Gold Closes Almost Unchanged – Waiting?
Commentary for Friday, July 27, 2018 – Gold closed down $2.30 at $1223.00 today in another day of quiet summer trading. Gold still remains perplexing in that its technical pattern over the past month has not been good (the bears are in charge) and they have pushed prices down almost $30.00. At the same time the price of gold over the last 12 months – even with all the bad press only shows a loss of $34.00. So all things considered this market year to date has been pretty flat – but very volatile.
The problem being that during that time gold spiked higher moving from $1240.00 through $1360.00 between February and April and then fell out of bed between April and July losing $140.00 over FOMC threats of higher interest rates.
Last Monday gold closed at $1224.00 and today the close was $1223.00. So while the longer term chart pricing is definitely bearish it looks like gold is seeing support at $1220.00.
The logic behind “higher US interest rates and subdued bargain hunting equals continued weakness and lower prices” is sound but not foolproof as anyone in this business will readily admit. It’s not a bad idea to question – especially if you are certain of gold’s direction. Usually when everyone’s thinking is the same there are no more sellers and buyers enter the market. This is especially true now that gold seems oversold.
It’s obvious that gold, for now is held hostage by the US Dollar. But possible higher interest rates here in the US does not mean higher interest rates in other parts of the world. Yesterday for example the ECB held the interest rate line and said that loose monetary policy would stay in place well into next year and this alone could have major implications on what the Fed does between now and the end of the year. Remember that if the FOMC hiccups now that they have virtually promised higher interest rates gold will jump to higher ground.
All of this might suggest an interesting case. An aggressive FOMC is probably not a good idea (President Trump might agree). And further even with today’s celebration over an indicated 4% growth rate (note the word indicated – this is based on short term numbers and most likely will be adjusted lower). Of some importance is that the US will have to deal with tariff blowback the rest of 2018 and perhaps even into 2019.
So what all this means is that aggressively raising interest rates during the early stages of what could turn into a large tariff war is a bad idea at best and might upset what looks like a nicely continuing US economic recovery.
The fact that the price of gold seems to be flattening out above $1200.00 should also be taken with a grain of salt. The technical damage done since recent highs is large enough to give pause but I would guard against too much pessimism if you are a long term buyer. You could miss a great change to average down.
Reuters strikes the right tone – not too hot and not too cold – “In the physical markets, gold demand in India improved this week as domestic prices traded near a six-month low, while weaker rates in Singapore prompted a pick-up in demand there. Demand remained weak, however, in top consumer China as the yuan fell. “We believe price action (in gold) is likely to be subdued in the coming weeks (as) physical demand is in the middle of a seasonally slow period, short interest in gold has risen as prices have fallen and there are 200 tonnes of loss-making ETF positions that could be liquidated,” said Barclays in a note.”
So for now continue to watch and perhaps wait – but keep an open mind. It could be a mistake to assume that further gold price pressure is a fait accompli. There are still a lot of moving parts left to consider when it comes to the world’s largest ever experiment with loose monetary policy.
This from Zaner (Chicago) – “While the gold market at times waffled around both sides of unchanged yesterday, it finished the trade poorly and prices have damaged the charts again in the early going today. Both gold and silver are vulnerable to further selling following US GDP, as an “as expected” result probably sends the Dollar up toward 95.00. While soft second quarter earnings at Barrick Gold Corp might point to the extension of declining global gold output, that news is countervailed by talk of weak retail demand in Asia. On the other hand, gold imports into mainland China from Hong Kong increased sharply earlier this week, and that might suggest a bounce in the Yuan and low gold prices created some bargain hunting buying. Going forward, the action in the dollar will continue to be a dominating issue for gold and silver and the rejection of the sub 94.00 level in the dollar yesterday sets gold up for a chop back down toward the July lows but a closer-in support zone might be seen at $1,215.30.
While the palladium market did not manage a definitive higher high Thursday, prices spent the majority of the trade in positive territory and in the upper half of the recent upside breakout area. However, the charts this morning are leaning bearish with prices at times sliding toward yesterday’s lows. News of poor earnings at a South African platinum mining company reiterates the deteriorating conditions for mining companies which have been compounded by low prices, declining reserves, higher production costs and governmental interference by South Africa and Zimbabwe. However the markets were also presented with news that Lonmin PLC managed to increase PGM sales by 2% in the quarter but their production of platinum actually declined by 2.3%. Clearly the platinum charts are more vulnerable than the palladium charts and the inability to take out the $850 level on three attempts this week in platinum suggests some form of intermediate high has been found. Near term bottom of the range targeting in October platinum is now seen at $822.10. In palladium a critical pivot point this morning is seen down at $919.00 and to put the bull camp back in control might require a post GDP report trade back above $933.”
Silver closed unchanged at $15.44.
Platinum closed down $5.60 at $826.80 and palladium move lower by $14.50 at $926.50. With platinum trading almost $400.00 less than gold some bargain hunting in cheap platinum bullion should be in order.
This is our usual ETF information – All Gold Exchange Traded Funds: Total as of (7/18/2018) was 67,362,841. That number this week (7/25/2018) was 67,384,579 ounces so over the last week we gained 21,738 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 2018 was 70,763,846 and the record low for 2018 was 67,144,817.
All Silver Exchange Traded Funds: Total as of (7/18/18) was 650,492,161. That number this week (7/25/18) was 651,410,268 ounces so this last week we gained 918,107 ounces of silver.
All Platinum Exchange Traded Funds: Total as of (7/18/18) was 2,299,169. That number this week (7/25/18) was 2,320,662 ounces so this last week we gained 21,493 ounces of platinum.
All Palladium Exchange Traded Funds: Total as of (7/18/18) was 973,488. That number this week (7/25/18) was 973,535 ounces so over the last week we gained 47 ounces of palladium.
Our Patented Employee Survey – Gold’s Direction Next Week?
Of course, it’s not really patented but we do have some fun along the way. This is what the GoldDealer.com employees think: 7 believe gold will be higher next week 1 thinks gold will be lower and 2 think it will be unchanged.
Our Patented Customer Survey – Gold’s Direction Next Week?
Like the employees, our customers were given three choices – up – down – unchanged. We limited the survey to a random sampling of 100 transactions – unscientific but worth considering because these people took action: 59 people thought the price of gold would increase next week 29 believe the price of gold will decrease next week and 12 think prices will remain the same.
Precious Metal Closes & Dollar Strength – July 23 – July 27
The GoldDealer.com Unscientific Activity Scale is a “3” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 4) (Tuesday – 2) (Wednesday – 3) (Thursday – 3). The scale (1 through 10) is a reliable way to understand our volume numbers. The Activity Scale is weighted and is not necessarily real time – meaning we could be busy and see a low number – or be slow and see a high number. This is true because of the way our computer runs what we call the “book”. Our “activity” is better understood from a wider point of view. If the numbers are increasing – it would indicate things are busier – decreasing numbers over a longer period would indicate volume is moving lower.
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