Gold Higher on Job’s Bust
Commentary for Friday, March 8, 2019 – Gold closed up $13.20 today at $1297.00. It closed this past Monday at $1284.80 so on the week we were up $12.20. No big deal but it’s important that we are once again challenging $1300.00.
So the question posed in our last chat as to whether gold was over-sold has been sorted out to some extent. Yes, it was but today’s action was helped by yesterday’s talk that business in was again in trouble and the flop of US job’s creation in February.
The “flop” is probably more important because it might suggest that the US economy is not as rosy as Washington claims and therefore interest rate hikes in 2019 are again on shaky ground.
There is some recessionary talk but this is premature – we are doing just fine, debt and all as more and more money is borrowed and poured into this economic machine. It’s interesting that while job’s growth was a bust, wage gains are strong laying the foundation for higher inflation.
It should be obvious that this fine mess we have gotten ourselves into has a dark side – but that is a story for another day. For now gold has punched higher, bouncing off that recent bottom ($1280.00) and that is good enough for me going into the weekend.
Overhead resistance at this point looks like $1310.00 and any close above that would mean we are back to struggling with that old question of whether gold can sustain pricing above $1350.00.
Needless to say our physical business moves between very quiet to crazy depending on whether gold is testing recent lows (crickets) or is developing momentum above $1300.00 (we are crowded and the phones are busy). And I would not place too much weight on today’s job’s flop but a failure such as this does point to how edgy the gold market remains, even at the higher end of its current pricing structure. One day the higher price magic disappears and the next day it’s back and people are enthusiastically buying again.
So in the meantime expect this choppy, on again off again market to continue while watching the dollar. This dynamic is still married to FOMC interest rate changes and the price of gold hangs in the balance, until inflation once again visits our home. I remain cautiously optimistic but want to see further confirmation that today’s big awakening has more substance.
This from Reuters – The ECB slashed its growth and inflation forecasts for 2019 and lowered those for 2020 and 2021 on Thursday, acknowledging that Europe’s slowdown was longer and deeper than earlier thought.
“The good news here for gold is that the interest rate environment globally is unlikely to move much higher,” Bart Melek, head of commodity strategies at TD Securities in Toronto, with reference to the ECB statement.
“We do have reason to believe the U.S. dollar will be firm for now and that historically tends to suppress gold prices. But at these levels, gold is still very supported at $1,275 and $1,285.”
This from Zaner (Chicago) – “Gold was higher overnight on more concerns about the global economy and a somewhat weaker dollar. China’s total exports fell 20.7 percent in February, and their net exports fell 15.5 percent, elevating concerns about the state of their economy and the global economy in general. US Ambassador to China Terry Branstad said no meeting between President Trump and Chinese President Xi has been set because neither side thinks they are close enough to a deal. This is in sharp contrast to the optimism seen a week ago. As reported yesterday, China expanded its gold holdings for the third straight month in February. The World Gold Council expects global central bank buying to reach its highest level in decades, and many analysts are citing this is a primary reason to be long-term bullish towards gold, as Russia “de-dollarizes” and China works at diversifying its foreign-exchange reserves. After the dovish turn by the ECB yesterday, the trade is focusing on the monthly US jobs report this morning. A weak report could turn the dollar bearish and send gold higher, especially in light of the market’s oversold status. However, a strong number would suggest the US economy is the leader of the pack, which could also mean the dollar will be the leader, and this would not bode well for the metals. May silver was also higher overnight. It too is oversold, but it may have less to gain on short covering and be more vulnerable to further the downside if the stock market stays weak.
Platinum was near unchanged this morning after attempting to push lower overnight. The market had another sharply lower day yesterday as it reacted poorly to the dollar strength and concerns over the European economy. The market was already reeling from an industry report this week calling for the global platinum surplus to extend for two more years. The April has moved back into its December-mid February trading range from $780.90 to $830.50, and those levels may define its range over the near term. We would add that $780.90 is probably critical support, as a move below there could initiate another leg down. If the jobs data turns weak, platinum could draw some support from a rally in gold. June palladium was also near unchanged overnight, as it continued along its consolidation path in the wake achieving another new all-time high last week. Palladium has a long term bullish fundamental story, with a global deficit expected to continue this year and perhaps next. There is still no sign of a top. Look for support in June palladium at $1,460.50, with resistance at $1,503.00.
The key decision point may be the monthly US jobs report, as a weak number could spark some short covering in gold and silver, while a strong number could send the markets on another leg lower. An initial retracement of the recent break in gold puts an initial target on a rally up at $1,307.20, which coincides nicely with the 50-day moving average at $1,305.80. Look for support at $1,273.20. A similar retracement point in May silver would be $15.485, while the 50-day moving average comes in at $15.431. Look for support at retracement objective down at $14.938.”
Silver closed up $0.31 at $15.27. This market remains cheap and “hot”, Monster Boxes Rule.
Platinum closed up $0.70 at $816.00 and palladium closed down $23.40 at $1489.00.
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: 8 believe gold will be higher next week – none 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: 39 people thought the price of gold would increase next week – 35 believe the price of gold will decrease next week and 26 think prices will remain the same.
Precious Metal Closes & Dollar Strength – March 4 – March 8
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