; the Fed remains hawkish so higher interest rates will continue to cap gold gains. The second concern centers around world inflation and public demand. This is also a moving target, but the longer term favors higher inflation and the bullish gold scenario. But patience is necessary.

The outcome will not be known until the Fed puts to bed the question of recession. Falling crude oil is a minus for the inflation scenario but may be a nagging early recession warning.

Good advice – ignore the political noise. The problem is that not all Fed members are voting members. Which allows for nuance in what is presented by “officials”. This type of monetary system was created for a reason. It allows Chief Powell the ability to create a desired short-term result without changing any of the switches on this Rube Goldberg machine.

On the day gold closed down $13.10 at $1758.00 and silver closed down $0.24 at $19.87.

Zaner (Chicago) – “The bias today in gold and silver has shifted down in the wake of a 3-day high in the US dollar. The bear camp is also emboldened by a significant bounce in US treasury yields and from another large daily outflow from gold ETF holdings of 207,596 ounces. Fortunately for the bull camp in silver, silver ETF holdings saw an inflow yesterday of 2.8 million ounces. While early gains yesterday in gold were attributed to the range down move in the dollar index, the upside extension into the highs forged ahead of mid-session were thought to be the result of an escalation in tensions between US and Chinese military assets around Taiwan. Obviously, the tensions between the US and China were fostered because of the US Speaker of the House traveling to Taiwan and thereby recognizing Taiwan as a sovereign country. In retrospect, the silver bull camp should be disappointed by silver’s lack of strength in the wake of yesterday’s flight to quality rally in gold. In other words, silver remains focused on slowing physical demand in the event of a global recession. Gold might also have benefited from the lowest US treasury yields since April 5th in the Tuesday morning trade. Unfortunately for the bull camp, Treasury yields rose sharply after the markets interpreted the skirmish between the US and China as a negative to US and Chinese financial instruments. A large Mexican silver and gold producer (Fresnillo) saw its gold production decline by 28% in the first half while the company reaffirmed its silver production would remain within a previously forecasted range of 50.5 million ounces and 56.5 million ounces annually. While yesterday’s initial decline in treasury bond yields to the lowest level since April 5th propelled gold higher, comments from the Fed’s Evans yesterday should thicken resistance in gold with the Fed member indicating a 50-basis point rate hike in September was appropriate and that a 75-basis point rate hike in September could still be a consideration. Going forward, we remain very skeptical of the gold market uptrend particularly with volume and open interest falling off precipitously on the late July and early August rally!”

On Thursday the gold trade moved back to typically bigger than life. The overnight London and Hong Kong markets pushed higher ($1790.00), the domestic New York cash trade sold the rally and gold moved lower ($1774.00). Just as suddenly the market bounced higher threatening $1800.00. I’m sure that most traders had a headache before market close and the short paper are again considering options. I don’t think China’s use of rocket fire to underline their dislike of the Pelosi visit has much to do with higher gold. But rising tensions in that area does support higher prices in the metals. The basic reason gold surged was the continued weakness in the dollar and treasury yields. The Dollar Index moved almost a full point lower in two hours of trading! Still, reasons for this drop remain speculative. The most likely answer is that traders believe the Fed will be less hawkish. But this disregards reason and ignores the still fresh FOMC dialogue which claims their intention is to lower interest rates. Even if you equivocate and use the new dialogue – replace the word “inflation” with “price stability”. It is difficult to see how they can have their cake and eat it too. My secret bet, Powell may sense something in the numbers which suggests inflation has peaked. This would give everyone some wiggle room.

Let’s at lease have some fun with this latest up leg in the price of gold. Which might just be another anomaly in a confused market. I’m not that excited over today’s performance and I’m always suspicious when super-analyst Jim Cramer opines. But he enjoys a massive following.

This from Anna Golubova (Kitco) Is this ‘bizarre’ time for gold finally over? Gold price is about to rally and now is ‘the perfect time’ to buy, says Jim Cramer – CNBC’s Jim Cramer just updated his gold outlook, saying that now is the perfect time to get into the gold trade after what he described as a “bizarre period” for precious metals. Cramer shared the disappointment experienced by many gold bugs after gold failed to bring much-anticipated returns this year after peaking at new record highs back in March.

“It has been a bizarre period for precious metals. I am a big fan of holding some gold as an insurance policy against inflation or economic chaos. Historically, that has been very effective. But in recent years, it has blown up in our faces,” Cramer said Wednesday. At first, Cramer blamed competition from the crypto space as holding gold back. But when crypto markets collapsed this year, the situation has not changed.

“Last year, we had rampant inflation, and gold didn’t do much for you. I thought the culprit was crypto. That people who normally hide their money in gold were instead buying cryptocurrencies,” he said. “This year, the whole crypto ecosystem has collapsed. Meaning that gold doesn’t have much competition. And we’ve gotten insanely high inflation readings, the worst in decades. Yet gold is basically flat for the year.”

But as the public is giving up on gold, it might be the perfect time to get into the trade, Cramer said, citing chart analysis done by legendary market technician Larry Williams, famous for calling tops and bottoms in trading patterns.

“Williams finds that when small speculators get too bullish, it is almost always a sign that we are near a top. But when they get too bearish, it is almost always a sign that we got a bottom on our hands,” Cramer explained. “According to the latest Commitment of Traders report, small speculators are net long 92,690 contracts for gold, which is their smallest long position since May of 2019, right before we got a major boost in gold. In the last nine years, whenever their net long position has been this low, the actual metal has rallied, and the best selling points all came when they had large long positions.”

Back in March, when gold peaked above $2,000 an ounce, these small speculators were long 200,790 contracts, which was their largest net long portions in four years, Cramer pointed out. Cramer added that the price of oil is another great indicator of future gold price moves, noting that the precious metal tends to respond to changes in oil prices much more than any other inflation indicator.

“Price of oil pushed forward by eight weeks has been very powerful for predicting the price of gold in the past. Williams says that based on the price of oil in the next eight weeks, now is the time to buy gold. His forecast says it should be ready to rally here,” Cramer said. “I know it has been tough to bet on gold this year. But right now, the charts might finally be on your side.”

Cramer’s own view is not to bet against Williams when it comes to spotting a bottom on gold. “Charts suggest that gold could be ready to rally, and it might be the perfect time to do some buying,” he reiterated.

On the day gold closed up $30.50 at $1788.50 and silver closed up $0.23 at $20.10.

On Friday the bull’s anticipation of continued higher prices turned into a wet blanket as the jobs report suggests that recession may not be in the cards. The Dollar Index moved higher by almost a full point in less than two hours during the morning trade.

This remains a brutal paper market to trade and price oscillations may get worse if this latest employment information again emboldens the short paper momentum players. Traders will be carefully watching the US Consumer Price Index late next week for the latest read on inflation. But professional opinion as to outcome is all over the place. Ranging from mild and likely decreasing to hot and this inflation cycle will be with us for an extended period.

While gold’s latest run to the upside helped the bulls psychologically there are still powerful forces at work which favor the bears. And we may be well into 2023 before the smoke settles.

A conservative approach makes sense. Use the metals as a quiet savings account with no third-party obligation. This has been the main bullish argument in favor of physical gold and silver ownership since the government began messing with the financial system in the early 1970’s.

On the day gold closed down $15.60 at $1772.90 and silver closed down $0.28 at $19.84.

Platinum closed down $0.20 at $924.70 and palladium closed up $51.20 at $2128.70.

Zaner (Chicago) – “While the October gold contract failed to technically take out yesterday’s high in the early going today and in retrospect stalled right on psychological even numbers of $1800, the bias remains up. Clearly, the primary impetus behind yesterday’s sharp rally was increased geopolitical tensions between the US and China, which resulted in Chinese ballistic missiles overflying the Taiwan capital city! While some traders suggest economic uncertainty from today’s payroll report is adding to buying interest, we suspect that interest is very modest. With a holdout Democratic Senator agreeing to a $430 billion drug and energy bill, that is probably contributing some lift this morning. Not only were gold and silver futures in vogue yesterday, but investors moved money into gold and silver mining shares. Unfortunately for the bull camp both gold and silver ETF holdings saw outflows yesterday of 81,050 ounces in gold (year-to-date gold holdings are now up only 3.3%) with silver seeing an outflow of 352,347 ounces. Obviously, weakness in the dollar, reports that China may carry out sustained military exercises around Taiwan and a ratcheting up of global recession fears provides the gold, silver, palladium, and platinum markets with ongoing flight to quality buying interest again today. Furthermore, it goes without saying that the slide in US treasury yields added to the upward impetus in gold and silver this week. However, given the strength in gold and silver prices this week, the impact from the US monthly nonfarm payroll report could prompt significant price volatility. On the other hand, if the US jobs report adds to anxiety surfacing from global recession fears flowing earlier this week, the metals trade will be forced to decide if there is a realistic potential for inflation instead of deflation. It is possible that a disappointing US nonfarm payroll report will result in a pummeling of the dollar which in turn could shift the focus of the gold and silver trade toward bullish currency influences. Unfortunately for the bull camp, the late July and early August rally in gold of $114 has yet to inspire injections into gold ETF holdings. While many analysts expect the US interest rates to remain at low levels, a disappointing US nonfarm payroll report could send yields tumbling further and in turn ignite further speculative buying of gold and silver. In conclusion, the technical and fundamental bias in gold is pointing upward, but the risk and reward ratio of buying October gold near $1,800 (after a rally of $114) is unattractive.”

My Brothers and Sisters, thank you for your business and friendship. If you have unusual circumstances, need cash or a special visit – talk to Harry. All our in-house staff have been vaccinated and have the booster! We continue to enforce ridged safety standards between people and product. Be careful, the contagious Omicron variants remain dangerous. At the same time trust that God will soon get us back to normal and our traditional business model.  As always, thank you for your patience. Richard Schwary

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

 

 

 

 

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Gold – A Bright Spot Do I See?

Gold – A Bright Spot Do I See?

Commentary for Friday, July 29, 2022 (www.golddealer.com) – Today gold closed up $12.60 at $1762.90 and silver closed up $0.33 at $20.16. Gold moved higher on Friday as the Dollar Index continued a soft drift towards 106.00. The markets are trying to resolve the interest rate / recession conundrum. But since Powell’s less hawkish and even uplifting Wednesday talk the gold trade seems a little lighter. And safe haven more in focus into the weekend. Today’s momentum above the important $1750.00 psychological overhead resistance is a welcome change from the drubbing gold and silver have recently taken. Last Friday gold closed at $1727.10 / silver at $18.59 – on the week gold higher by $35.80 and silver was up $1.57.

Important Notice – FedEx is no longer having people sign for packages, they are scanning IDs. We have complained to FedEx, but they remain resolute. Scanned identification is safer, but if you have a problem with this decision, please make your feelings known to FedEx. Unfortunately, the present delivery time for the USPS alternative is 2-3 weeks, but that should soon be improving.

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 understanding.

On Monday gold moved higher in the overnight Hong Kong market but in typical fashion traders sold the rally in London and the domestic trade. Likely because the Fed will boost interest rates ¾ of a point this week.

Still the gold bulls were disappointed that the gradual price slide in New York ignored a weaker Dollar Index. Gold did catch a small bounce higher at $1716.00 but it was unconvincing.

Most professionals see lower prices responding to a bearish technical picture. Another setback to the bullish gold scenario is the slide in crude oil prices. Crude has lost $25.00 these past 2 months over recession talk. And the dip may not be transitory. Higher oil fueling inflation was a bullish gold cornerstone in the early days of the Ukraine war.

The big question at this point is whether the bulls will gather themselves after this week’s FOMC rate hike. Or remain defensive. Gold is already trading at a big discount and anything that even hints at a more dovish view may prompt a relief rally.

As you can imagine there is zero bullish buzz in this slow summer trade. But the trend that long-time gold and silver believers continue to buy weakness remains intact. This is especially true if they can find live quality bullion products.

This optimism comes from the notion that precious metal “insiders” believe the economic system and the central banks are either broken or corrupt. There are others who want to place a portion of their wealth outside the traditional financial system. And not subject to third-party intrusion. These are the “just in case” folks. And there are more of them than you might imagine.

We begin this week with several significant customer bullion sales. Which may eventually prove interesting. I can’t believe there are many “weak hands” left considering that the bearish storyline has been around since the Fed began talking higher interest rates. The idea is that the bearish scenario is old, and all the bears have already sold, clearing the way for higher prices.

Silver’s negative pricing picture may soon resolve itself. The reasons for the drop in prices are complicated. Some believe silver jewelry demand in top consumers India and China has fallen due to the number of stores being closed after the Covid-19 outbreaks. The initial optimism for rising prices because of industrial demand and the “green movement” pushed prices to $25.00. But recession fears have reversed these gains to the pricing channel between $15.00 and $20.00. Which has been in place for 6 years. We see this $5.00 spread as a great value play today.

Because industrial demand will return, perhaps gaining strength if we avoid a recession. If we cannot dodge the recession bullet, we believe the downside is small for practical reasons. Silver bullion is scalable, a convincing argument. Everyone can participate and begin to build private wealth, outside the typical financial system. Finally remember that silver at these lower and lower levels is more and more subject to large, short covering rallies.

On the day gold closed down $8.10 at $1719.00 and silver closed down $0.30 at $18.29.

On Tuesday gold was typically choppy and flat with what Reuters calls the “jitters” over the now in process FOMC meeting. Most expect a ¾ point rise in interest rates which will continue to create trouble with the gold trade. “The relief we’ve seen in yields is a good sign for gold… persistent fear in the equities market, geo-political issues and if the energy squeeze intensifies, there will be strong demand for safe-haven,” Edward Moya, senior analyst with OANDA.

Consumer confidence is again on the slide over inflation and the public’s fear of recession. Yesterday CNBC cited a recent poll which claimed that nearly half of Americans belief we are already in a recession. This is a reach and most traders do not believe the Fed will push the US into recession. It makes no sense to welcome unemployment and less working taxpayers simply to battle inflation. This most current reasoning leads to the notion that the FOMC will raise interest rates this week but is running out of ammunition. And will soon be forced to perhaps even lower interest rates to fight recession.

I’m not sold on the recession idea because of the number of “help wanted” signs. So, it is too soon to dismiss the bearish potential of large interest rates hikes. Under these circumstances it makes sense to keep your powder dry if you are thinking about buying gold bullion.

Just a note here, the premium on US Eagles is being raised by the US Mint and will be passed on to consumers. It is too soon to tell if this increase is caused by higher operating costs or demand.

It is surprising that gold did not react to the latest development in the Ukraine. Reuters – “Russia said it will cut gas supplies to Europe from Wednesday in a blow to countries that have backed Ukraine, while missile attacks in Black Sea coastal regions raised doubts about whether Russia will stick to a deal to let Ukraine export grain.” This may simply suggest intense focus on this week’s big FOMC decision. Or perhaps the US audience is resigned to the notion that Putin is crazy and there is little more that can be done outside of humanitarian aid.

On the day gold closed down $1.30 at $1717.70 and silver closed up $0.20 at $18.49.

Zaner (Chicago) – “Despite higher initial action today traders should brace for position squaring selling as traders move to the sidelines ahead of what is expected to be another “jumbo” US rate hike. With the gold market unable to rally off news yesterday of a Japanese import ban on Russian gold (starting August 1st) and discounting news of a significant jump in Hong Kong gold exports to mainland China, the bear camp retains control. In retrospect, the dramatic oversold technical condition from the July washout of $137 has likely been balanced by last week’s low to high bounce of $59. Unfortunately for the bull camp, both gold and silver ETFs continue to see disinvestment, with silver ETF holdings yesterday declining by 38,682 ounces and gold holdings declining by 41,711 ounces.

Furthermore, gold holdings have been down for 19 straight sessions and have seriously reduced the year-to-date inflow to only +3.8%. Silver on the other hand has seen a year-to-date reduction of ETF holdings of nearly 9%. Clearly, the combination of a series of US rate hikes, expectations for more global central bank rate hikes and rising concern of global recession leaves the precious metal bull camp without much ammunition.

However, it should be noted that last week gold prices managed a significant recovery rally in the instant aftermath of the ECB rate hike! Going forward, the wildcard for the gold trade is the direction of the dollar with the 106.00 level currently seen as the line of demarcation between a bullish currency impact on gold and a bearish currency impact on gold. However, with the dollar faltering from the July high, despite the looming aggressive US rate hike potential the dollar bulls appear to have lost some resolve. Pushed into the market, we are a seller of both gold and silver at corrective resistance of $1,756 in October gold and at $19.15 in September silver.”

On Wednesday gold prices were hemmed in awaiting a Fed decision on the next interest rate hike. This will probably be released after the market closes, but most expect a ¾ point jump. If the FOMC goes big (a full point) gold will adjust downward but likely less than expected.

Reuters – “The Federal Reserve raised its benchmark overnight interest rate by three-quarters of a percentage point on Wednesday in an effort to cool the most intense breakout of inflation since the 1980s, with “ongoing increases” in borrowing costs still ahead despite evidence of a slowing economy. “Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures,” the rate-setting Federal Open Market Committee said as it lifted the policy rate to a range of between 2.25% and 2.50% in a unanimous vote.”

The actual increase is no surprise, but two paths of reasoning will likely follow. The first is simply that higher gold prices after the announcement will be transitory because we are looking at a relief rally for those figuring a full point was the next FOMC move. The bears will sell the rally and move to the sidelines, a very typical pattern these days.

The second, and the one I favor comes from the notion that the Fed will “adjust the stance of monetary policy as appropriate”. The Dollar Index did move lower by almost a full point after Powell’s comments. So, if your natural bent is toward “recession” this may yet turn into a realistic dovish pivot. But it will require patience.

Today’s higher aftermarket was enough to steady the fearful bulls. But not enough to materially change the fact that lower gold pricing since late June suggests a bearish technical picture.

There are still plenty of bears in those woods. But it’s important to note that the FOMC will not formally meet again until November. Which essentially takes this issue off the table until late this year helping the flagging bullish scenario.

The good news is that gold is in the fight for the higher ground. I don’t see much capitulation in these numbers. The world inflation numbers are a mess. And most likely the best encouragement for the bulls is that quality physical bullion products do not sit in our safes for long.

On the day gold closed up $1.40 at $1719.10 (with a + $15.00 aftermarket) and silver closed up $0.06 at $18.55 (with a + $0.55 aftermarket).

On Thursday gold moved higher in the opening domestic trade, reflecting yesterday’s higher aftermarket. And added something I have not seen lately, a positive buzz. It is still too soon to judge the Powell comments but the at least developing theory is that the FOMC has left the door wide open to options. This morning the Gross Domestic Product fell for the second consecutive quarter setting off more warning bells about recession.

I’m not an economist but apparently the process of declaring an official recession can be drawn out and complicated. But they may make a believer out of me yet if the GDP does not recover.

At any rate, traders are buying the idea that a recession is on the way. And, at least on the short term figure the Fed will become less hawkish and modify its interest raising plans.

This is something of a non sequitur because the next FOMC confab is not until November. So, no one is expecting any new information until year end. Which effectively places the interest rate question on the back burner for the rest of the year because I can’t imagine the Fed raising on the Christmas season. Santa would not like such a rash and unnecessary move because the Fed may have already planned on slowing this program down through the summer month of next year.

I would not describe today’s gold trade as a firecracker start to the bullish gold scenario. We have seen $1750.00 plenty of times and higher numbers represent formidable overhead resistance. But there are at least some sparks in that old chimney. If gold is finally accepted as being cheap, relative to highs traders might even see that bullish scenario burn brighter.

On the day gold closed up $31.20 at $1750.00 and silver closed up $0.10 at $871.90.

Zaner (Chicago) – “Not surprisingly, the gold market has forged a significant recovery/relief rally after clearing the FOMC rate hike meeting. However, the rally has more credence given it has been forged after 2 weeks of general grinding gains! Apparently, gold, and other physical markets gleaned hope from market chatter embracing the potential that the rate of US interest rate hikes may slow. However, the Federal Reserve chairman generally forecast another robust rate increase in the next meeting but suggested the pace of rate hikes “would slow at some point”. Commodity markets are likely to continue to draft lift today from the Fed chairman’s rejection that the US is “in recession”. In a very minimal supportive overnight development gold ETF holdings broke the July chain of daily outflows with a minimal inflow of 15,878 ounces. Unfortunately for silver bulls large daily silver ETF outflows continued yesterday with the exit of 3.8 million ounces. The gains in gold this morning are particularly impressive given World Gold Council projections that Chinese first half gold consumption declined by 12.8%, Chinese production increased and with the Council also calling for Chinese demand for gold jewelry, bars, and coins to fall below year over year levels in the 2nd half of 2022. In fact, the WGC expects the year-over-year decline to register in double digits because of the contraction in disposable income and lingering impacts from periodic infection flares. For the time being, recession pressure on gold and silver has moderated especially with the US durable goods report yesterday much stronger than expected and Powell denying the US is in recession. With the rally in the dollar yesterday not overly impressive, and the currency Index violating the 106.00 support early today, the currency impact on gold and silver today leans in favor of the bull camp. Not surprisingly, gold, and silver prices managed new highs for the day yesterday in the immediate aftermath of the US Federal Reserve policy change. While we suspect a large portion of the buying/recovery in prices is a relief rally, news that the US economy might not be in recession adds to the “temporary” bounce. On the other hand, from a technical perspective the upside breakout today to the highest level since July 8th shifts the charts bullish and produces an upside target of $1760.20. Not to be left out, the silver market has also extended yesterday’s impressive recovery and posted the highest price since July 5th in the early action today and that could project prices in the near term back above $20.00.”

On Friday gold opened firm. Likely a combination of further short-coving and the fact that inflation in Europe is still running above 8%. Which encourages safe haven demand. This makes sense because recent gains in gold are large enough to suggest a short-term bottom is in place.

We are seeing fresh public interest in buying both gold and silver bullion with this recent uptick in prices. They are not standing in line, but the action is no longer sluggish. The technical picture a week ago was bearish but is improving nicely over the possibility of a FOMC dovish pivot.

For gold to continue higher the Dollar Index must weaken on the short term. Not an easy job if the FOMC fails to lighten up on its hawkish sentiment. But there may be another bullish light at the end of this tunnel. I would not bet the farm, but 10-year Treasury yields have managed to settle below support at 2.7% (FXEmpire). This may be the key to a lower Dollar Index.

Reuters cites the latest Michigan Consumer Sentiment, claiming the public expectation of higher inflation may have peaked. Even if this “cooling” is modest it would be another plus for the gold bulls. The FOMC would be given the gift of time in its interest rate reduction plans.

On the day gold closed up $12.60 at $1762.90 and silver closed up $0.33 at $20.16.

Platinum closed up $13.00 at $884.90 and palladium closed up $49.50 at $2128.90.

My Brothers and Sisters, thank you for your business and friendship. If you have unusual circumstances, need cash or a special visit – talk to Harry. All our in-house staff have been vaccinated and have the booster! We continue to enforce ridged safety standards between people and product. Be careful, the contagious Omicron variants remain dangerous. At the same time trust that God will soon get us back to normal and our traditional business model.  As always, thank you for your patience. Richard Schwary

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

 

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Gold – Quiet Summer Trade

Gold – Quiet Summer Trade

Commentary for Friday, July 22, 2022 (www.golddealer.com) – Gold closed up $14.40 at $1727.10 today and silver closed down $0.10 at $18.59. Gold finished the week on some upbeat news and its first weekly gain in 6 weeks according to Reuters. Today’s PMI (Project Management Institute) suggests the service sector may be flagging perhaps pointing to recession. The Dollar Index is also moving lower, perhaps suggesting recession and Europe is showing similar slowing numbers. The idea here being that if recession fears turn into reality the Fed will be less aggressive on its interest rate program. At least that is the theory this morning. But this bullish gold scenario is a bit thin in my mind. For it to really work the FOMC would use a ¾ point rate hike at the end of this month and then turn its attention to recession problems. First, many believe there is no way the US is heading for recession, the probability being 1 in 4. And second the Fed would have to change its mind about inflation, or at least accept the notion that real interest rate by the middle of next year would be a point lower than their projection. This might work if inflation indeed proved transitory, meaning we have peaked but that is also a stretch. Last Friday gold closed at $1702.40 / silver at $18.55 – on the week gold closed up $24.70 and silver was up $0.04.

Important Notice – FedEx is no longer having people sign for packages, they are scanning IDs. We have complained to FedEx, but they remain resolute. Scanned identification is safer, but if you have a problem with this decision, please make your feelings known to FedEx. Unfortunately, the present delivery time for the USPS alternative is 2-3 weeks, but that should soon be improving.

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 understanding.

On Monday gold managed a modest climb in the early New York market but drifted lower on what looks like a typical profit taking round. This relatively firm market is adjusting to a weaker dollar and moderately higher crude oil prices. The Dollar Index began to break down last Thursday (109.00) and has continued weaker even today (107.00). Which might suggest traders have dumped the notion that the FOMC will use a full point jump later this month.

Reuters – “Recent readings on inflation came in above expectations but showed signs that higher prices may be starting to ease, giving the U.S. central bank a possible cushion to raise interest rates at a smaller 75 basis points increment.

“I know we just had two bad headline numbers, but the evidence on inflation is becoming more and more pronounced that it is rolling over, the commodity upward inflationary thrust, the leading edge of commodities, has turned into a deflationary trust,” said Jim Paulsen, chief investment strategist at The Leuthold Group in Minneapolis.

“What the market is starting to sniff out is that yeah, the Fed is going to put its funds rate into the same ZIP code that the free market rates are at – that is two and a half-ish percent – but once it is there, it might be done for a while.”

If the Europeans raise rates less aggressively, a possibility (Reuters). And there is a shortage of crude oil, suggested by rising prices, trader psychology could become less bearish towards both stocks and the metals. It is not a stretch to believe this market got carried away over interest rate expectation. Last week most everyone was talking about lower prices in gold.

It is not as though those interest rate clouds have disappeared. But they seemed a bit less threatening at the beginning of this week. Sprott brings up an important point which may support the bullish gold scenario – “There may not be a quick fix for inflation.” Prices below $1700.00 for gold are not off the table but today’s trade suggests more stability. A small win for gold and silver bullion buyers trying to understand why manufacturers are still behind the demand curve.

On the day gold closed up $6.80 at $1709.20 and silver closed up $0.24 at $18.79.

On Tuesday gold continued rather flat in quiet trading as analysts ponder the next interest rate move by the European Central Bank. I believe they will go with a half point rise but there is some speculation that perhaps only a quarter point will be used. If so, this would help the sagging US market and perhaps at least slow down the still hyper FOMC rate hike sentiment which will become a reality at the end of this month (July 26th and 27th).

The gold price is also supported by a weaker Dollar Index. Since Thursday of last week, the index has moved considerably lower, but this decline has flattened (106.00/107.00). A minus sign for gold if the short paper decides to test support ($1700.00). Hedge funds are moving away from gold. And professionals see gold’s inability to take advantage of recent rallies as the handwriting on the bearish wall. To be fair, negative sentiment has been gold’s next-door neighbor for some time but the public scoops up quality bullion products as prices move lower.

Still the gold trade seems lighter this week as our shiny friend is at least holding up in the supercharged environment of higher central bank interest rate increases.

Silver bullion may catch a break as investment interest rises in China. But as usual there is the typical confusion factor as to the complete story. (Reuters) – “Silver is benefitting from a continued rise in Chinese interest for the white metal. However, reports that major Chinese banks will suspend investors from taking new positions in gold and silver by August are blurring the outlook for this signal,” TD Securities said in a note.

Grant on Gold (Zaner) – (1) Gold ended last week down 2%, establishing an 11-month low at $1707.42 on Thursday. It was the fifth consecutive lower weekly close. (2) Silver lost just over 3% last week, dropping to over a 2-year low of $18.14. It was the seventh consecutive lower weekly close. (3) Platinum closed down nearly 5.9% last week, erasing the previous week’s gains and then some. (4) Palladium tumbled 15.8% last week, retracing nearly all the gains realized in the previous 3-weeks.

On the day gold closed up $0.80 and silver closed down $0.12 at $18.67. Crickets.

On Wednesday gold was choppy with a mild downward bias. Paper traders are waiting for further downside adjustment as the technical picture belongs to the bears. Still the lack of fresh news requires caution. Barron’s latest was surprisingly upbeat for Europe as gas supplies might not be cut off, easing fears that a worsening energy crisis would damage the region’s economy.

Keep in mind that this market remains drama orientated. The worst possible FOMC and world scenario are daily headlines. But this disaster sentiment is transitory because there is still plenty of money floating around. And it must be deployed in some fashion. If the predicted storm clouds clear, even a small amount, the metals will get more attention.

It is not news that the US public is not happy over inflation. But in what must be one of the great counterintuitive moves they are not much interested in buying gold, at least for the present. As I have said before they are willing to wait and see if the FOMC can deliver as promised. Reuters – “President Joe Biden’s public approval rating fell to 36% this week to tie the lowest rating of his 19 months in the White House as inflation takes its toll on American life, according to a Reuters/Ipsos opinion poll. Biden’s lowest ratings have rivaled the lows of his predecessor, Donald Trump, whose popularity bottomed out at 33% in December 2017.”

Jim Wyckoff (Kitco) – “Technically, August gold futures bears have the solid overall near-term technical advantage. Prices are trending lower on the daily bar chart. However, the recent “collapse in volatility” on the daily bar chart (whereby at least three price bars in a row are significantly smaller than previous price bars) suggests a bigger price move is coming soon. It’s important to note that markets typically vacillate between periods of higher volatility and lower volatility, and at present the gold market is in a period of low volatility. Bulls’ next upside price objective is to produce a close above solid resistance at $1,750.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,650.00. First resistance is seen at this week’s high of $1,722.00 and then at $1,735.00. First support is seen at $1,700.00 and then at the July low of $1,695.00.”

On the day gold closed down $10.50 at $1699.50 and silver closed down $0.03 at $18.64.

On Thursday gold reversed Wednesday’s loss and moved higher because of several factors. First, the weekly jobs claims moved higher for the third week in a row. Suggesting perhaps a slowdown in growth which was eventually reflected a half point drop in the Dollar Index.

But the index remained choppy, so you would likely call this small bit of joy to the bullish gold scenario transitory. The thinking behind this scenario is that the dollar is overpriced. The EU is getting their gas from Russia, And ECB President La Garde raised EU interest rates an oversized half point. This was the first such move in 11 years, so it is significant. The bulls theorize that the metals are oversold and look for these kinds of transitions to produce the next rally.

I believe the strength in gold today is the result of two factors. Increased safe haven demand coming from a confused economic picture in Europe. More importantly you are looking at a typical short covering rally in a paper market. With gold being off $350.00 since March and a bearish technical picture the paper default position is always looking to reinvent the word “short”. Especially when bearish information piles up over a relatively long period. There is an old trading caution here – “it works, until it doesn’t”. The pop back above $1700.00 was the short covering rally. The additional $6.00 in the aftermarket was safe haven demand.

On the day gold closed up $13.20 at $1712.70 and silver closed up $0.05 at $18.69.

On Friday the bulls got excited as gold touched $1740.00 in the New York spot market. The joy however was short-lived as traders sold the rally and our shiny friend drifted lower. Still today’s higher close snapped a 5-week losing streak.

And small bullish rumors are creeping into the trader talk around morning coffee. But the 60-day gold pricing chart looks miserable as gold moved from $1850.00 through $1700.00, so the technical picture remains bearish.

Still, gold is holding above the rather tenuous $1700.00 support so traders will assume that the coming rate hike is already reflected in today’s price.

If the FOMC does not get crazy at the end of the month you might see bearish sentiment lighten. As far as calling a bottom the smart money is keeping their powder dry. Even the physical market slowed today. But the bulls welcome a hopefully quiet weekend.

On the day gold closed up $14.40 at $1727.10 and silver closed down $0.10 at $18.59.

Platinum closed up $4.10 at $861.20 and palladium closed up $142.10 at $2013.20.

My Brothers and Sisters, thank you for your business and friendship. If you have unusual circumstances, need cash or a special visit – talk to Harry. All our in-house staff have been vaccinated and have the booster! We continue to enforce ridged safety standards between people and product. Be careful, the contagious Omicron variants remain dangerous. At the same time trust that God will soon get us back to normal and our traditional business model.  As always, thank you for your patience. Richard Schwary

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

 

Posted on

Gold – Looking for Encouragement

Gold – Looking for Encouragement

Commentary for Friday, July 15, 2022 (www.golddealer.com) – Gold closed down $2.10 at $1702.40 today and silver closed up $0.38 at $18.55. The best you can say about gold going into this weekend is that pricing has turned flat. And our shiny friend is trading slightly above $1700.00. But with gold looking to its fifth weekly loss, the bulls are rightly discouraged that little buying interest has developed. Still, this market offers its usual contradictions. The manufacturer told us this morning that Pamp Swiss 1 oz and 10 oz gold bars are sold out. So, these popular choices now join the ranks of Delayed Delivery. Their best guess – perhaps September! And to add insult to injury the premium on most popular gold bullion coins is moving higher. This would suggest that once the metals settle down. Meaning the Fed has achieved their goals, the physical market may turn into another delayed delivery mess for quality bullion products. Last Friday gold closed at $1740.60 / silver at $19.17 – on the week gold closed down $38.20 and silver was lower by $0.62.

Important Notice – FedEx is no longer having people sign for packages, they are scanning IDs. We have complained to FedEx, but they remain resolute. Scanned identification is safer, but if you have a problem with this decision, please make your feelings known to FedEx. Unfortunately, the present delivery time for the USPS alternative is 2-3 weeks, but that should soon be improving.

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 understanding.

On Monday gold held up surprisingly well considering the Dollar Index saw a 20 year high today (108.00). To put that in perspective the index has moved up 3 full points this past week! Even with gold at 9-month lows, traders expect a left-footed market trying to adjust to new and aggressive Fed interest rate policy. I don’t think there is much chance we will soon see a reversal in the FOMC objective of slowing inflation. Last month’s consumer price index will be out Wednesday and if inflation remains hot, you could see continued downward drift but nothing dramatic. My initial reading of the tea leaves suggests a quiet trading week.

The best bullish guess is that considering the beating our shiny friend has taken this month alone we might see light bargain hunting if traders believe gold or silver are oversold. It is always worth mentioning that from a practical standpoint – eager buyers are keeping their powder dry waiting for this downdraft to settle into something which is actionable.

Hardline bullion players have returned to mild bargain hunting. And the cash market in Los Angeles remains alive and well regardless of relative pricing for specific bullion products. Even with the number of bears in the woods increasing longer term and committed bullion players keep their longer-term perspective. Reuters – “Meanwhile, Fed’s Esther George, a dissenter at the central bank’s 75 bps increase last month, said abrupt changes in rates “could create strains” in economy. But growing pessimism over the state of some economies in Asia, and geopolitical instability to some extent, are limiting gold’s losses, as bullion remains the go-to safe haven during times of trouble, said Ricardo Evangelista, senior analyst at ActivTrades.

Reuters also offers a life raft for the still wobbly safe haven demand. “The bond market is pricing in a sharp deceleration in inflation over the next year, as aggressive tightening by the Federal Reserve to counter the steepest surge in prices in a generation ramps up recession concerns. The deceleration, which economists also call disinflation, is characterized by a slowing of the rise of overall prices and likely would be a welcome respite for financial markets.”

Finally, the fact that Musk bailed on the $44 billion Twitter deal has little to do with the price of gold. But it should suggest a small red flag has been posted on the overleveraged financial horizon. For the present few traders see these storm clouds developing into something dangerous. I am not overly worried unless the Fed cannot control inflation. But giant speculations like the Twitter deal, which come out of nowhere and disappear as quickly should not be considered another day at the Wall Street office. There is an immense mountain of money being drained from a system which has gotten used to a free lunch. The Warren Buffett quote comes to mind. “Only when the tide goes out do you discover who’s been swimming naked.”

On the day gold closed down $10.60 at $1730.00 and silver closed down $0.10 at $19.07.

On Tuesday New York spot gold varied between $1738.00 and $1723.00 in a day of back-and-forth trading which suggests a market waiting for the next confirmation of higher interest rates from FOMC. Today’s trading pattern was a carbon copy of yesterdays in that gold closed on lows for the day. The trading mood remains dark unless you are shorting this market. Which I would not suggest makes any sense with the number of variables changing from day to day.

The CME FedWatch Tool provides a countdown to the next FOMC meeting and includes an approximation and probability of the next rate hike. No one knows for sure what the Fed will do between now and the end of this month. But the smart money suggests it will raise interest rates ¾ of a point, which is a heavy hand considering the growing talk of recession.

Gold and the stock market will then reassess and adjust their pricing to reflect this new interest rate reality. The Europeans are faced with a similar set of higher interest rate “woes” and Russia will likely use gas supplies as a political weapon. Now it is not as though the entire world is going bankrupt but the “worry meter” has moved higher these past few months. And Chief Powell does not sound like he wants to hold anyone’s hand.

S&P Global Ratings: Beth Ann Bovino, the U.S. chief economist, writes that “economic momentum will likely protect the U.S. economy from recession in 2022.” She puts the probability of a recession at 40 percent, adding that “it’s hard to see the economy walking out of 2023 unscathed.”

Crude oil could also become a nightmare. Reuters – “The global price of oil could surge by 40% to $140 per barrel if a proposed price cap on Russian oil is not adopted, along with sanction exemptions that would allow shipments below that price, a senior U.S. Treasury official said.”

On the day gold closed down $6.70 at $1723.39 and silver closed down $0.17 at $18.90.

On Wednesday gold remained off balance as the June consumer price index came in hot (9.1%) beating the Dow Jones estimate of 8.8% according to Jeff Cox (CNBC). “CPI delivered another shock, and as painful as June’s higher number is, equally as bad is the broadening sources of inflation,” said Robert Frick, corporate economist at Navy Federal Credit Union. “Though CPI’s spike is led by energy and food prices, which are largely global problems, prices continue to mount for domestic goods and services, from shelter to autos to apparel.”

Gold pricing was a bit surprising, in that on the initial news gold fell to early lows on the day ($1710.00) which was expected. But traders bought the dip and pushed the market to $1740.00. The interest rate story is turning into an old-time western shoot out as the Bank of Canada opted for a full point rise, pushing their interest rate to 2.5%! And this hawkish background supports the notion that the US will also be aggressive as our inflation numbers reach 41-year highs. President Joe blames the greedy corporations for this inflation mess, and yet Biden’s approval rating rose three percentage points this week to 39%, rebounding from a week earlier when it matched the lowest level of his presidency (Reuters/Ipsos opinion poll).

Rising interest rates push investors into buying safe-have dollars. But in this case the Dollar Index fell a half point, which supported the price of gold. This late bounce to higher ground also looks like a short covering rally. And some analysts suggest that while gold has taken a bath this past 30 days, falling from $1840.00 through $1720.00, it is being steadily adsorbed. Which will support the bullish scenario as the FOMC arrives at a workable interest rate/economic formula.

On the day gold closed up $10.90 at $1734.20 and silver closed up $0.24 at $19.14.

Zaner (Chicago) – “All eyes are fixed on today’s US CPI report with the trade ultimately attempting to determine if inflation has peaked. Unfortunately for those hoping for a moderation of inflation the overnight newswires showed hotter than expected inflation in Germany, France, and Spain. In fact, annualized consumer price inflation in Spain is running at a 10% clip while a beleaguered German economy still managed to produce an annualized inflation rate of 7.6%. At this point, we are not sure what factors gold and silver would rally off as bullish sensitivity has been minimal to several supportive developments recently. Several weeks ago, gold and silver would have been lifted by the significant drop in US treasury yields and/or would have been lifted by economic uncertainty thrown off by the most inverted US yield curve in 12 years. Gold and silver are also not showing correlation with equity prices, and strangely have not been lifted for months despite evidence of surging inflation from every corner of the globe and nearly every physical commodity market. Therefore, we contend gold and silver are once again classic physical commodity markets with prices determined by the market’s expectations of future physical demand, which in turn means the outlook for the economy rules upcoming price direction. Investment demand for gold and silver remains poor with gold ETF’s posting the 10th straight daily outflow of 140,575 ounces and silver ETF holdings posting a 9th straight outflow with a significant 1.2 million ounces exodus bringing the year-to-date outflow up to 62.3 million ounces! However, going forward, the focus of gold and silver traders could change aggressively with global scheduled inflation readings to shape rate hike estimates, mold recession views and result in significant gyrations in currencies. It should be noted that treasury bond prices are also trading counter intuitively with hot inflation readings serving to lift prices off views that sharply higher rates will increase the odds of recession and increase flight to quality buying of treasuries. In conclusion, we expect the opposite reaction in gold and silver from historical action where a moderation of inflation results in a relief/short covering rally in prices. In our view, all physical commodities need an abatement of inflation just to halt recent liquidation trends.”

On Thursday gold continued its steady drift to lower ground as analysts now believe the expected ¾ point interest rate hike will turn into a full point by the end of this month. The reasoning is simple enough, the Fed is empowered and committed to slowing inflation.

And that means the definition of “aggressive” has changed in just a few days as the latest US inflation numbers hit 40-year highs in June, driven by gas prices (CNN). This morning possibility of an oversized rate hike coming at the end of this month drove the Dollar Index above 109.00! The bulls – already under the bed are now holding their breath.

And the bears are once again anxiously testing lower gold price support. The psychologically important $1700.00 mark was breached ($1698.00) today in the domestic trade. Which created the typical short covering rally. Gold then pushed to $1714.00 but quickly drifted lower as traders reset and hunkered down.

At this point the bear’s own the technical picture. There is some support at $1650.00 but these serious downdrafts surrounded by increased bearish sentiment create the worst of pictures and the talk of capitulation.

Which is typical when the storm clouds are their darkest and trader focus remains on the short term. The fact that the US producer price index for June came in at a staggering annual rate of 11% is lost in transition. Instead of bolstering safe haven demand traders worried more about rising interest rates and the possibility of recession.

This latest round of bad news may ultimately provide the litmus test that the physical market is looking for to create a serious round of safe haven buying. With gold hovering around $1700.00 what is the worst-case scenario? Could this market slide to $1600.00? Sure, but I don’t think the bargain hunters have the moxie to sit on their hands at $1650.00. The 30-day market at that point would present bargain hunters with an enticing 11% savings from gold’s $1850.00 recent high. To put this in better perspective, yesterday our selling volume numbers tripled. If you believe the Fed will eventually move the interest rate into the 3% range by next year you would still be a cautious buyer. But long-time bullion buyers are buying this market and believe the Fed will blink somewhere along the way. Which will provide some cover from this shelling. An interesting comment made by Alex (a Marine) in our usual morning phone conversation.

On the day gold closed down $29.70 at $1704.50 and silver closed down $0.97 at $18.17.

On Friday gold offered little encouragement, which might seem counterintuitive given the current inflation problems. But when you look into the numbers consumer sentiment remains divided as to whether their cup is half full or half empty.

FXEmpire – “The fact that households’ real liquid assets are high but falling fast explains why current spending remains strong, but consumers and voters say inflation is their top concern and the economy is on the wrong track. The resilience of consumer spending in the face of rapidly escalating food, fuel and other bills will depend on whether households focus on the level of their real liquid assets (high) or the rate of change (falling fast). It also depends how long rapid inflation is expected to persist and continue eroding the value of their existing savings and ability to add to them.”

Believe it or not, the US consumer believes the Fed will control inflation. Which means the fear factor which drove gold to recent highs during the pandemic is missing from the price equation. Which makes sense, if folks were really worried you could not get into our parking lot. Which was the case as gold pushed over $2000.00 in 2020 and again in 2022. How long they will remain complacent is the big unknown. But there is an adage in this trade which claims the best time to buy is when the fear factor is at its highest – which may now be the case.

On the day gold closed down $2.10 at $1702.40 and silver closed up $0.38 at $18.55. Whether you like silver bullion or not these prices are getting very friendly.

Platinum closed up $13.60 at $844.20 and palladium closed down $68.70 at $1824.00.

Zaner (Chicago) – “With a fresh contract high in the dollar and fresh market chatter regarding a US interest rate hike of 1%, gold and silver start the session back under significant pressure. Unfortunately for the bull camp, the markets are likely to see fresh selling following the 2nd round of US inflation readings (PPI) this morning. In fact, given the significant recoveries off yesterday’s lows both gold and silver are technically vulnerable to a quick slide back toward this week’s lows. In a minor supportive overnight development Indian gold jewelry export to the UAE are showing signs of improving with the improvement attributable to a recent trade agreement between the two countries. From the negative demand side of the market, the trade saw another very large 2.9-million-ounce single day outflow from silver ETFs yesterday and a large 87,934-ounce outflow from gold ETFs. While net spec and fund long positioning readings in both gold and silver (adjusted into the recent lows yesterday) should begin to reduce the magnitude of downside stop loss washouts, tech conditions are unlikely to stop the carnage. From a longer-term perspective, gold and silver are unlikely to make solid bottoms and are even less likely to recover aggressively until the trade has reason to believe planned Fed rate hikes will not need to be adjusted even higher and following views that a recession can be avoided. Unfortunately for the bull camp, the metal markets will be presented with yet another US inflation reading in the form of PPI this morning. Expectations for US PPI for June call for a gain of 0.8% in the month over month comparison and 10.7% on a year-over-year basis. In conclusion, hot PPI readings should result in gold and silver prices making fresh new lows for the move!”

My Brothers and Sisters, thank you for your business, friendship, and patience. If you have unusual circumstances, need cash or a special visit – talk to Harry. All our in-house staff have been vaccinated and have the booster! We continue to enforce ridged safety standards between people and product. Be careful, the contagious Omicron variants remain dangerous in the world and restrictions are sketchy. At the same time trust that God will get us back to normal and our traditional business model.  Richard Schwary

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