Gold – Cheap Enough or Not?
Commentary for Wednesday, March 6, 2019 – Gold closed up $2.90 today at $1284.90 but the best you can say is that the action was choppy. The positive buzz has disappeared and this market is defensive. But is the sky really falling? To get a better picture of the bullish line in the sand look at the 60 day gold pricing chart.
Yes gold broke down and if you are bearish – the short paper is drooling over the possibility of making more money. But this morning the dialogue has moved from technically negative to suggesting that gold may now be oversold.
This new scenario fits nicely into the 2 month pricing pattern in that there is a great deal of support in place since early January between $1280.00 and $1290.00.
These are not the blow-out numbers real bargain hunters will be looking for but they are cheap enough for us in the physical world to see folks testing the buy side of this equation.
Interestingly enough I have not seen much in the way of selling either in gold or silver bullion since both markets got shaky. And I think for the average person just watching and thinking about how good a deal they may get trying to guess whether either metal has bottomed is not very productive. For the average buyer a better approach in my mind would be to take advantage even in a small way of cheaper prices.
If the $1280.00 support ledge does not hold the next stop will likely be around $1240.00 – and then $1220.00. But looking carefully across our counter I see caution yes but no panic.
So this bigger move to the downside seems unlikely unless the Fed gets rough with interest rates.
Still the Trump/China deal may create precious metals headwinds – a done deal would likely encourage the DOW and reinforce that “things continue to improve” and therefore safe-haven protection like gold or silver bullion does not get the more appropriate attention considering the many other political and economic problems still brewing.
The current financial system is loaded with debt and really there is no way of correcting itself. The US political system seems distracted at best with both parties bashing their colleagues. And further more socialistic steps may really be unavoidable.
My hope is that this latest “free everything” talk is just that – rhetoric designed to excite the base because if it’s not everyone should be making sure there financial future is secure against the tornado on the distant horizon.
It’s safe to say that for now gold is still comfortably within that long channel between $1200.00 and $1400.00 which has been in place since 2013. This is actually good for those new or still accumulating bullion. You are buying the dips – right? Take advantage of lower prices – this is what the world is doing including the central banks. So why not take a page from there play-book? Gold and silver are both discounted greatly from their all-time highs so what’s not to like?
This from Zaner (Chicago) – “With optimism regarding a trade deal and Brexit fading, the risk-off mood has waned and has allowed a modicum of support to the precious metals. Secretary of State Pompeo’s comments yesterday that President Trump would reject any trade deal that is “not perfect” sent up a caution flag. And although strong US economic data strengthened the dollar a bit yesterday, the trade was reminded that not too long ago it was excited about the Fed stepping back from raising rates and that there has been no indication of a change in their posture on the issue. Gold fell to its lowest level in five weeks Tuesday, but that event did not usher in a sharp selloff, suggesting that the market had gotten a bit oversold on the reaction to the positive trade news over the past week, especially with an agreement not yet settled. May silver pushed to a new low for the move as well, but it did not follow through on the downside either. Police have been called in to the Sibanye-Stillwater mine in South Africa on concerns about violence, which could be supportive to gold and platinum.
The CFTC continued to play catch-up with the Commitments of Traders data on Tuesday with a report showing the data as of February 26th. This Friday (with data as of Tuesday) they will be back on schedule. Tuesday’s report showed managed money traders were net sellers of 4,481 contracts for the week ending February 26th, reducing their net long position to 104,230. Non-commercial & non-reportable traders combined were net sellers of 6,113 contracts, reducing their net long to 186,259. For silver, managed money traders were net buyers of 8,929 contracts, bringing their net long to 48,313. Non-commercial & non-reportable traders were net buyers of 2,537, bringing their net long to 78,247. The data was collected prior the last week’s steep selloff, so we suspect that the net longs are much smaller by now.
The platinum market received another fundamental blow from a report by the World Platinum Investment Council that called for largest platinum surplus since at least 2013. It expects an oversupply of 680,000 ounces in 2019, up from 645,000 in 2018. Consumption is expected to increase, but so is supply. The market was in deficit as recently as 2016, but the falloff in diesel engine sales has reversed that. Diesel sales are stabilizing after falling off in recent years, and the ongoing move towards pollution control is expected to help inch autocatalyst demand higher. The WPIC expects the biggest demand growth to come from the investment sector. April platinum made a more decisive break below the 200-day moving average overnight, leaving retracement levels of $830.40 and $818.70 as the next downside targets. Tuesday’s COT report showed managed money traders were net buyers of 18,060 contracts of platinum for the week ending February 26th, taking them from a net short to a net long position of 1,037. They may be back to a net short after the selloff this week. Non-commercial & non-reportable traders combined were net buyers of 15,577, bringing their net long to 26,300.
June palladium was steady overnight after declining on Tuesday. The market has seen a rally of roughly 90% since August and could be due for a correction. Fundmentals are still bullish longer-term, as the trade is looking for the market to be in deficit situation through this year and next, but technical indicators suggest a loss of momentum. The market has left some gaps over that last couple of weeks that could act as downside targets. The first gap would be filled at $1,460.10. The next one is down at $1,432.00 to $1,399.80. The COT reports showed managed money traders as net sellers of 192 contracts of palladium, reducing their net long to 14,432. Non-commercial & non-reportable traders combined were net sellers of 77 contracts, reducing their net long to 14,389.
Gold and silver have moved into oversold territory, which has left them vulnerable to short covering, especially if the trade news or economic data turn negative. However, the metals could have trouble mounting a recovery as long as the US dollar maintains its bullish posture. Support for April gold comes in at $1,281.50 and then at $1,275, with resistance at $1,300. Support for May silver comes in $15.00, with resistance at $15.45.”
Silver closed down $0.02 at $15.00.
Platinum closed down $9.70 at $826.20 and palladium closed up $20.50 at $1516.90.
This is our usual ETF information – All Gold Exchange Traded Funds:
Total as of (2/27/2019) was 69,611,032. That number this week (3/6/2019) was 69,071,077 ounces so we dropped 539,955 ounces of gold.
The all-time record high for all gold ETF’s was 85,112,855 ounces in 2013. The record high for Gold ETF’s in 2019 was 70,515,544 and the record low for 2019 was 68,732,549.
All Silver Exchange Traded Funds: Total as of (2/27/2019) was 613,545,408. That number this week (3/6/2019) was 611,593,611 ounces so we dropped 1,951,797 ounces of silver.
All Platinum Exchange Traded Funds: Total as of (2/27/2019) was 2,567,091. That number this week (3/6/2019) was 2,578,173 ounces so we gained 11,082 ounces of platinum.
All Palladium Exchange Traded Funds: Total as of (2/27/2019) was 767,851. That number this week (3/6/2019) was 772,982 ounces so we gained 5,131 ounces of palladium.
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