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Gold Pushes Higher

Gold Pushes Higher          

Commentary for Thursday, May 10, 2018 ( – Gold closed up $9.50 at $1320.80. The latest from the federal inflation front was kind of a bust if you were looking for rising inflation. And with inflation surprisingly flat why is gold moving higher? The logic here is a bit left-footed. Because inflation is still manageable so traders believe the FOMC will not be as aggressive in raising interest rates. Anything which stretches out the time it takes the federal government to “normalize” interest rates supports higher gold prices.

Gold was also higher because the Dollar Index was weaker moving from 93.00 towards 92.50 – always friendly for gold.

Escalating international problems also helped – Tehran fired rockets at Israeli held territory and Israel retaliated with air strikes attacking Iran’s military infrastructure in Syria.

But most think this was a kind of warning from each side and the trouble will not escalate. Still not good because you can see that the Trump Iranian decision has created unwanted fallout and any escalation in the Middle East is dangerous.

And the price of crude oil continues higher – almost $71.00 today. In the summer of 2017 the price of crude oil was $42.00 so you can see things are ratcheting up and with some analysts claiming even higher prices are around the corner so inflation fears build.

With today’s close ($1320.80) you can appreciate that gold is still in the game but the overall reaction of somewhat higher prices is underwhelming. Gold closed Monday at $1312.20 so in the past 4 trading days (with a great deal going on) we have seen a gain of $8.60.

Actually any one of the above factors under “normal” conditions would have pushed gold $20.00 higher and the combination we have recently seen should be worth 3 times that number. In other words we should not still be wondering if gold will hold $1300.00. With this week in place our conversation should be as intense as we saw in early April when gold was challenging $1360.00.

It’s not. So while the world is putting a little more gold under the mattress the paper market still fears the coming interest rate hikes and the financial “fear” factor is AWOL. I’m not saying this most recent push higher in the price of gold is a busted flush but a little more zing would be appreciated.

This from Zaner (Chicago) – “In retrospect the gold market has held up fairly impressively this week to the fairly consistent pressure from the US dollar. However reports of military exchanges between elements in Syria and Israeli forces overnight as well as ongoing strength in crude oil prices has created a bid for precious metals again. In fact the Israelis maintain they were fired on first by Iranian backed Syrian elements, while Syrian sources maintain the Israelis carried out a raid in Syria that killed Iranian’s. Adding into the geopolitical safe haven environment this morning are ongoing Iranian aligned attacks of the Saudi capital from Yemen. While the dollar isn’t showing significant weakness today it has carved out a fairly narrow slightly lower trading range and appears to be off balance to start the trading session. In a minimally supportive classic fundamental supply-side development, South African gold output figures were released overnight for March and they registered an 18% year-over-year decline! While the overall complexion of the market this morning favors the long side of gold and silver, the June gold contract has not yet thrown off this week’s pattern of lower highs and lower lows. Therefore it could take a trade this morning back above $1,317.80 to turn the technical bias in favor of the bull camp. However the silver charts this morning look a little bit more impressive than gold with the market in the early going sitting right on its highs and seemingly poised to test the highest level in 10 days up at $16.655.

The charts in both palladium and platinum remain positive with a decent May uptrend pattern fleshed out on the charts. In addition to spillover lift from gold and silver this morning the PGM complex should draft some support from generally higher international global equity market action, a weaker dollar and news that South African PGM output in March declined by 6.1%. While the trade hasn’t paid that much attention to the ongoing erosion in South African PGM production that situation has become a clear pattern and should be a consistent underpin for prices going forward. Uptrend channel support in June Palladium today is seen at $964.15 but uptrend channel support in July platinum is much further down on the charts at $905.10. However, it would appear as if the PGM complex has reestablished a positive track with US equities, even if prices are restrained by periodic gains in the dollar and rising US interest rate fears. In the short term, we would expect gains in palladium to be hard-fought and measured in scope with a similar condition in platinum. Initial resistance in June Palladium is seen up at $982.30 with initial resistance in July platinum seen at $921.”

Silver closed up $0.22 at $16.68.

Platinum closed up $8.90 at $920.50 and palladium closed up $23.30 at $996.10.

This is our usual Thursday Chicago Mercantile Exchange report covering the last 5 trading days – so we are looking at the trading volume numbers for the “May” Gold contract: Thursday 5/3 (318357) Friday 5/4 (314224) – Monday 5/7 (301510) – Tuesday 5/8 (282885) – Wednesday 5/9 (273166) and the trading volume numbers for the “May” Silver contract: Thursday 5/3 (141772) Friday 5/4 (142773) – Monday 5/7 (142040) – Tuesday 5/8 (140959) – Wednesday 5/9 (139250).

The Unscientific Activity Scale is a “4” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Friday – 4) (Monday – 4) (Tuesday – 4) (Wednesday – 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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