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Gold Did Not Blink Much – Yet

Gold Did Not Blink Much – Yet

Commentary for Wednesday, June 13, 2018 ( – Gold closed up $1.80 at $1296.90 – continuing to hold steady in the face of a hawkish FOMC – for now. For as much as this latest meeting was anticipated I’m surprised there were not more fireworks. Still the markets were very sure that today’s ¼ point hike was already baked into the cake.

But there were a few surprises – the FOMC sounds even more optimistic than it was even last week claiming that steady job growth and low inflation allows perhaps two more hikes this year and this economic picture will remain rosy into 2020. Now that is confidence – but that is what they get paid for so take all of this with a small grain of salt.

Actually, everyone thought the interest rate hike was a cinch so the more significant new information was that the FOMC removed their “accommodative for and extended time” comment seen in the past.  The dollar moved higher just after the Fed move but metals seemed to hang on to the slight gains seen on the day and the aftermarket was up another $4.00!

But considering that gold has seen a $10.00 price range these past 14 trading days I would still call this market unexciting in the extreme. We might perhaps see more of a reaction before the end of trading this coming Friday after the paper traders get a chance to mediate.

So gold continues to confound – even with the specter of higher interest rates. The 6 month price picture tells this story nicely in that we see prices move from a “no interest” $1240.00 last December through “expectations” of $1400.00 in early January of this year. But the fact is that gold needed more than just nice momentum to push above $1360.00 and in fact tried on four occasions between January and April as the bears took control and pushed prices from $1360.00 through $1290.00 where surprisingly this market turned flat most likely waiting for these latest FOMC decisions.

Traditional technical theory would suggest that this latest downward leg will continue to break down perhaps first testing $1280.00 and then $1250.00 but there is that pesky upward channel which began around $1150.00 last December. Anytime there is a pattern of higher “lows” the tea leafs are not so clear and the short paper can cut and run quickly.

I think that is what is happening now – traders expect further weakness but few wanted to place any real money on the idea in a week where the FOMC was meeting, Trump was in the process of threatening world trade and the North Korean meeting was happening.

Gold ignored rising producer inflation numbers today and looks like it has abandoned tariff fears which is amazing. Tariffs are inflationary and Canada has announced that retaliatory tariffs will begin July 1st so like I’m of fond of saying “What is good for the goose and so forth”.

There is also an interesting psychological aspect in play – most people “think” we are in for lower pricing even though this market has sold off considerably since recent $1360.00 highs and might just be worn out. Gold had experienced the typical “pile on” as momentum players seek to take advantage of its move recent price direction – that being lower.

So what now? I think you can expect more of the same – relatively flat and unexciting is the name of the game for now – gold really needs some kind of special catalyst at this point.

As you already know I’m not big on a large drop in prices even as these higher interest rates play out. And even higher interest rates might have a short shelve life if stock prices begin to worry about how higher interest rates will change the bottom line. Also note that while the US might see an improving future most of the rest of the world sees stagnant growth and worrisome debt.

Finally the American public completely ignored this most recent rate hike – business one way or the other is typically “summer” quite.

This from Zaner (Chicago) – “While the gold market remained locked in a trading range around the psychologically important $1,300 level yesterday, signs of more Dollar gains, weaker oil prices and a lack of incendiary geopolitical issues today leaves the bear camp with an edge to start. However, the action in the dollar has resulted in a fresh 6 day high and fear of the Fed should prevail until the decision is known. While gold might fade further under a rate hike, a move is widely anticipated already and the bear camp in gold might need a hike and hawkish forward guidance to sustain moderate pressure on gold beyond the initial washout. Clearly the apparent progress in the North Korean peace talks deflate safe haven interest in gold but the market might draft minimal support from fresh escalation of tensions in Yemen with a Yemini attempt to re-take a port city. While gold should have a tough day in the event rates are hiked, bargain-hunting buying should be considered in silver and other industrially-based precious metals markets if there is an FOMC generated washout in those markets. In fact with the markets widely anticipating a Fed hike today, one would expect the washout off the move to be a spike low washout especially if the Fed acts and appears to be close to neutral. However, given a Fed hike today and a rally in the Dollar Index back above 94.00, that could result in a spike low in August gold below $1,286.

Despite weakness in the entire metals complex for most of the Tuesday trade, the palladium market remained near the top of this week’s range into the third trading session of the week but a noted reversal/failure unfolded and it is clear that the market is fearful of today’s Fed meeting. It is also possible that September palladium prices above $1,106.00 are expensive in the current context and that a washout is needed to balance the technical condition and bring in demand orientated bargain hunting buyers. The palladium market should see solid support rise up to $990.80 and the failure to hold that level into the Fed might signal a temporary pulse down below $982. Given that platinum basically tracked in a range for the past month and a half while palladium rallied, it should be the least vulnerable to a hawkish Fed result today but significant chart damage overnight, spillover pressure from gold, a higher Dollar and a lack of positive physical commodity market optimism sets up a target today down at $892.70 in the July contract.”

Silver closed up $0.10 at $16.95.

Platinum closed up $1.00 at $900.50 and palladium closed down $8.10 at $1019.50.

This is our usual ETF information – All Gold Exchange Traded Funds: Total as of (6/6/18) was 69,536,427.  That number this week (6/12/18) was 68,853,804 ounces so over the last week we dropped 682,623 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 (6/6/18) was 650,807,745.  That number this week (6/12/18) was 650,752,870 ounces so last week we dropped 54,875 ounces of silver.

All Platinum Exchange Traded Funds: Total as of (6/6/18) was 2,335,593.  That number this week (6/12/18) was 2,344,079 ounces so over the last week we gained 8,486 ounces of platinum.

All Palladium Exchange Traded Funds: Total as of (6/6/18) was 1,016,793.  That number this week (6/12/18) was 1,001,831 ounces so last week we gained 14,962 ounces of palladium.

The Unscientific Activity Scale is a “2” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 3) (last Friday – 2) (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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