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Gold Firm into the Weekend

Gold Firm into the Weekend

Commentary for Friday, June 7, 2019 – Gold closed up $3.60 today at $1341.20. It opened rather flat, woke up and pushed nicely to session highs on a weak jobs report and settled lower for a modest gain. Short term technical territory belongs to the bulls but a wider view might suggest some caution here. We were at this level in late February when gold broke lower and eventually threatening $1270.00.

Granted Trump’s tariff policy has created tension and the fact that the Europeans seem to be as dovish as ever on interest rates – they will not rock their financial boat and continue to embrace cheap money. Now consider the notion that the US might lower interest rates, if necessary before year end and it’s easy to see why gold is well bid.

Still – higher gold prices, at least on our end have not created a fresh wave of gold bullion buyers. There have been some but not anything which would suggest we are at 3 or 4 month highs in gold. There is certainly more interest but public is still kicking the tires.

We are seeing smaller to mid-sized public sales into these rallies and premiums on US gold Eagles have moved considerably lower – this is an important dynamic to be watched.

These lower premiums are typical of most large dealers today, indicating that the public is selling into these rallies. Which makes sense if you look at the wider historical view – as I have pointed out gold has challenged the formidable $1350.00 level many times in the past 5 years and in each case has failed to break into new higher ground.

Consequently – I’m not overly excited over this latest rally but it sure beats worrying whether gold is going to hold up at $1270.00 which was the scenario just a few months ago.

Each time however that gold threatens $1350.00 you have to wonder if this time around things will be different. Really, it has been a long time since gold roared and everyone knows that sooner or later gold will make new highs and the dollar will make new lows.

This from Boris Mikanikrezaiboris (London Metal Bulletin) “Central bank gold buying sentiment remained strong in April, judging by the central bank gold reserves published by the International Monetary Fund (IMF) and reported by the World Gold Council (WGC).

 Net purchases by central banks totaled 43 tonnes in April, up 8% from March. Net purchases in the first four months of 2019 amounted to 207 tonnes, the highest year-to-date central bank buying since central banks became net buyers in 2019.

In April, the largest central bank buyer was Russia (15.1 tonnes), followed by China (14.9 tonnes), Uzbekistan (7.8 tonnes), Kazakhstan (4.9 tonnes) and Turkey (3.8 tonnes). In the year to date, central bank gold buying was driven by Russia (70.4 tonnes), China (47.9 tonnes), Turkey (42.7 tonnes), Kazakhstan (16.1 tonnes) and India (12.1 tonnes).”

Stocks are holding up – which is a wonder to me but here is the logic. The DOW pushed higher today on a disappointing jobs report because this fuels the hopes of a Fed rate cut. Wall Street still loves cheap money over prudent fiscal policy.

The Dollar Index has a cold this morning – down a half point obviously helping the gold bulls. And there is certainly a more optimistic view about higher gold prices, perhaps even shorter term. Which gives me some pause – I always worry when the majority of folks are either too bullish or too bearish.

One thing is sure going into this weekend – few have the sand to short gold.      

This from Zaner (Chicago) – “Global equity market were mostly higher overnight with the exceptions again weakness in Chinese markets. Economic news released overnight included Japanese leading indicators which came in slightly softer than expected with coincident indicators coming in much better-than-expected. Swiss unemployment rate was unchanged but a number of German economic readings were all indicative of slowing. In fact German industrial production on a month over month basis fell by nearly 2%! The North American session will start out with a highlight for global markets, the May US employment situation report. May non-farm payrolls are expected to come in around 180,000 to 190,000 versus 263,000 in April. May unemployment is forecast to hold steady at 3.6% while May average hourly earnings are expected to hold steady with April’s 3.2% year-over-year rate. May Canadian unemployment is forecast to hold steady at 5.7% along with a modest net increase in their employment. April wholesale inventories are expected to hold steady with March’s 0.7% reading. April consumer credit is forecast to have a moderate increase from March’s $10.3 billion reading. San Francisco Fed President Daly will speak during early morning US trading hours.

The bull camp was already disappointed with the magnitude of the rally in gold on Thursday and therefore another day of modest risk-on sentiment combined with a Dollar bounce has shifted the tables slightly on the bull camp. While the gold market does not have as large of a slate of different bullish themes as was seen at the beginning of the week several bull themes remain most importantly the prospect of economic uncertainty and that issue will be focused on this morning following the payroll report. News from the jobs sector this week suggests a weak number today especially after the ADP reading fell sharply! In fact some numbers within the ADP report showed massive slowing and therefore traders should be poised for a trend decision following payrolls. However, the Dollar recovery this morning is problematic for the bull camp and August gold sits just above a critical pivot point of $1,331.20 and we think a key trend decision is upon the market this morning. Traders might consider the purchase of July gold $1,335/$1,360 call spreads.

While the PGM markets not consistently benefiting from strength in gold this week the action in gold today will initially be very important. However even a stock market rally today might not serve to lift the PGM complex straight away as we think the markets are lacking specific bullish fundamental forces. In the short term we see the platinum market as the most vulnerable market with risk off negative views toward commodities in general leaving the prospects of a retest of the May low down at $788.30 very high. While all the metals markets showed an in-sync rally yesterday, the complex doesn’t appear to be in a position this morning to suddenly garner steady inflows because of surging safe haven optimism from a soft payroll result. In other words, we continue to think the PGM markets are classic physical commodity markets in need of a “much” better demand outlook just to shake off the sideways action of the last several weeks.

Even with a slight decline to start the trade today it is difficult to take control away from the bull camp in the gold market as a number of bullish storylines have drifted in and out of the markets focus this week and they largely remain in place behind the scenes this morning. Certainly it took a very concerted wave of bullish factors to lift gold to its initial test of $1,350 but with open interest levels well below the highs of the last month it would not appear as if the market has exhausted its buying fuel yet. Obviously a critical pivot point is seen at $1,324.70 and the $1,350 level is resistance and a target but we think a soft payroll reading has a chance of igniting another wave higher. The big risk to the bulls is an as expected or higher payroll reading as that shows the US economy is still holding up despite fears of tariff disaster.”

Silver closed up $0.12 at $14.99. A small pop in silver bullion sales – nothing big but steady.  

Platinum closed up $2.40 at $804.60 and palladium closed up $6.90 at $1349.50.

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 1 thinks gold will be lower and 1 thinks 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: 53 people thought the price of gold would increase next week – 30 believe the price of gold will decrease next week and 17 think prices will remain the same.

Precious Metal Closes & Dollar Strength – June 3 – June 7

Gold Firm into the Weekend

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