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Gold Finishes the Week in the Green – Barely

Gold Finishes the Week in the Green – Barely           

Commentary for Friday, May 11, 2018 ( – Gold closed down $1.80 today at $1319.00 – disappointing really considering the market was up $9.00 at one time. This week saw a $9.00 advance in the price of gold which was also anticlimactic considering the amount of fireworks on the geopolitical front.  Still the close today is above gold’s 200 day moving average ($1306.00) meaning it continues to fight for higher ground.     

This market does feel like there is another shoe to drop if you look at the 30 day pricing chart. Gold topped out at $1350.00 and bottomed out short term at least just above $1300.00. But the fact that the bulls have fought back to the $1320.00 level makes the conversation interesting.

So what do you think? Was gold oversold because the dollar was so strong and this week created some bargain hunting? Or did the turbulent Trump/Iran problem provide enough angst to push those looking for better prices into action? Did lower than expected inflation numbers and the resultant FOMC inaction suggest a more dovish approach to higher interest rates?

Of course the jury is still out but everyone and their brother is watching this latest bounce to higher ground because it will prove pivotal in determining gold’s shorter term fate. In other words is this simply a short term bounce created by minor safe haven buying or will the trough pricing between $1320.00 and $1360.00 hold up or not? For the purist gold’s most recent low is troubling ($1305.00) suggesting that a breakdown has already begun. But pushing back to the $1320.00 mark is also encouraging.

Without more fireworks gold could continue to weaken testing $1300.00 and then $1280.00 but generally speaking I think most feel that gold should be fairly priced now approaching a 30% discount from all-time highs.

I don’t think this view is held by the American public but it might be what has kept gold at the higher end of its current trading range by the world in general.

As usual the Dollar Index is at the center of the discussion. This past month the index has been very strong moving from 89.00 through 93.00. Yet the price of gold stayed in the fight and today you can see that the index has weakened somewhat touching 92.40 before pushing a bit higher.

What makes the conversation more complicated is that the academics know that the index is stronger because the US economy continues to improve. But the dollar’s run to higher ground is old in the extreme. In January of 2014 the index was closer to 80.00 so it makes sense to at least question dollar strength given all governments need weaker currencies to remain competitive.

The next FOMC meeting will be June 12th and 13th. They may raise rates another ¼ point but who knows for sure so for now just the threat of this is good enough to contain the bulls.

But keep in mind that any real financial threat will trump interest rates. The “fear” factor is missing from the gold dialogue at the present. This is unfortunate in the sense that fear in reasonable amounts is good for the human race – it keeps everyone honest.

And in my mind there should be at least concern about how things are going both in this country and overseas. Yet consumer confidence numbers are the strongest seen in a decade. Perhaps this alone is enough to suggest that caution is not a bad idea.

With trillion dollar deficits now on the table you would think there should be more discussion especially because it’s difficult to imagine how large “a trillion” is. Take a minute and Google this comparison it will be an eye opener – a trillion dollar deficit is an earth wake.

The fact that gold bullion is virtually the only investment which offers no third party risk should be part of the “safety canon”. It is the final arbiter of value in a world creating fiat paper currency at an unprecedented rate. I know you have heard this before but historically this central bank game of cat and mouse really should be held to a higher standard before it’s too late.

Finally note that premiums on US Gold Eagles and Buffalo are creeping higher. This means the oversupply we have seen for months is moving lower.

This from Zaner (Chicago) – “While the tensions in the Middle East remain high headline flow to start today hasn’t rekindled fresh anxiety. In fact some European leaders are openly supporting economic activity with Iran and the Iranian leader is suggesting their oil exports will not be noticeably reduced as a result of the stronger US sanctions. While gold and silver might lack a definitive safe haven buying interest to start today, this week’s US economic data (particularly US inflation data) leaves the dollar vulnerable to both macroeconomic and interest rate differential selling and that has counter vailed the slight safe haven downshift. Furthermore with the dollar early this morning sitting just above yesterday’s range down spike low and the failure to hold 92.39 today could be a development that provides gold with a definitive currency based lift. The gold market might derive some minimal lift from a world Gold Council report that North American gold ETF inflows for the month of April reached the highest level in seven months. One can also suggest that gold and silver leave this trading week with much less concern/pressure from the global rising rate threat. It goes without saying that tensions in the Middle East continue to simmer and that should leave a bid under gold and silver in today’s trade. It should be noted that gold saw fresh evidence this week of further declines in South African gold production and that news is accentuated by the opening wage negotiating request for a large 37% increase from the national union of mines. The current agreement being negotiated by the national union of mines expires July 1st. Certainly the gold market has focused on the dollar recently and international safe haven stories, but it is important to keep in mind that South African mining output in the most recent monthly figures contracted at the largest rate in two years.

In addition to spillover lift from the gold market yesterday, the PGM complex probably saw fresh buying due to favorable chart breakouts and from momentum buyers. We also think the markets were playing catch up to news earlier in the week of a South African PGM production decline of 6.1% in March, especially since that decline follows a 13.3% decline in output in February. While the threat against Russian palladium supply is not “front and center” right now, that issue remains in the background and that also makes the South African production travails more important. With the recent platinum noncommercial and non-reportable net long falling down to 16,420 contracts as of May 1st, one could suggest that the May lows represent a “mostly liquidated” condition and the rejection of the $900 level suggests strong value has once again been found at the $900 level in July platinum. Not to be left out, the palladium market also ranged sharply higher and reached the highest level since a big range down washout in late April and it has don’t that in a fashion that suggests the market is poised to claw its way back above $1,009.”

Silver closed today unchanged at $16.68.

Platinum closed up $1.90 at $922.40 and pallidum closed down $8.70 at $987.40.

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: 2 believe gold will be higher next week 5 think gold will be lower and 3 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: 25 people thought the price of gold would increase next week 34 believe the price of gold will decrease and 41 think gold prices will remain the same.

Precious Metal Closes & Dollar Strength – May 7 – May 11

The Unscientific Activity Scale is a “3” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 4) (Tuesday – 4) (Wednesday – 4) (Thursday – 4). 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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