Gold – Patiently Waiting
Commentary for Friday, December 30, 2022 (www.golddealer.com) – Today gold closed up $0.20 at $1819.70 and silver closed down $0.22 at $23.86. Gold continues to be a quiet trade, with enough world uncertainty to keep the physical world interested. Still, I believe there is not much conviction of a breakout to the upside although the bears certainly do not want to short this market with even the slight possibility of a Fed pivot. The silver bullion market on the other hand may be developing buzz going into 2023 as rumors of shortages and rising physical demand overseas keep things interesting. Last Friday gold closed at $1795.90 / silver at $23.76 – on the week gold was higher by $23.80 and silver gained $0.10.
Wishing you a Happy New Year! And God’s blessings. Stay safe, we are open on Monday. Brinks, UPS and FedEx are on holiday so our Monday shipping will go out Tuesday.
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On Monday we were closed for the Christmas holiday. And Santa was happy as the positive technical picture suggests higher prices into the New Year. But the Grinch is still lurking around the edges of this jolly picture waiting for the next round of hawkish inflation news.
On the day gold closed up $8.90 at $1795.90 and silver closed up $0.28 at $23.76.
On Tuesday gold was optimistic with solid follow-through from last Friday’s firm close. Which is surprising as I expected a quiet after Christmas trade, not an upward bias. But the combination of a stronger technical picture and China’s relaxing its Covid policies has helped bullish sentiment. Today gold embraced a 6-month high ($1830.00) before paper traders took mild profits. Crude oil has moved higher by $10.00 a barrel since early December. Suggesting the China “pivot” on its Covid policy may encourage this manufacturing giant to resume “normal operations”, thus increasing crude oil demand. Another plus for the price of gold.
Still, it just makes sense to be price cautious because of two important reasons.
The first factor is that the price of gold between $1800.00 and $1900.00 has been gold’s Achilles heel. It was this region which led the parade to gold’s most recent low between $1600.00 and $1700.00 when Fed hawkishness was roaring, and traders braced for higher interest rates.
The second, and equally important, is the 8 FOMC scheduled meetings for 2023. The important first quarter meetings will be held on February 1st and March 23rd. And these will provide a good “first look” at what Chief Powell has in mind relative to long term interest rates.
On the day gold closed up $18.90 at $1814.80 and silver closed up $0.28 at $24.04.
On Wednesday gold saw a typical round of profit taking. Which makes sense because this “grinding” pattern has repeated itself as paper traders continue to “buy the dip” and “sell the rally”. The Dollar Index has also been consistent, between 4.0 and 4.5 the past 5 trading days. We continue to see a thin “holiday” trade leading up to the New Year.
I would not make too much of the downward swoop in the price of gold this morning. Our shiny friend lost the battle above $1800.00 in the early trade. And paper speculators decided it was time to test support. Bargain hunters bought the weakness at $1797.00 which may indicate the “short” trade, still very much lurking around the edges, still fears the Fed “pivot”. New rumors regarding Covid problems may support the fear and safe haven sentiment.
CNBC – “There are mounting concerns in the international community on the ongoing COVID-19 surges in China and the lack of transparent data,” U.S. officials said. Japan announced it will require a negative Covid test for travelers arriving from mainland China starting Dec. 30. Taiwan will also test arrivals from mainland China starting Jan. 1, the government said in a statement. For more than two years, overseas travelers have had to quarantine upon arrival in China because of Covid restrictions. The U.S. government is considering imposing new Covid rules for travelers from China citing concerns over virus-related data released by the Chinese government.
On the day gold closed down $6.90 at $1807.90 and silver closed down $0.38 at $23.66.
Zaner (Chicago) – “With the dollar index coiling into a tight consolidation and both gold and silver ETF’s posting outflows in two of the last three trading sessions, the gold bears start the Wednesday trading session with a slight edge. However, news that Hong Kong was removing additional Covid activity restrictions and that inbound travelers to China will not be subject to quarantine in early January provided some modest speculative buying again overnight. On the other hand, overnight trade chatter suggests that Chinese lunar New Year buying (which is the earliest since 2004) could add to the gains in the coming two weeks. It should also be noted that hedge funds increased their net bets to six-month highs in gold and 28-month highs in silver! At present the gold and silver trade is being cushioned by hopes for lower US inflation which in turn might reduce the upward track in interest rates. With the dollar bound in a tightening/coiling range a major currency market impact on gold and silver prices should be expected at some point soon. However, without definitive direction from the dollar, uptrend channel support in February gold at $1801.60 is a buying zone for aggressive traders today. US economic data was on the disappointing side over the last several sessions, and this lent support to the metals as it suggests that the Fed rate hikes are doing their job. This comes after a lower-than-expected PCE reading last week and a stronger than expected GDP reading. An ECB official said that the bank was halfway through its rate hike cycle, and this comment adds to the idea that surging rates have been heavily factored into most markets. While some traders will suggest the prior 2 weeks have seen silver lose upside momentum, reports of increased Chinese speculative/jewelry silver demand provide uptrend channel support today at $23.63.”
On Thursday gold drifted higher as the dollar and the Dollar Index drifted lower. For the past week the Dollar Index has been steady (104.00 – 104.50) but this morning moved to the lower end of this trading range. We are seeing some transitory support for the metals, again based on the changeable theory that a slowing economy will encourage less Fed aggressiveness in 2023.
Reuters – “Gold edged higher on Thursday, helped by a dip in the dollar as initial unemployment claim data pointed to a cooling off in the U.S. labor market, easing worries about harsher Federal Reserve rate hikes next year. Initial claims for unemployment benefits rose 9,000 to a seasonally adjusted 225,000 for the week ended Dec. 24, the Labor Department said. Economists polled by Reuters had forecast 225,000 claims for the latest week. The jobs data led to some dollar weakness and Treasury yields backing off, causing gold to turn around, said Phillip Streible, chief market strategist at Blue Line Futures in Chicago, adding that markets were thin on volume due to the Christmas and New Year holidays.”
On the day gold closed up $11.60 at $1819.50 and silver closed up $0.42 at $24.08.
Jim Wycoff (Kitco) – “Technically, February gold futures bulls have the firm overall near-term technical advantage. A seven-week-old uptrend is in place on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at the $1,875.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,782.00. First resistance is seen at today’s high of $1,825.00 and then at this week’s high of $1,841.90. First support is seen at today’s low of $1,811.20 and then at $1,800.00. March silver futures bulls have the solid overall near-term technical advantage. Prices are in a four-month-old uptrend on the daily bar chart. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $25.00. The next downside price objective for the bears is closing prices below support at $22.735. First resistance is seen at the December high of $24.525 and at $24.80. Next support is seen at $24.00 and then at this week’s low of $23.645.”
Zaner (Chicago) – “The gold and silver charts remain supportive of the bull case with uptrend channel support lines respected and higher lows more of a rule than exception. The gold market this morning is locked into a tight range because of thin holiday conditions, a lack of movement in the dollar and because of opposing fundamental headline developments overnight. On the negative side of the ledger, Chinese November net gold imports through Hong Kong declined by roughly 10% versus October and reached a 6-month low. On the positive side of the equation, Indian gold jewelry retailers are projected to see revenues jump by as much as 25% this fiscal year reportedly because of rising disposable incomes and pent-up demand from the Covid period. According to Mint.com jewelry retail sales volume in India are poised to increase by 16% to 18% on the year and are expected to rise above pre-pandemic levels of 600 tons. However, investors remain cool to both gold and silver ETF instruments with both markets seeing outflows yesterday, and the silver outflow the 5th straight day of declines in holdings. While the US dollar index was higher yesterday, thereby justifying some weakness in gold prices, the magnitude of the gains in the dollar hardly justified a $20 slide in gold and a $0.52 decline in silver. The markets should have drafted support from ECB comments indicating the central bank should be halfway through its rate hike cycle, as that creates light at the end of the tunnel for markets undermined by rising rates. Even the bullion markets were under pressure yesterday, perhaps because physical and futures longs with profits from the November spike low have decided to bank profits to secure good monthly returns. Therefore, we will be monitoring open interest for declines signaling more liquidation and/or for steady to higher open interest if traders are rolling contracts forward and bargain hunting buying surfaces. Unfortunately for the bull camp, US treasury yields continue to climb, and it is possible that Treasury futures implied yields will now come back in line with the magnitude of increases in the US Fed funds rate. As for Chinese physical and investment demand prospects, we remain very skeptical as the Covid situation in China looks to get much worse before the infection wave burns out and therefore demand for all physical commodities could become very worrisome. With the net spec and fund long in gold early last week nearly 82,000 contracts above the 2022 low of 72,174 contracts long, the gold market is sitting with a burdensome net spec and fund long positioning into year end. Uptrend channel support in February gold drawn from the November and December lows is $1,808.80 today with a past double low at $1,793.70 a critical bull/bear pivot point on the charts. As indicated in the gold market coverage today, the silver market yesterday came under what appeared to be excessive selling as headlines yesterday were not definitively bearish and the dollar showed little definitive action. Uptrend channel support in March silver today is $23.64 with a pivot point support level seen down at $23.44.”
On Friday gold remained choppy between $1825.00 and $1815.00 in quiet trading even as the Dollar Index drifted mildly lower, and traders look for fresh information. Reuters – “Gold prices were set to wrap up their best quarter since June 2020 on Friday on investor expectations the U.S. Federal Reserve will slow its interest rate hikes after a fast-paced tightening cycle tempered bullion’s safe-haven rally this year. Gold is expected to remain range-bound due to low market participation, and prices could rise further once it breaks above resistance at $1,840, said Vandana Bharti, assistant vice-president, commodity research at SMC Global Securities. Bullion is only down about 0.5% in 2022, having recovered from a more than two-year low hit in September. “For most of the year, gold was under pressure from a hawkish Fed. But by the end of the year, it saw some recovery and got a lifeline on expectations that the Fed might slow down,” said Ilya Spivak, head of global macro at Tastytlive. Gold price moves will continue to be dictated by the Fed’s response to bubbling inflation in 2023, analysts have said. After prices reached a near record above $2,000 an ounce in March as Russia’s invasion of Ukraine spurred safe-haven flows, demand for the non-interest-paying asset has waned because of the higher interest rates. Bharti also said investment in gold ETFs could improve in 2023, adding that central banks are aggressively buying safe-haven gold, “a hint that they don’t have much confidence in the global economy”.
On the day gold closed up $0.20 at $1819.70 and silver closed down $0.22 at $23.86.
Platinum closed up $24.00 at $1073.70 and palladium closed down $18.60 at $1789.30.
My Brothers and Sisters, thank you for your friendship. If you have unusual circumstances, need cash or a special visit – talk to Harry or Eric. Most employees have been vaccinated – if this is a concern ask for more information. We continue to enforce ridged safety standards between people and product. Be careful, the contagious Omicron variants remain dangerous. At the same time trust that God will get us back to normal and our traditional business model. As always, thank you for your patience. Richard Schwary
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