Gold Prices Remain Soft
Commentary for Friday, July 13, 2018 – Gold closed down $5.40 at $1239.60 today in another round of typical summer trading. As gold drifts lower the 5 day Dollar Index pushes higher – moving from 93.77 on Monday through 95.19 at the close today. The “higher dollar” trend of course continues to weigh on the price of gold as bullish traders lament and the bearish traders eye a possible break-down in prices at $1240.00.
Across our counters we see a few bargain hunters as the usual summer doldrums continue.
There is business to be done usually with old time customers who are taking advantage of lower prices but enthusiastic fresh interest is still lacking. What happened to all the fireworks which should have been created over trade wars? Why is gold not reacting to real higher inflation numbers? How long can the dollar remain in nose-bleed country without changing the Wall Street dynamic?
All good questions and unfortunately all overshadowed by a hawkish FOMC, higher interest rates and a definite lack of positive gold buzz.
The week sets up another round of soft pricing as traders anticipate fresh news which might stir the bullish pot. This week gold closed at $1258.10 on Monday and $1239.60 on Friday. Not much of a difference ($18.50) but this set of numbers will encourage the technical bears and suggest gold continues to struggle. If gold continues to break down there is not much support between here and $1150.00 but it’s premature to speculate at this point because we are well into oversold territory in my opinion and can expect a short-covering rally.
Why? Because I still don’t see any big physical sellers and sooner or later the Asian demand will bolster already cheap prices. This market is lethargic for sure but I don’t see a route because I don’t see a forever rising dollar. Since April the Dollar Index has moved from 90.00 through 95.00 – to keep that pace would be ruinous to Wall Street and our economic recovery.
I still look for returning Asian interest in the physical market and expect our government to “talk down” dollar strength ala President Trump.
Also keep in mind that the FOMC can talk all they want about higher interest rates – all central banks are committed to cheap paper currency over the longer term. This basic truth has always underpinned the price of precious metals and is worth remembering in these choppy waters.
At this point enjoy the cheaper prices. At the same time look for this now oversold market to rebound into steady numbers helped by fresh bullish news generated over the still ignored trade war disaster still developing. At the same time remember the US economy can easily overheat at this point and reintroduce higher inflation numbers – a sure winner for gold and silver.
Finally remember some Mark Twain humor. “The report of my death was an exaggeration”. This quote came from a letter Train wrote in 1897 in response to a reporter who asked him about rumors that he was on his deathbed in London. I have used it many times since I was in college to clear the air when the dialogue of any pending disaster moves toward the extreme.
The investing picture for gold or any other “opportunity” is never as bad or as good as pundits would have you believe. Gold and silver bullion have withstood the test of time for good reason – they are real money. Taking advantage of better prices always makes sense. Both gold and silver bullion are still one of the best ways to “put away” a little savings for a rainy day.
This from Zaner (Chicago) – “With a six day low yesterday, fresh downside damage this morning and higher high action in the dollar seemingly entrenching, it is difficult to take control away from the bear camp in gold and silver. In fact, given positive economic data from the US and slightly hawkish US inflation readings this week, one might expect the dollar to rise further and that combined with unfolding weakness in crude oil will probably keep would be metals buyers off balance. It should also be noted that further dollar strength will likely reduce the purchasing power of Indian and Chinese gold buyers ahead, and that should mean bargain-hunting buying in the cash/retail markets might not be forthcoming soon. However, while anxiety from the trade war has moderated somewhat over the prior 36 hours the record US trade deficit news with China is likely to result in US hints at more retaliation. In short we don’t see gold or silver managing to hold above consolidation support (from the July lows).”
Silver closed down $0.16 at $15.74.
Platinum closed down $16.10 at $826.20 and palladium closed down $16.00 at $940.20.
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: 55 people thought the price of gold would increase next week 32 believe the price of gold will decrease next week and 13 think prices will remain the same.
Precious Metal Closes & Dollar Strength – July 9 – July 13
This is our Chicago Mercantile Exchange report covering the last 5 trading days – so we are looking at the trading volume numbers for the “July” Gold contract: Thursday 7/5 (311985) – Friday 7/6 (312777) – Monday 7/9 (299870) – Tuesday 7/10 (287412) – Wednesday 7/11 (275674) and the trading volume numbers for the “July” Silver contract: Thursday 7/5 (159705) – Friday 7/6 (158215) – Monday 7/9 (158580) – Tuesday 7/10 (156774) – Wednesday 7/11 (155745).
The GoldDealer.com Unscientific Activity Scale is a “3” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 2) (Tuesday – 2) (Wednesday – 3) (Thursday – 4). 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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