Commentary for Tuesday, May 15, 2018 (www.golddealer.com) – Gold closed down $27.60 at $1288.90. The reasonably long standing fight between the bulls and bears was finally decided by the dollar – the bears won. The Dollar Index moved from a low of 92.65 to a high of 93.44 because US economic numbers are going further into the green. The Empire State Index was another big plus and Cleveland Fed President Loretta Mester said that the Fed could raise interest rates to 3% – bullish to be sure. All of this pushed the dollar higher and gold lower. At the same time gold ignored the Palestinian crisis it was just in a bad mood.
Actually gold could have broken either way but hinted that “lower” might be the direction when the pricing trough in place since December broke down at $1320.00.
What had everyone guessing was the reasoning behind why gold had held up between $1320.00 and $1350.00 for months even though the FOMC had been talking on the hawkish side since the beginning of the year.
So technically gold has broken down – the close today ($1288.90) is now below the 50 Day Moving Average ($1327.00) the 100 Day Moving Average ($1327.00) and the 200 Day Moving Average ($1307.00). Gold opened slightly weaker but soon broke down at the important $1300.00 level and really everyone ran for the door. This is typical – paper traders are quick to sense a momentum change and pile on became the name of the game.
The next few trading days should be interesting in that gold broke down at the higher end of a party that began last November at $1240.00 and approached $1360.00 before losing momentum. We should see more selling – the low last year was $1150.00. But keep in mind that $1280.00 has significant technical support and this number is also in the area we saw a pop in bargain hunting across our counter in October of last year.
May you live in interesting times as they say – I think the Asian trade will reassert itself once gold stabilizes.
It is difficult to say just how dramatic higher interest rates will play out with the price of gold because what is good for the goose is good for the gander – higher interest rates certainly impact gold but they also impact the price of stocks. Investors might re-balance – taking profits in stocks and buying what might appear as undervalued gold bullion especially if inflation reenters the conversation. Gas prices in California moving higher – competition is beginning to push wages higher and ask whoever shops for your family how prices at the grocery are doing.
But my sense is that while prices will most likely stay defensive they will not fall out of bed. Let’s wait and see – our phones are beginning to ring – it looks like we are busy just because the past few weeks have been so quiet. One thing is sure – the buying public like cheaper.
This from Zaner (Chicago) – “Gold and silver weakened further overnight as the dollar index continued to make gains following its bounce yesterday. The dollar ended a three-day selloff yesterday, and this seemed to pull any remaining support from the precious metals after the safe-haven flows of recent weeks had eased. Gold and silver saw some additional safe-have outflows yesterday after global stock markets rallied on hopes for improved trade relations between the US and China after some supportive comments by the US president. Comments from the Cleveland Fed President Mester stating she supports a gradual rise in interest rates lent further support to the dollar. The release of US retail sales today could give the market something to chew on after the relatively quiet news day on Monday. Lacking any flare-up in geopolitical concerns, gold and silver would seem to need noted weakness in the dollar to resume their uptrend, and this may be hard to come by if economic data is strong and geopolitical concerns continues to ease. The strife in Gaza has the potential to lend some safe-haven support if it spreads.”
Silver closed down $0.38 at $16.19.
Platinum closed down $17.70 at $893.80 and palladium closed down $12.50 at $985.40.
The GoldDealer.com Unscientific Activity Scale is a “4” for Tuesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 4) (last Thursday – 4) (last Friday – 3) (Monday – 2). 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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