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Gold Finishes a Quiet Week

Gold Finishes a Quiet Week

Commentary for Friday, April 5, 2019 – Gold closed up $1.40 at $1290.40. Gold still looks non-committal to me – Monday’s close was $1288.40 so on the week we are up a few dollars. The Dollar Index this week was also flat moving between 97.00 and 97.50 but it closed at the higher end of the range today. Gold opened choppy around $1288.00 sold off a few dollars then bounced higher ($1292.00) on some bargain hunting at least.

The 30 day pricing chart clearly shows the big buzz which began developing in early March has been swapped for a kind of ho-hum attitude – traders are receiving fresh news but gold seems distracted. The good news shorter term is that we seem to be holding around $1290.00 but this market needs to get its mojo back or we could be heading lower.

As we have pointed out in the past the “shelf” around $1280.00 goes back 5 months. Then gold bulls decided to get happy and pushed prices to $1340.00 but the rally just could not break higher. No big surprise – the $1350.00/$1400.00 wall has been in place since 2013.

I believe that physical demand at much above $1300.00 wavers because the typical Asian market simply pulls up and waits for better pricing.

And as mentioned before, as long as the “fear factor” remains absent – the US market yawns.

Why not, stocks are firm and perhaps trending higher, interest rates remain low, hawkish talk from the Fed has all but disappeared, and Europe has walked itself back from a ledge. Yet the President today claimed the FOMC should lower interest rates. 

I think at this point you might want to ask why gold has held up since the big sell-off in 2013.

One reason has to do with some sort of “valuation” understanding. Gold has not exactly reinvented itself from a financial standpoint but it has once again joined the “insurance party”. In other words it’s pretty clear that the dialogue has moved on from the overly pessimistic talk we heard in late 2015 to something more mainstream given the world’s current financial problems.    

Obviously this is pushed by underlying world angst. For now most are buying the political tack that everything is just fine. But I think an honest assessment of both the political and financial world leaves doubt. The English can’t even seem to close the Brexit deal with public support. The Chinese trade deal grinds on and immigration reform stalls. I’m not whining here but doesn’t it seem like it’s getting harder and harder to get anything done?  

Granted the “safe-haven” pot isn’t exactly boiling but our across the counter bullion action is steady. No real whales in either direction but solid interest in typical bullion products.

And premiums are holding up – this is a big inside plus indicating that dealers are not liquidating and looking for the door. So the underlying optimism this market developed over the past 4 or 5 months is still in place but the sideways price action in place since early February has taken some of the sizzle or immediacy out of the physical trade.            

This from Zaner (Chicago) – “We detect vulnerability in the gold market to start today as weakness in the dollar has had little impact, the charts favor the bear case and one can make a case that the dollar could manage to rally off notably weak and notably strong jobs data. We would suggest that some whisper numbers for the payrolls are for them to be soft as in the prior month, and therefore a major fundamental decision point could be seen in a number of markets today. In the end a number giving off strong positive economic signals could result in money flowing to the dollar because it offers the best relative growth prospects, while a very disappointing number, could see money flow toward the dollar in a safe haven move off increased economic uncertainty. However in a slight change of pace exchange traded gold funds saw an inflow of 54,771 ounces which brings the net purchases this year back up to 834,096 ounces. While the June gold contract managed to reject the brunt of the initial washout yesterday, the failure on the charts weakens the resolve of the bulls and emboldens the bear camp. The silver market did damage its charts yesterday and therefore the path of least resistance looked to remain down today, but early chart action today has improved and that suggests silver might be able to delink with gold this morning. In other words it is possible that silver could benefit from fresh physical demand hopes in the event payrolls are “strong” even if gold falters.

With yet another sharp range up extension in platinum overnight the market extends bullishness into another trading session. While some might suggest the market is becoming overbought with a six day $75 per ounce rally, the platinum market in February posted an even larger rally over nine days and it appears to have definitively taken over the leadership role in the PGM complex. However total derivative holdings of platinum notched back away from modern highs posted from earlier in the week and traders should expect a measure of macroeconomic impact from this morning’s jobs data. Obviously platinum has derived some lift this week from improving demand hopes and therefore the jobs number is a critical juncture especially with the platinum market on the weekly charts reaching back up to the highest level since June of last year. While we expected platinum to eventually play catch up to palladium, we are a little skeptical of projecting extended gains in platinum in the event that palladium prices diverge significantly on the downside. Under normal demand and restricted supply, with a mixture of improving investment demand, a return to a $900 to $1,000 range in platinum prices would not seem to be an extreme projection. As indicated, the palladium market appears to have rekindled a volatile trading condition and the market might have little in the way of support in the June contract until $1,292.50. As in many other physical commodity markets, traders should be on the lookout for major financial trend decisions from today’s US jobs figures.

It would appear as if today’s nonfarm payroll reading could set the tone for the rest of the quarter as the markets would be very concerned in the event that another overtly weak number is chained on to last month. As indicated already the charts favor the bear tilt with a series of lower highs in in gold place and yesterday’s downside breakout weakening the resolve of the bull camp. A critical pivot point this morning seen at $1289.50 and it could take a trade back above $1302 to effectively reverse initial bearish psychology.”

Silver closed unchanged at $15.04. This number is still “cheap” so I look for physical demand to continue steady – Monster Boxes and $1000 face Silver Bags are highly prized.  

Platinum closed up $1.00 at $901.00 and palladium closed up $13.60 at $1349.10.  

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 employees think: 7 believe gold will be higher next week none think 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: 46 people thought the price of gold would increase next week – 33 believe the price of gold will decrease next week and 21 think prices will remain the same.

Precious Metal Closes & Dollar Strength – April 1 – April 5

Gold Finishes a Quiet Week

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