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Gold Continues to Settle

Gold Continues to Settle

Commentary for Wednesday, June 27, 2018 (www.golddealer.com) – Gold closed down $3.60 at $1253.00 in quiet summer trading. To say that the typical bullish/bearish trade talk has turned decidedly bearish for gold should not be surprising. Weighing on the bullish argument is obviously the trader capitulation at $1300.00, the lack of physical interest at these lower levels and the continuing threat of FOMC higher interest rates.

So is it time to jump out the window? Not yet for a few reasons: (1) gold has considerable support around $1250.00 which goes back to 2016. This is the reason we are now seeing smaller and smaller moves to the downside – traders are testing this long in place support level and I’m surprised we have not yet seen a relief rally.

If you are buying or selling this latest $1250.00 line in the sand is important. And you won’t have long to wait – this should be resolved by the end of next week. If not it might suggest that gold is stronger than the bears would have you believe. (2) Technically the Dollar Index looks like it is turning flat around 95.00 and we won’t see another FOMC meeting until the end of July – more time for gold to get back on its feet. (3) Actual physical demand has been lagging because the bears are running loose in the woods.

This bad news “pile on” is being helped I suspect with the use of “naked short” positions – an infernal device used by professional traders to sucker punch an already weakened market.

These can create fear in the paper ranks but if they do not have the desired result in a short period of time must be covered and the covering process encourages the bulls especially when we have seen prolonged weakness.

So am I turning bearish? Not really – this type of market is actually good for gold.

It provides a kind of cathartic cleansing – anyone holding the expectation of higher pricing has already sold. This is the very definition of lower pricing reaching a bottom and attracting new interest.

I also have an observation – real – large physical sellers have been missing from this equation for a long time. Where are they if the “new” news regarding gold ownership remains bearish?

For now Wall Street and the dollar hold some aces but this is always subject to change – that is the nature of “crowd” mentality when it comes to investing. Today CNBC talked about the real possibility of a recession created by inverted yield curves – amazing that no one seems to notice or care that a recession is long overdue.

It’s good news that the “big” Chinese tariff threat has been averted as the US took some products off the hit list this morning. This will convince world markets that a larger tariff war has been averted but note throughout the process that President Trump’s message has been “nothing is set concrete” so his hard line approach is likely a negotiating style.

Worth noting is that oil prices were sharply higher today perhaps suggesting a renewed inflation scenario.

With the price of gold looking at 6 month lows it is worth considering that we are still a long walk from last year’s low of $1150.00.

The plus in this type of market is that lower prices opens up the door for those that thought they missed the last big price run-up. Actually they did not – the “big” run up is still dead ahead. It will be fueled by overzealous, debt ridden world governments and will be measured in thousands of dollars not hundreds. Stay tuned this story is just getting interesting and the financial stakes have never been higher.

This from Zaner (Chicago) – “With the gold market early this morning failing to benefit from distinct safe haven conditions in the wake of significant weakness in global equities and ideas that China is preparing for a trade war, the bull camp has to be very disappointed. With other safe haven markets like Treasuries and the Japanese Yen rising overnight, the weaker early action in gold is further confirmation of its lack of interest in market anxiety. However it is not entirely surprising to see gold fail to benefit from safe haven, as it has become a physical commodity of late with a very tight correlation with equities. Just to add another disappointment for the gold and silver bull camps, it seems as if a softening of tone from the US President on trade overnight has been summarily ignored. The early action today appears to set the stage for a return to last December’s lows down around $1,251.90 in the August contract. Furthermore with the recovery in the dollar nearing a 4 day high, fresh currency related selling is likely especially since a deflating Chinese Yuan should provide the Dollar with an added and perhaps concentrated lift! The best argument of the bull camp is that the market is becoming short term oversold and also getting intermediately oversold technically.

While the PGM markets rejected new lows for the moves and forged fairly impressive recovery action off their lows yesterday that bullish technical action is lost with the bearish overnight action in global equities. With tariffs on autos seemingly coming to the front line of trade wrangling, it is not surprising to see auto catalyst demand fears surface and for PGM prices to come under fresh pressure as a result of today’s condition. With both markets fresh off impressive recovery action yesterday that naturally leaves both markets vulnerable to at least short term technical stop loss selling. Given the magnitude of early declines in equities we have to think that the path of least resistance in platinum and palladium is pointing downward and a slide back to $932 in September palladium could be seen, with a similar slide in platinum down to $862.20 likely.”

Silver closed down $0.09 at $16.15.

Platinum closed down $11.00 at $858.30 and palladium closed down $13.30 at $951.30.

This is our usual ETF information – All Gold Exchange Traded Funds: Total as of (6/19/18) was 68,690,515.  That number this week (6/26/18) was 68,473,734 ounces so over the last week we dropped 216,781 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 68,169,590.

All Silver Exchange Traded Funds: Total as of (6/19/18) was 647,210,136.  That number this week (6/26/18) was 643,783,311 ounces so the last week we dropped 3,426,825 ounces of silver.

All Platinum Exchange Traded Funds: Total as of (6/19/18) was 2,338,975.  That number this week (6/26/18) was 2,304,987 ounces so last week we dropped 33,988 ounces of platinum.

All Palladium Exchange Traded Funds: Total as of (6/19/18) was 987,659.  That number this week (6/26/18) was 1,005,974 ounces so last week we dropped 18,315 ounces of palladium.

The GoldDealer.com Unscientific Activity Scale is a “5” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 2) (last Friday – 3) (Monday – 2) (Tuesday – 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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One thought on “Gold Continues to Settle

  1. Richard, thanks! And thanks for sharing your great posts every week!

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