Gold Heads South
Commentary for Friday, March 1, 2019 – Gold closed down $16.40 today at $1296.40. We closed at $1325.90 last Monday so it’s been a tough week – down $29.50 – time for a martini. No one is happy about gold’s 30 day chart pattern – we have moved from a sideways and finally optimistic move from $1310.00 through $1340.00 with talk from the bulls that gold will again challenge and overcome that $1350.00 cap – in place since 2014.
And with all the political and international angst this talk was well placed. But as the 30 day gold pricing chart points out the bulls will once again have to eat some humble pie – for now. Prices tumbled lower and because gold has failed to hold the higher ground since its highs in mid-February the technical folks will be looking for more testing of the downside.
But here is where this gets a bit dicey – is the gold rally really over or is it just back to moving sideways? While this latest weakness clears out the very bullish conversation of gold breaking to the upside it sets up an already familiar secondary scenario.
This “look” asks a question about “value” which looks at the tea leafs less passionately. Questions like where is the physical demand coming from and does the dip in prices recover because of bargain hunting?
This more “optimistic” look puts a better face on momentum turnarounds. And historically this has been the case if you look at pricing failure these past 5 years. In other words when gold could not move past the summit ($1350.00) it moved lower and consolidated for another attempt.
Big deal or no big deal and what does this have to do you with you – the interested party?
From the dispassionate standpoint gold is still dealing with old and formidable enemies.
Look at the dollar – the index’s most recent low is 95.83 and at the present we are looking at 96.23 – case closed short term – and what about the latest inflation news – still surprisingly flat and within FOMC guide lines. Second case closed.
Like I said in the last newsletter – gold cannot exist for long on buzz alone. Or on what “should” have happened with all this fiat paper money floating around.
Today’s paper traders and even committed physical buyers will move forward on buzz but to climb that “wall of worry” they need consistent price encouragement.
In my mind that means either a return of inflation or a weaker dollar. Either is still in the offing (an important point) but neither has sufficiently defined itself to sustain higher prices.
So look for further consolidation of prices. But I don’t see a big move to the downside and in fact there is always enough going on in the world to upset the financial apple cart and support gold.
Today is a good example – prices dropped in both gold and silver and our phones were active. Plenty of buyers – and sellers – that should tell you there are people paying close attention and thinking about how all of this world turmoil fits into the gold and silver pricing picture. The take away here is that this latest move to the downside may set up the big blow off everyone is looking for when there is a momentum shift. Believe it or not this is good for the market – it cleans out all the weak hands and encourages cheap buyers.
I think most of the trade still believes this market has plenty of legs. How could they not? The metals are cheap relative to old highs – world debt continues to accumulate at record levels and there is no country that has a realistic answer as to how the money will be repaid.
Look for gold to shake off this latest setback and again challenge $1350.00 – perhaps several times in 2019 once the bruised bulls get back on their feet.
When will gold seriously break to the upside? Who knows – but I think you are closer to that time now than you ever were a few years ago. One thing is sure – it will eventually push above this tough overhead shelf – that’s just the nature of the precious metals.
And when it does it is game on for new all-time highs.
This from Zaner (Chicago) – “Global equity markets overnight were higher with the exception the RTS Index. Economic news released overnight included Chinese February Caixin manufacturing PMI which came in better than expected at 49.9 which is nearly on the growth/no growth line. Overnight Japanese February Nikkei manufacturing PMI readings came in better than expected. From Europe the market saw Italian manufacturing PMI which bested expectations but came in below the prior month. However private French manufacturing PMI readings came in slightly better than expectations and better than the prior month. Also from the euro zone overnight were German unemployment readings which showed a much larger drop than was expected with the unemployment rate remaining at a record low level. Overall Euro zone private PMI manufacturing readings came in better than expectations but softer than last month. Mortgage lending activity in the UK showed a slight softening but an expansion of consumer credit. UK private manufacturing PMI readings came in right on expectations but softer than the prior month and finally euro zone HICP inflation showed as expected data. The last and perhaps most important data point from the euro zone overnight came from the EU unemployment rate which came in below expectations but unchanged from the prior month. The North American session will start out with December personal income that is expected to have a modest uptick from November’s 0.2% reading. December personal spending is forecast to have a minimal downtick from November’s 0.4% reading. Fourth quarter Canadian GDP is expected to have a moderate downtick from the previous 2.0% annualized rate. The February ISM manufacturing index is forecast to have a moderate decline from January’s 56.6 reading. A private survey of February consumer sentiment is expected to have a modest uptick from the previous 95.5 reading. Atlanta Fed President Bostic will speak during early afternoon US trading hours. Earnings announcements will include Foot Locker and Tribune Media before the Wall Street opening.
Obviously the technical action in the gold market yesterday and again overnight has been very discouraging for the bull camp, as the range down move has now pushed prices down to the lowest level since mid-month. In fact, the range was rather significant Thursday and volume picked up in a fashion that suggests a wave of longs is rushing to the exits. Part of the washout in gold might be the result of a slight reduction in supply threats after a South African Court ruled against several Union strikes. Apparently chatter overnight of a slight increase in Asian gold demand, off recent the corrective action, has failed to cushion the market which in turn suggests many buyers on the sidelines want even lower pricing to be enticed into positions. In retrospect the dollar appears to have seen yesterday’s US growth readings as supportive and given the upside extension in the dollar and the potential for a consistent dollar index trade above 96.00m gold looks to be headed to the February low of $1304.70 and perhaps even 1300 in the event that US scheduled data later this morning results in a higher high trade in the dollar above 96.30. With gold continuing lower today, May silver might see a quick slide below $15.50.
While the palladium market spent the majority of the Thursday trade in positive territory, it should be noted that volume since the February 19th range up spike has been very high and open interest has been declining. In other words, the palladium market appears to be giving off some form of an intermediate top and recent action could be seen as a psychological top because of the even number $1,500 level has coincided with a sideways consolidation. While strength in palladium prices earlier this week leaves the overall bias pointing upward, the market this morning did not benefit from news of a rise in ETF holdings and the market hasn’t embraced bullish auto consumption forecasts from ANZ (Australian & New Zealand Banking Group). However, the market has recycled a story highlighting buying by a major Russian palladium miner for the purpose of meeting future demand to end-users, and to us that suggests the market is in need of fresh bullish revelations. However, there continues to be the potential for strikes in South Africa even if a court has temporarily reduced near term potentials, but that is a story that is more supportive of platinum than palladium. While the platinum charts were more bullish than the palladium charts earlier this week, that condition has shifted 180 degrees with the platinum market ranging up, reaching and then recoiling from the psychologically important $880 level, and more importantly taking out yesterday’s low this morning. While Platinum derivative holdings have now reached up to the highest level since August of 2017 (which suggests investors continue to buy), we are a little discouraged by the fact that the last three weeks rally in platinum has been accompanied by an 8,000 contract decline in open interest (which is greater than 10%).
Unless US scheduled data surprises with definitively weak data today, the path of least resistance looks to be down in gold and silver. In fact, chart damage has been significant and that should push gold and silver buyers to the sidelines until even lower more attractive levels are seen. Logical downside corrective targeting in April gold is seen at $1,304 and then again down at $1,294. As mentioned already silver has a key pivot point early today at $15.50 and the failure of that level would target a slide down to $15.44.”
Silver closed down $0.37 at $15.17.
Platinum closed down $11.40 at $861.60 and palladium closed up $4.60 at $1536.60.
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: 7 believe gold will be higher next week – 1 thinks 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: 44 people thought the price of gold would increase next week – 32 believe the price of gold will decrease next week and 24 think prices will remain the same.
Precious Metal Closes & Dollar Strength – Feb. 25 – March 1
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