Gold – A Bumpy Ride in a Dangerous World
Commentary for Thursday, July 2, 2020 (www.golddealer.com) – Gold closed up $10.80 at $1784.00. Our shiny friend closed last Friday at $1745.90 so on the week we have gained $38.10. On the month gold is higher by $58.80 and year to date we are up $380.00.
Even with these gains gold buzz this week was subdued as pricing turned choppy and it became clear that gold was again having troubles with overheard resistance at $1800.00. Actually, most insiders thought the $1800.00 level would be a tough nut to crack but generally the optimism necessary to make all time highs this year remains intact. I loved this Kitco title – Gold is the asset to hold in a dangerous world – Ballingal Investment Advisors. This sums up an attitude that has been late in coming to the precious metals. Don’t ask me why because there has been a substantial case for owning gold and silver bullion in place before the virus threat. But today that word “dangerous” is becoming a small part of daily investment vocabulary. We may be relearning what it really means to make sure your financial future does not completely depend on paper assets. A reminder that we will be closed this coming Friday July 3rd celebrating Independence Day. Commodity markets will be closed, but the USPS will be open.
Monday of this week was quiet as gold finished up $2.30 at $1772.10. This market is still worried about the virus flareup but may be content with the notion that targeted “spots” identified through testing will discourage a wider business shutdown. At least this would explain why the DOW moved higher by 400 point today, a takeaway for safe-haven buying.
Gold pricing Tuesday of this week pushed lower in early trading, but traders bought the dip and momentum trading pushed gold dramatically higher moving above $1785.00. Reinforcing the already in place bullish trend looking to make new all-time highs. Fed Chair Powell talked to the House of Representatives Tuesday, but he did not add any new information to this already volatile mix. It is also hard for me to relate June’s higher consumer confidence with higher gold prices, so what’s really going on? Most likely safe haven buying over a resurgence of virus cases worldwide as governments rethink their reopening decision. Gold closed up $18.20 at $1793.00 today – a strong technical picture but the aftermarket saw a round of profit taking which might cool this market off somewhat as gold again challenges $1800.00.
Gold’s “cooling process” came more into focus Wednesday as the ISM manufacturing index came in hot suggesting the US economy may not be as damaged as Powell suggests. The price of gold in New York opened weak and quickly moved to $1760.00 before firming somewhat to finish the day down $19.80 at $1773.20. This illustrates the leverage exerted by the virus recovery worldwide and the positive or negative changes created in safe haven buying. The paper gold trade is nervous when exploring highs so get used to these sudden shifts in sentiment over “news” that would normally not create much buzz at all.
Gold’s pricing Thursday continued weaker on the open but turned around at $1760.00 and moved back towards $1780.00. On the day gold closed up $10.80 at $1784.00. With yesterday’s weakness the paper trade this morning pushed “weak hands” and then bought the dip. Technically gold remains encouraging, bears however suggest that June’s stronger labor numbers present headwinds for gold and safe-haven demand may move lower.
An important point to ponder – July is National Ice Cream Month. We all need something to smile about these days and you deserve a break – so enjoy yourself!
Silver closed up $0.11 at $18.24.
Platinum closed down $2.80 at $822.50 and palladium closed down $3.10 at $1906.10.
As always, we appreciate your friendship and business. And if you have unusual circumstances, need cash or are looking for a special store visit – talk to Harry. Let us be careful out there – stay safe and trust in God’s blessings. Richard Schwary
This from Zaner (Chicago) – “Global markets have been able to maintain a positive risk tone coming into this morning’s action. The latest reading on the Australian trade balance showed a lower than expected monthly surplus. Asian shares were mostly higher, and were led to the upside by gains in the Shanghai Composite and Hong Kong Hang Seng indices. The latest Euro zone unemployment reading came in lower than forecast, but Italian unemployment had a larger than forecast uptick while Euro zone PPI and Swiss CPI were weaker than expected. European stock indices were mostly higher early in the day, and were led to the upside by gains in the German DAX and French CAC-40 indices. The North American session will have the highlight for global markets, the June US employment situation report. June non-farm payrolls are expected to come in around 3 million which would an increase from May’s 2.509 million. June unemployment is forecast to have a moderate decline from May’s 13.3% while June average hourly earnings is expected to have a moderate decline from May’s 6.7% year-over-year rate. A weekly reading on initial jobless claims is forecast to have a modest downtick from the previous 1.480 million, while ongoing jobless claims are expected to have a modest downtick from the previous 19.522 million reading. The May international trade balance is forecast to have a moderate increase from April’s $49.4 billion monthly deficit. May Canadian international merchandise trade is expected to have a mild decline from April monthly deficit. May factory orders are forecast to have a sizable increase from April’s -13.0% reading.
Gold and silver were mixed overnight in anticipation of today’s June jobs report. This came after they closed lower yesterday on resurgence in economic optimism and positive reports on a vaccine against Covid-19. The ISM Manufacturing Index released yesterday came in a 52.6 for May versus 43.1 in April. This was the strongest reading since April 2019 after three straight months of contraction. Early trials indicated that a vaccine from Pfizer was safe and that it prompted patients to produce antibodies against the virus. Stock markets rallied in response to this news, and gold and silver were met with profit taking. The vaccine news came after resurgence in virus infections in the US that has fueled concerns about new shutdowns and has boosted the safe-haven buying in gold and silver. The June 9-10 Fed meeting minutes released Wednesday afternoon mentioned a need for the Fed to hold a highly accommodative monetary policy for quite some time, which is a long-term bullish factor gold and silver. ETFs continue to be a strong support, adding 151,320 ounces to their holdings in the last trading session, bringing this year’s net purchases to 20.2 million ounces, a 24% jump since the beginning of the year. ETFs also net bought 10.7 million ounces of silver, their sixth straight increase. The next hurdle will be the jobs report this morning, with the trade looking for 3 million jobs created for June after an increase of 2.5 million on May. A strong number could fuels some long liquidation, but a really weak number could bring in some more safe-haven buying and start gold on another leg up. Gold showed a technical reversal on Wednesday, which could set the market up for profit taking ahead of the holiday weekend in the US, especially if the jobs number comes in strong. Still, the virus story dominates, and that has the potential to keep dips shallow.
Palladium and platinum fell under modest pressure on Wednesday despite some improvement on the economic front, as the markets likely felt pressure from the weakness in gold and silver. The twin stories of strong ISM data and progress on the vaccine front should have supported demand ideas for auto-catalysts, particularly for palladium, which is used for automobiles, but the markets appeared to be pulled lower by weaker action in gold and silver. This news followed positive Chinese PMI readings and a jump in overall Chinese exports that suggested an improving economy and which should also support industrial demand for the PGMs. July palladium settled lower on the day yesterday, but it held inside Tuesday’s range and did not present a “toppy” technical indicator the way that gold did. Trendline resistance comes in at $1,964 today, with support way down at $1,845.75. October platinum did have an outside day lower, suggesting weakness ahead. Look for support at $862.70 with resistance at $809.40.
An outside reversal lower in August gold on Wednesday was the first negative technical indicator in some time, and it could set the market up for some profit taking ahead of the long weekend. The news on the vaccine front may have sparked the reversal, but the worries about the spread of the coronavirus have the potential to limit a downside correction. Uptrend channel support in August gold today is raised to $1,773, and a solid break below there could spark a spate of long liquidation. If the market holds, then an intermediate term upside target comes in at $1,900 using the width of the April through June trading range as a measuring tool. Trendline support for September silver comes in at $17.90 today, with next key resistance point seen at the double high at $19.02 from June 1-2.”
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