Gold Continues to Equivocate
Commentary for Wednesday, May 1, 2019 – Gold closed down $1.40 today at $1281.40 but the after-market was stronger by $5.00 because the FOMC left interest rate unchanged and then quickly moved back to unchanged and then weaker.
In the early part of the trading day everyone was unsure what the outcome would be after the FOMC begins talking about their latest meeting – which took place Tuesday and Wednesday. The Fed does not want to say anything before the markets close and so the aftermarket if volatile should tell you whether the public saw anything in the latest tea leafs.
There are two schools of thinking, the “optimistic” players claim the Fed will not change interest rates this year, the “pessimistic” players will cite improving US economic conditions will force the Fed to “cool” down this economic growth with at least the threat of higher interest rates.
In my mind neither side is willing to bet the ranch – both realize that the Fed really does not have to “do” much – talk here has been a big stick for years.
What I’m more interested in here is a change in attitude relative to physical demand.
At the present time central banks (especially the Russians and smaller players) are buying, for them it’s already cheap enough. But for most everyone else they seem willing to wait for “cheaper” – especially because the technical picture for gold is nothing to write home about. This dynamic will not change much unless inflation becomes a problem.
And here is where the rubber meets the road if you are old enough to remember this admonition. There is a serious discussion going on right now which suggests that the reason we are not seeing the usual inflation numbers is because we have invented a new, more efficient economic machine driven by more and more consumerism. This “new wave” thinking may be the reason gold has enjoyed fairly steady pricing at the lower end of its current trading range.
I don’t buy this argument and believe that more money in circulation equals (eventually) more inflation – which will eventually support increased safe haven demand and higher gold prices.
Now look at the 30 day pricing chart – earlier in the month gold held around $1290.00 pushed to $1306.00 and collapsed to $1275.00. Fine – but this market did not (according to Hoyle) continue to fall apart – it held that $1275.00 line while everyone wondered if this would be a short-term bottom. This potential “floor” is still in question with today’s weaker aftermarket – yes it is pushing lower but whether it will break even lower is still unclear.
I think everyone is still waiting for something more definitive, perhaps from the FOMC or in some other area. Some thought the Chinese tariff problems with Washington would be a catalyst – failure would damage the already problematic world trade increasing safe-haven demand.
But problems in China, Europe, England (Brexit) even an unstable Venezuela and Iran have not moved the supply/demand conversation enough to dissuade either the bulls or the bears.
Look at gold’s 52 week high (1360.00) and 52 week low ($1183.00) and it’s easy to see why the public remains ambivalent. A similar conclusion with silver – 52 week high ($17.68) and 52 week low ($14.09).
At least with the physical silver market the trade gets crowed at the cheaper end of this spread – silver approaching $14.00 creates a storm of interest in the traditional bullion products like 90% bags, Monster Boxes, 1 and 10 ounce bars. And actually while no one has to wait long to fill an order – even at cheaper prices silver bullion production does lag.
This might suggest that at these lower prices there really is not as much produced bullion as everyone believes – which is good for the buzz market. A spike in prices and the “sold-out” sign would appear everywhere.
So what do you think about gold’s apparent inability to make up its mind? Before you say that gold is breaking down consider that once a weaker aftermarket made itself clear today – our phones became very active – the public still likes cheap.
Silver closed down $0.25 at $14.65.
Platinum closed down $13.90 at $874.20 and palladium closed down $38.30 at $1349.10.
This is our usual ETF information – Gold Exchange Traded Funds: Total as of (4/24/2019) was 68,625,671. That number this week (5/1/2019) was 68,175,653 ounces so we dropped 450,018 ounces of gold.
The all-time record high for all gold ETF’s was 85,108,867 ounces in 2013. The record high for Gold ETF’s in 2019 was 70,515,544 and the record low for 2019 was 68,175,653.
Silver Exchange Traded Funds: Total as of (4/24/2019) was 612,298,249. That number this week (5/1/2019) was 612,344,190 ounces so we gained 45,941 ounces of silver.
Platinum Exchange Traded Funds: Total as of (4/24/2019) was 2,809,981. That number this week (5/1/2019) was 2,798,562 ounces so we dropped 11,419 ounces of platinum.
Palladium Exchange Traded Funds: Total as of (4/24/2019) was 728,327. That number this week (5/1/2019) was 727,679 ounces so we dropped 648 ounces of palladium.
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