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Gold Holds $1200.00 – Barely

Gold Holds $1200.00 – Barely   

Commentary for Friday, Aug 31, 2018 (www.golddealer.com) – Gold closed up $2.60 at $1200.30 so gold remains in the “$1200.00” fight and on the week lost $8.70. The relatively bullish leg which began mid Aug at $1160.00 however looks tired as gold struggles to remain above $1200.00. I really don’t expect much going into the long Labor Day Weekend and with domestic markets closed this coming Monday next week’s pricing might remain subdued.

Surprisingly gold yawned as the Turkish lira and the Brazilian real tanked – you would think that with serious paper currency problems in larger and developed countries like these the safe-haven aspect of gold would be front and center. And what are the chances the Democrats will edge out the Republicans in the House? Don’t laugh – the Trump administration has enough trouble on its hands with the current Special Council – not that this seems to bother him much.

The point being that if the Democrats win they might bury him with legal subpoenas raising questions about propriety, marital fidelity, tax questions, you name it. Could they win? Election 2018 – FiveThirtyEight claims that the chance of the Dems winning control is 72.4% – a surprisingly high number in my mind.

Whether any of this holds water remains to be seen but consider the distractions. Could this turn into a Black Swan that tips the Stock Market? Not likely but an interesting question.

The confidence level in the US is sky high – Wall Street is happy – the US continues to add jobs to the recovery and talk higher interest rates. Even serious geopolitical problems are swept aside by gold traders – tariff issues, a potential big plus for gold and it again yawns.

This past week the Dollar Index has moved from 95.5 through 94.5 and while this supports pricing in fact gold has struggled to hold on to last week’s higher energy and higher prices.

The close today ($1200.30) suggests the positive buzz created since mid-August might be turning into a failed opportunity to discourage the bears and another test of support ($1160.00).

It’s not that I think the bears will make a roaring comeback – they might be as worn out as the bulls – lacking energy during these traditionally slower summer months. So I expect smaller and smaller price swings. A back and forth market until the next FOMC meeting (late September).

And even their decision on interest rates is not as clear as the bears might suggest. There is no need for the Fed to tinker with an economic train which is gaining speed – they could stand pat. This would be a plus for gold and bring those waiting on the sidelines back to safe haven buying.

If on the other hand they do raise (the most likely scenario) – this was almost universally expected and has already been priced into the market.

One thing is sure – there will be some fireworks – nothing huge but something which will bring the usual bull/bear conversation back into balance.

I think most traders still have big questions as to whether gold has reached the “bottom” of the big price blow off which started above $1800.00 in 2011.

For my money the fact that gold has traded on either side of $1200.00 since 2013 suggests that current pricing should be taken more seriously by the physical metals community.

Does gold have to test the $800.00 level last seen in 2008 before it’s “cheap enough?”

All that being said the two big game changers for gold remain inflation and dollar strength.

For a gold stampede to begin look for either inflation to move higher or the dollar to move lower. Obvious yes and I think it’s only a matter of time before we experience both events. In other words I’m not talking about 20 years from now – either event could be right around the corner.

We have been lucky on the inflation front and the most recent news from the EU reflects a similar picture – inflation rates at less than 2% according to Reuters. The Dollar Index since 2014 has traded between 90.00 and 100.00 but a number closer to 80.00 was considered “normal” for more than a decade.

Still even at this point don’t overlook the obvious, both gold and silver offer substantial discounts to old highs. This view is typically buried on the back shelf when it comes to public opinion but should also be taken more seriously.

These slower summer days will soon be over – interest will move higher in third world countries with currency problems, the gold “holiday” or Festival of Lights season is approaching (October/November). Asian demand, already reasserting itself because of lower prices will gain speed as this market either gets cheaper or stabilizes at current levels.

So trading has all the ingredients necessary to present a different pricing and psychological  before the end of this year. Let’s see if gold and silver once again surprise the “experts”.

This from Zaner (Chicago) – “While it might be premature to suggest that the gold and silver markets have “shifted” their focus away from physical commodity market fundamentals and toward safe haven issues that would appear to be the case over the last 12 hours. The idea of a shift in trade focus comes from the fact that the dollar is only minimally lower and there is a risk off wave from lower equities and yet gold and silver have forged impressive rallies overnight. The bull camp appears to be embracing ideas that the US is preparing to quickly ramp up additional tariffs on 200 billion in Chinese imports and while that threat was already lodged, comments from a presidential speech overnight have increased anxiety on the spiraling trade war theme. It is also possible that gold and silver are drafting some safe haven buying support off very weak action in a number of global currencies. However, seeing the Indian rupee repeatedly positing new all-time lows dampens purchasing power by an extremely important global gold demand player. Certainly, it might be premature to expect ongoing weakness in Turkish, Brazilian, Argentine and South African currencies the action this week, but it is possible we are seeing the beginning of an “anxiety event”. Minor negatives for gold overnight came from the Congo where gold output in the first half of 2018 gained by 15.8% over 2017, and from news that Gold SPDR holdings dropped by 66,262 ounces last night.

The palladium market once again ranged up and in turn reached the highest level since a big range down washout back in June but the market is showing some modest retrenchment to start this morning in a fashion that breaks its relationship with gold and hints at a corrective track. From a short term perspective, the palladium market is overbought and a certain measure of long palladium short platinum spread unwinding might be unfolding today. Certainly the palladium market was oversold and extremely cheap into the August lows but the market has returned to levels above $950 and we no longer consider palladium to be cheap. In fact, without evidence of a US/Canadian trade deal today and with worsening US/Chinese relations, rising currency market concerns and a risk-off vibe in global equities, we think palladium has entered a zone where the risk of being long is greater than the reward of being long.”

Silver closed down $0.04 at $14.44 – pretty cheap by any account. This very low price for silver is creating more interest. US Silver Eagle sales have grown decidedly this month with sales of 2018 coins tripling this month from July.

Platinum closed down $4.60 at $785.90 and palladium closed up $16.60 at $980.30.

This is our usual ETF information – All Gold Exchange Traded Funds: Total as of (8/22/2018) was 65,978,472.  That number this week (8/29/2018) was 65,768,771 ounces so over the last week we dropped 209,701 ounces of gold.

The all-time record high for all gold ETF’s was 85,112,855 ounces in 2013. The record high for Gold ETF’s in 2018 was 70,728,953 and the record low for 2018 was 65,768,771.

All Silver Exchange Traded Funds: Total as of (8/22/18) was 650,620,172.  That number this week (8/29/18) was 643,785,208 ounces so last week we dropped 6,834,964 ounces of silver.

All Platinum Exchange Traded Funds: Total as of (8/22/18) was 2,339,615.  That number this week (8/29/18) was 2,353,483 ounces so this last week we gained 13,868 ounces of platinum.

All Palladium Exchange Traded Funds: Total as of (8/22/18) was 1,019,482.  That number this week (8/29/18) was 1,006,104 ounces so this last week we dropped 13,378 ounces of palladium.

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: 47 people thought the price of gold would increase next week 35 believe the price of gold will decrease next week and 18 think prices will remain the same.

Precious Metal Closes & Dollar Strength – Aug 27 – Aug 31

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