Gold Jumps over Trump’s Tweet. Holding or Not?
Commentary for Wednesday, April 11, 2018 – Gold closed up $14.50 at $1356.50. It jumped higher today on safe haven buying as President Trump claimed that the US is planning missile strikes against Syria and the Assad regime over chemical attacks they initiated against their own people yesterday. And he added insult to injury claiming the Russians could not do a thing about it even though they are based in the region. What a mess this is turning out to be – but an expected mess over the very long civil war which continues in Syria.
I have always worried about this region from a human rights standpoint – it’s always the innocent that pay the price. But even with its potential to create geopolitical tension the Far East has thankfully been on the back burner for months – the price of gold being more influenced by FOMC interest rate adjustment, the strength of the dollar and the potential of a tariff war.
President Trump’s tweet regarding the Russians is just another piece of firewood on this kind of smoldering technical picture. Gold bulls have the short term advantage and were waiting again for further confirmation – sustained pricing above $1360.00.
Today’s close provided that initial confirmation so traders are now faced with the possibility of $1400.00 gold but let’s not get ahead of ourselves. Over the past 6 months the price of gold has challenged $1360.00 on three occasions – today’s close ($1356.50) being the fourth.
Inflation news in my mind is mixed. Consumer Prices in March fell but our core inflation numbers are rising – good for gold and inflation is still not a big deal with the FOMC suggesting future interest rate increases may be tame. Most will buy higher interest rates if they are small increases and stretched out over perhaps even years.
Any sudden rise or even the threat of really higher rates will spook the stock and real estate markets. So “higher rates” in and of themselves might not do as much damage to the price of gold as some might predict. In other words rising interest rates might not be incompatible with higher gold prices – it just depends on how heavy the FOMC comes through the front door.
Higher interest rates will also balloon the national debt as the “cost to carry” will increase exponentially – so the FOMC can “talk” higher rates but the “doing” must be a light touch.
There are also a rising number of people who believe that when the stock market loses its current vibe the physical gold market will benefit simply because gold prices still look cheap relative to other places investors might want to place their money.
So what about the “buzz” over today’s higher close?
There is some – the usual foot traffic increased at the store – it always does when gold moves above current highs. But the phones are not ringing off the hook either so I think the public is interested but cautious remembering we have been here before a number of times this past year.
No doubt today’s initial jump to higher ground was good for gold – but keep in mind the close ($1356.50) was off the highs and the aftermarket was even weaker. This rather quiet ending to a day which began with fireworks suggests a knee-jerk reaction to the Trump tweet at a time when our relations with the Russians are at least strained.
Still a challenge to the $1400.00 mark is again in the making and this in itself is a big deal because this high-water maek has been in place since 2013. But the conclusion that we are in the middle of the expected “game changer” is premature. This type of real fireworks would have to be supported by something more than a Presidential tweet.
What remains interesting is that there are plenty of good things cooking in gold’s kitchen. Including this week’s higher ETF numbers and crude oil at 3 highs – but in my mind dinner is not being served – yet.
Platinum closed up $1.20 at $928.80 and palladium closed up $11.20 at $961.95.
This is our usual ETF information – All Gold Exchange Traded Funds: Total as of (4/3/18) was 69,408,831. That number this week (4/10/18) was 69,888,975 ounces so over the last week we gained 480,144 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 69,891,585 and the record low for 2018 was 68,169,590.
All Silver Exchange Traded Funds: Total as of (4/3/18) was 650,995,809. That number this week (4/10/18) was 653,912,461 ounces so last week we gained 2,916,652 ounces of silver.
All Platinum Exchange Traded Funds: Total as of Total as of (4/3/18) was 2,412,621. That number this week (4/10/18) was 2,410,048 ounces so over the last week we dropped 2,573 ounces of platinum.
All Palladium Exchange Traded Funds: Total as of (4/3/18) was 1,145,602. That number this week (4/10/18) was 1,128,999 ounces so last week we dropped 16,603 ounces of palladium.
The GoldDealer.com Unscientific Activity Scale is a “2” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 3) (last Friday – 3) (Monday – 3) (Tuesday – 2). The scale (1 through 10) is a reliable way to understand our volume numbers. The Activity Scale is weighted and is not necessarily real time – meaning we could be busy and see a low number – or be slow and see a high number. This is true because of the way our computer runs what we call the “book”. Our “activity” is better understood from a wider point of view. If the numbers are increasing – it would indicate things are busier – decreasing numbers over a longer period would indicate volume is moving lower.
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