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Gold – Jobs Miss / Gold Higher

Gold – Jobs Miss / Gold Higher

Commentary for Friday, Sept 3, 2021 ( – Gold closed up $22.20 at $1830.90 and silver closed up $0.88 at $24.76. The bulls finished the week with a smile as the US jobs number “missed” and the Dollar Index moved lower pushing gold higher. Still, traders have talked “tapering” into the ground. The sad fact is there are still too many moving parts and unanswered questions when it comes to US quantitative easing. Remember that not too long ago most governors favored “tapping” the economic brakes. And that conviction is still alive and well. But when Chief Powell chose a less aggressive stance waiting for more economic data traders continued to embrace the idea of buying the dips and selling the rallies. Today’s failed jobs data has now added some zip to the party. The “print” was 235,000 jobs versus an expected number of 720,000 so the miss added to the bullish gold scenario, at least for this week. But gold must forge higher prices next week or this latest good news will turn into what Roman statesmen Marcus Cicero would call a tempest in a tea pot. Last Friday gold closed at $1816.60 / silver at $24.06 – on the week gold closed up $13.40 and silver closed $0.70 higher. Both still holding a surprisingly tight range considering all the whoopla from the Washington deep thinkers.

We will be closed Labor Day. The Post Office and commodity markets are also closed.

The good news is that delivery on 2021 US Gold and Silver Eagles is getting better (still not “normal” but improving). And we are finally receiving early .9999 fine silver round orders. The bad news is that “any new orders” are still 2 to 4 weeks coming from the manufacturer. My guess, however, is that delays will soon shorten. 

Should you decide to use our Delayed Delivery Program please talk with your service rep and understand how this program works. It is handy if you want to lock in the price “now” and insist on new product – but is not for everyone. Just like us – you must pay upfront to “lock in” prices and you can’t “change” your mind. So, unless God has blessed you with patience, please ask your rep for other options and thank you for your understanding.

On Monday the gold market looked a bit defensive. Typical these days above $1800.00 as traders continue to buy the dips and sell the rallies. So, expect a round of profit taking on the short to medium term. At the same time last week’s drop in the Dollar Index has steadied and is moving higher (92.75). The fact that the dollar did not continue to sell off will present gold with further challenges. But for now, the technical picture remains sound as gold consolidates.

Reuters – “Overall, (the) monetary policy background will remain accommodative and there are uncertainties around COVID-19 Delta variant, Chinese slowdown concerns, geopolitical tensions. All these factors sort of provide bullish backdrop for gold prices,” said Harshal Barot, a senior research consultant for South Asia at Metals Focus. “Powell laid out a clear distinction between tapering of bond purchases and interest rate hike, even though tapering might start this year, a rate hike is far away,” Barot added. In a virtual speech at the Jackson Hole economic conference on Friday, Powell offered no signal on when the central bank plans to cut its asset purchases beyond saying it could be “this year” and indicated it would remain cautious in any eventual decision to raise interest rates.”

Trading opinion is mixed but many are still worried about gold’s inability to break above its double top ($1830.00). Still the recent forceful surge from $1730.00 through $1820.00 suggests a brighter technical picture and modest safe haven buying. This bullish picture however must continue to perform by bringing in fresh speculative money or risk losing the small buzz that was created just last Friday.

Of course, the problem with the bullish scenario is consistent. After last week’s Jackson Hole conference, the academics and professionals seem content with Powell’s notion that “tapering” is on the table but “when” has once again “drifted into the future” to use a Zaner phrase.

Goldman Sachs believes the dollar will become more stable as the FOMC has once again taken a somewhat dovish stand (Rajan Dhall / Kitco). This new position suggests the dollar might depreciate because Chief Powell has taken the “taper” off the immediate table. Lower inflation rates and slowing economic growth might also allow the Fed to drag its feet perhaps into 2023 before making any changes in its quantitative easing program.

I think 2023 is a bit much but who knows in this wacky world of high finance fiat money. On the short term consider two important dynamics. The now low Treasury rate (1.25%). Any rise in this number will indicate a hawkish shift which could drive metals lower. And the upcoming US jobs report this Friday. Good news in this sector may also prompt a hawkish FOMC shift. Keep in mind the Fed is masterful at the art of financial dialogue, but sooner or later will have to modify its in-place programs assuming that Covid does not reinvent itself. On the day gold closed down $7.60 at $1809.00 and silver closed down $0.10 at $23.96.    

Gold on Tuesday dipped on the open ($1802.00) but recovered nicely with some chop to both sides of unchanged. The Dollar Index is down a half point from Friday’s high and remains steady around 92.50 which contributes to gold’s narrow trading range. Reuters claims some investors are staying on the sidelines awaiting jobs information Friday because taper doubts linger. Which is true, as this quantitative easing argument has changed sides a number of times for months creating that wide trading range between $1720.00 and $1830.

Grant on Gold (August 30, 2021) 1. Gold rose 2% last week, closing back above the $1800 level for the first time since August 5. The yellow metal has now posted gains for three consecutive weeks and needs to close above $1811.98 on Tuesday to score a second consecutive higher monthly close. (2) Silver posted a 4% gain last week, the first in the past four. Yet the white metal still seems poised to notch a third consecutive lower monthly close on Tuesday. (3) Platinum closed modestly higher last week, but August is still likely to mark the fourth consecutive lower monthly close. (4) Palladium appears poised for a fourth consecutive lower monthly close, despite solid gains last week and upside follow-through on Monday.

Zaner (Chicago) – “In Asia gold prices overnight climbed near 4-week highs and the US gold market looks to start on a slightly positive note perhaps because of the fresh downside extension in the US dollar. While the gold and silver markets have not garnered notable lift from inflationary developments, seeing 10-year highs in inflation readings in the euro zone is certainly a potential bullish catalyst for the gold and silver trade. In fact, because of weak Chinese manufacturing and nonmanufacturing data overnight, several economists are now expecting the Chinese to implement fresh stimulus programs for their economy. While ascertaining the focus of the gold and silver trade can be difficult at times and the focus can shift without notice, we think the focus of the trade is currently on any news that contributes to the pushing back of tapering timing. Furthermore, the gold market is once again showing signs of tracking inversely with the Dollar which is being cushioned against more significant declines by disappointing US data and persistent increases in the US daily infection rate. In the near term, gold and silver prices are also being restrained by persistent all-time highs in equities as that downplays uncertainty buying of gold and silver and creates competition for investment dollars! As opposed to last Friday where gold and silver posted significant gains on a jump in trading volume, the higher highs for the move and corrective action from those highs yesterday failed to result in significant trading volume and that in turn suggests to us that bullish buzz in precious metals remains modest.”

So, where is the beef? It is missing in action – which is the problem. The expected higher prices in gold have melted somewhat but the technical picture remains positive. The gold bulls are not happy, and neither is anyone else as Reuters points out that US consumer confidence dropped to 6-month lows in August. The public is worried about the rise in Covid-19 infections and higher inflation has dampened the economic outlook.

At the same time stocks both here and in Europe are doing just fine because the Fed has been consistent about pouring fiat money into a closed system. Wall Street does not expect any change in the current “tapering” sentiment because the Treasury yields remain cheap (1.28%). There are plenty of reasons to support bullish gold sentiment, but this market continues to struggle with overhead resistance. Which might suggest that while gold still holds an edge, it may be less significant than it was last Friday. Our shiny friend will need fresh buzz to push higher. On the day gold closed up $6.00 at $1815.00 and silver closed unchanged at $23.96.

On Wednesday the gold market opened choppy on both sides of $1815.00 even though the Dollar Index drifted lower. This tight holding pattern is the result of two factors. First, the lack of follow through after Friday’s jump to higher ground. Second, traders may be nervous over the jobs outlook which will come into focus Friday. This data is expected to be good but if the numbers exceed expectations it might lead to a stronger dollar and pressure gold lower according to Reuters. The US markets will be closed this Monday for Labor Day so expect some squaring or accounts going into the long weekend.

It looks like gold is tired on the short term. Still with the 200 DMA at $1808.00 and the 50 DMA at 1797.00 there does not appear to be much downside. And it’s curious that traders cannot remain convinced of the Fed’s QE intention given inflation numbers in China and the EU are running hot. And the latest US Covid numbers look dangerous. At the height of the pandemic in early January our 7-day average infection average was 253,946 cases. By June that number had dropped to 11,878. By August we were back 158,946 cases and climbing. This looks grim to me considering that 53% of the US has already been vaccinated. But Wall Street is roaring – which subtracts from the bullish gold scenario. It is troublesome that public Covid worry is not growing as we approach the winter months. On the day gold closed down $1.90 at $1813.10 and silver closed up $0.22 at $24.18.

On Thursday gold opened choppy, lacking conviction, and holding a narrow $10.00 range in another day of quiet trading. This is not unexpected as traders ponder tomorrow’s jobs report. The mildly lower weekly dollar has supported gold around its 200-day moving average but has not created trading buzz. This suggests the price of gold remains defensive even though its technical picture remains bullish on the shorter term. And gold prices have remained in a nice uptrend since early August. The problem however is that gold continues to face a very hard overhead ceiling, featuring a double top at $1830.00 in place since July. This puts the gold bulls, behind this most recent runup in the unfortunate position of answering an old trader’s question. “What have you done for me lately”. I’m not calling this latest jump a fizzle, but gold is higher by $100.00 short term which suggests that if the graph flattens out we may see profit taking. I suspect, however that unless gold pushes above these old roadblocks the bullish scenario will remain in neutral, worrying about the Fed’s next quantitative easing move. Gold closed down $4.40 at $1808.70 and silver closed down $0.30 at $23.88.

Gold Friday pushed higher ($1830.00) in early trading as US payroll numbers missed. According to Neils Christensen (Kitco) – The U.S. Labor Department said that 235,000 jobs were created last month. The data was weaker than expected as consensus forecasts called for jobs gains of 720,000. The idea here is that if these latest numbers came in hot the Fed would expedite tapering plans, a negative for gold. They came in cold and so the tapering plan, whatever that may be is once again on hold, a positive for the gold bulls. President Biden painted a positive economic picture this morning inferring that the Covid D variant would not stand in the way of economic recovery. But most traders believe this miss is important. And may lead to further trouble if infection numbers continue to rise. The Dollar Index hinted at further trouble in River City by moving to weekly lows (92.00), underpinning today’s gain.

It is too soon to say that higher gold prices today are merely a “relief rally”. I believe too much emphasis has been focused on jobs all week because traders are still unsure of what the Fed might do on the short term. Given the combination of the Covid and rising inflation. It is possible that while the D variant is virulent it has a shorter shelf life, but if this is true why aren’t the numbers decreasing. And in the longer run the “transient” inflation idea might hold water.

Zaner (Chicago) claims that some traders believe a push-back in the tapering timeline could allow inflation more time to entrench and intensify, and that could also undermine the dollar. A possible very bullish “C’ change in this still dynamic trade. At the same time, they note that gold ETF investors have been moving to the sidelines this last year, with the world’s largest gold ETF seeing its holdings decline below 1,000 tons. Its lowest level since April of last year. And adding to bearish woes Perth Mint gold coin and minted gold bar sales declined by 24% in August.

My sense however is that even after today’s rise gold is still confused and trying to find its feet. An acceptable price which allows both the bearish and bullish scenario to spar while the Fed tries to unwind at least some quantitative earning without bringing down this house of cards. Central banks around the world have faced similar problems for decades and have managed to make most happy except the savers. The gold “insurance value” argument is always difficult to see on the short term and only becomes obvious over decades. To some degree this market has already priced in quantitative easing. I don’t see gold moving radically higher in the short term unless this train comes off the tracks. Perhaps a gradual rise in prices relative to the decline in the dollar is in the cards. This bullish argument would never hold water with investors who are heavily engaged in the stock market looking for gains to bolster low interest rates. But even these good folks should consider a balanced investment plan which includes gold and silver bullion and call it a “just in case bet”. On the day gold closed up $22.20 at $1830.90 and silver closed up $0.88 at $24.76. It may be too soon to say that silver has recaptured its mojo but silver bullion sales are picking up nicely.  

Platinum closed up $27.30 at $1021.20 and palladium closed up $17.00 at $2414.40.

My Brothers and Sisters, we thank you for your business and fellowship. If you have unusual circumstances, need cash or are looking for a special visit – talk to Harry. Many on our staff have now received the vaccine as we continue to enforce rigid safety standards between people and product. Be careful, this virus remains a danger. At the same time trust that God will soon get us back to normal. Richard Schwary

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