Gold Flirts with $1300.00 Again
Commentary for Friday, March 15, 2019 – Gold closed up $8.40 today at $1301.80. Monday gold closed at $1288.80 so on the week we are looking at a gain of $13.00 – pretty flat really although the rhetoric heated up a few times and “choppy” probably best describes this pricing action. What is interesting however is that the Dollar Index has been generally lower these past 5 trading days – moving from 97.5 through 96.5.
This full point loss should have more than supported the price of gold but this has not been the case. When gold was weaker the most likely reason was simply selling pressure. The price of gold hit a 2 week high and traders began to sell into rallies. As the market recovered I think traders bought the dip but whether that was bargain hunting remains to be seen.
It may seem quiet, across our counters at least but there is a great deal going on internationally. The Brexit vote is being postponed – I guess because they can’t get their act together and a delay in this decision is a takeaway from safe haven gold demand.
At the same time heavyweights like Commerzbank see $1400.00 gold by year-end and just the threat of a slowdown as seen in the drop of the New York Manufacturing Survey yesterday may have been enough to push gold prices back above $1300.00 – the thought here being that a slowdown would push the Fed further into inaction or even a rate cut later this year.
For now the shorter term technical picture for gold while sometimes encouraging remains somewhat defensive. These past 12 months we have moved from $1350.00 through $1200.00 back to $1350.00 and are once again seeing that this overhead resistance remains formidable. So live with “choppy” for now and see what the next FOMC meeting has in mind.
The Federal Open Market Committee will remain the major driving force for gold throughout 2019 as folks ponder the fate of shorter term interest rates. The Fed raised interest rates to 2.5% last year and early on promised that we would see 3% in 2019.
But this “probability” is all over the place. Some are saying there is zero chance of further rate hikes in 2019 and rather the Fed will reduce rates by year end as recession fears are realized – gold would obviously benefit.
Others claim that the DOW reclaiming 25,000 is a great opportunity and business will be smoking by year end. This line of thought reintroduces the notion that the Fed will move rates higher to “cool” inflationary forces and gold will move lower.
So take your choice – my bet is that the first option makes more sense because of the gigantic US and world debt which has been created this past decade. Rising interest rates have no place around that much borrowed money – that house of cards simply could not take the heat.
For now Powell’s “patient” approach to higher interest rates rules – and if this gentler approach remains the soupe-du jour (the “e” being intentional) gold will ultimately push the dollar lower and gold higher.
Actually investors have kept the dollar stronger because many have chosen the Green Back over the gold as a hedge in a world of uncertainties. That is the primary reason gold is not looking at much higher prices to date. This preference however is easily forgotten in a world of monstrous debt. Now I’m not suggesting the dollar will crash anytime soon but given enough time this option will become a reality and gold will benefit.
This from Zaner (Chicago) – “Global equity markets overnight were higher with the exception the Australian market. Overnight Chinese house price readings for February came in slightly above expectations while Chinese foreign direct investment came in stronger than expected for the month of February. The Bank of Japan monetary policy meeting yielded a reduction in economic views but no change in rates. From Europe the markets were presented with German and Italian car registrations which were in positive ground but significantly slower than in the prior month. UK car registrations for February showed a significant off the charts decline while French car registrations were in positive territory but showing minimal momentum. German wholesale prices on a month over month and year-over-year basis increased slightly. Italian industrial orders for January came in positive. The North American session will start out with the New York Fed’s March Empire State manufacturing survey that is forecast to have a modest uptick from February’s 8.8 reading. January Canadian manufacturing sales are expected to have a moderate uptick from December’s -1.3% reading. February industrial production is forecast to have a moderate uptick from January’s -0.6% reading. February capacity utilization is expected to have a minimal uptick from January’s 78.2 reading. The January job openings and labor turnover (JOLTS) survey is forecast to have a moderate decline from December’s 7.335 million reading. A private survey of March consumer sentiment is expected to have a moderate uptick from February’s 93.8 reading. The January Treasury International Capital (TIC) report will be released during afternoon US trading hours.
After a significant washout in the prior trading session, the gold market has rebounded noticeably and has managed gains in spite of little direction flowing from the dollar. However the bias in the dollar looks to be pointing downward and that combined with a generally positive metals sector overnight bounce should put the bear camp slightly off balance to start today. The market might be drafting support from what appears to be another delay in US/Chinese trade meetings with both sides suggesting a push back to “at least” April. Gold should be deriving some support from overnight news from an Indian gold Association prediction that 2019 Gold Dore imports would be 280 tons versus only 260 tons in 2018. However that news is partially counter veiled by Indian industry predictions of a slightly soft April & May import period. The gold market should derive some support from ideas that the PBOC is expected to continue to provide support to its economy especially if the Chinese government provides specifics on the timing of recently announced tax cuts. The gold market might also draft some support from yet another delay in the exit vote but the temporary avoidance of a hard exit takes some safe haven support away. While the silver market managed to rise above its 200 day moving average earlier this week, it failed significantly at that level yesterday and remains just under that key pivot point of $15.39 early today and that could signal a key trend decision.
Like gold and silver, platinum sold off sharply on Thursday. Zimbabwean miners, including Anglo Platinum, Impala Platinum and Caledonia Mining have agreed to an 80% wage hike. While this raises the cost of production, it may also ease supply concerns if it reduces the chance of strike activity. Apparently the PGM markets are drafting some support from initial weakness in the dollar but also from hopes that the Chinese will continue to provide stimulus for their struggling economy. Another issue that might lend support to PGM prices came from overnight reports that Anglo American Platinum would indeed yield physical PGM or producing properties to South African communities, following African National Congress efforts to implement Constitutional changes that would allow them to seize private property without compensation. In other words future supply of platinum might be called into question as some mining efforts will be undertaken by private citizens and the government! June palladium pushed through last week’s high of $1,516.80 on Thursday, leaving the next resistance level up at the all-time high of $1,525.80.
While the bull camp looks to control the early action in gold today dollar weakness is minimal and prices appear to have resistance left over from this week’s new high for the move reversal. Initial resistance in April gold is seen at the 50 day moving average of $1307.20 with initial resistance in May silver seen at $15.47. However we do give the bull camp a slight early edge but critical support in April gold must hold at $1295.60 early today to set the stage for a retest of this week’s highs up at $1311.60. Similarly May silver probably needs to hold above $15.27 in the early going to pave the way for a late afternoon test of the $15.55 level.”
Silver closed up $0.15 at $15.25.
Platinum closed up $4.70 at $830.30 and palladium closed up $3.90 at $1535.60.
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 GoldDealer.com employees think: 6 believe gold will be higher next week 2 think 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: 47 people thought the price of gold would increase next week – 41 believe the price of gold will decrease next week and 12 think prices will remain the same.
Precious Metal Closes & Dollar Strength – March 11 – March 15
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