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Gold – Quiet yet Attentive

Gold – Quiet yet Attentive

Commentary for Friday, Jan 11, 2019 – Gold closed up a modest $2.20 today at $1287.10 so on the week we are virtually unchanged. Still this is a great time to be in the gold market – not because I think you will make a fortune but because gold is the singular asset which protects and defends – no matter what.

Since last summer trade talk within the gold community has moved from negative to somewhat positive but more importantly the financial community has become more aligned with the idea that holding gold bullion – interest rate increase or not is a good idea.

And this kind of change in thinking has gathered steam recently. Even BlackRock, the first to suggest gold was heading to $1000.00 in early 2016 has now switched sides claiming our shinny friend will do well in 2019.

Neils Christensen (Kitco) also cites a positive view from Goldman Sachs – “Thursday in a note to clients, Jeff Currie, global head of commodities research at the bank, said he was raising his gold price forecast for 2019 as growing recession fears continue to ripple through financial markets.

He added that central-bank gold demand, which saw strong growth throughout 2018, will continue to be a dominate theme in the marketplace.

“Going forward gold will be supported primarily by growing demand for defensive assets. The same is also true of central-bank buying, with rising geopolitical tensions incentivizing more central banks to re-enter the gold market,” he said.

In its updated forecast, Goldman Sachs now sees gold prices pushing to $1,325 an ounce within three months, rising to $1,375 in six months and pushing to $1,425 an ounce by the end of the year. The new outlook is an upgrade from its previous three-month, six-month and 12-month forecasts of $1,250, $1,300, and $1,325 respectively.”

So does this bullish realigning make you nervous? Let me hack up the old contrarian adage “when everyone is looking for higher numbers all the buyers have bought”. Maybe “nervous” is the wrong word, after all gold has been working hard to stay above $1200.00 these past 5 years and at the same time has challenged $1350.00 on three occasions as world events heated up.

So even those with a bearish view can’t dismiss gold’s pent up potential as politics gets more contentious and the excessive production of fiat paper money raises concern with academics.

But I’m still not convinced that gold will roar in 2019. The dollar is too strong and it’s easy for the FOMC to keep interest rates firm. There is the possibility that stocks might become unstable but that bullish gold scenario does not make sense within the current business climate. Corporations are still making money and while optimism is not growing in my mind, no one is expecting a recession anytime soon.

So the assessment of 2019 will remain unchanged. Positive sentiment for gold is a welcome surprise but until pricing shows strength above $1350.00 we are still dealing with a sideways market which has been in place for years. And I think “in place for years” should be underlined.

This continuing support suggests that gold is still doing what it does best – protecting and defending. If this were not the case that old Black Rock claim of $1000.00 gold would already be on the books. Let’s remember to listen to that quiet pricing voice which suggests that troubles in River City will always be with us in one form or another and gold bullion is always at the ready in keeping everyone honest. Let’s hope this country will never really need this ironclad protection but let’s prepare for these possible problems in advance.

This from Zaner (Chicago) – “The extent to which the gold market’s fortunes are tied to the dollar is evident by the action over the past few days, as gold sold off on Thursday as the dollar recovered, and then it gained overnight as the dollar eased. The dollar has not fully rejected it recent lows and could be ready to resume its downtrend, which suggests that gold and silver could stand ready to resume their bullish tracks. The markets are awaiting “resolution” on a number of issues, such as US/China trade negotiations, the US Government shutdown, and even Brexit. Signs of progress on any of these issues could pull safe-haven interest away from the dollar and support the metals. The shutdown could be coming to a head, as it seems the President is moving towards declaring a “National Emergency,” which could at least reopen the government. In the meantime, investment interest in gold continues to grow. Gold ETFs added 37,174 ounces to their holdings on Thursday, bringing their net purchases so far this year to 762,975 ounces. Holdings have reached their highest level since May 18th. Gold could be on track for its fourth straight weekly increase if it closes above $1285.80.

Palladium traded to another new contract high overnight, as the trade looks for demand to outstrip supply this year. Palladium traded lower on the day for a while on Thursday, after some disappointing inflation data out of China raised new alarm bells about their economy, but it managed to close higher on the day, and it continued to make gains overnight. On Wednesday, in a Chinese official stated that the government was looking at ways to boost domestic auto sales in the face of economic uncertainty, and this is supportive to palladium consumption. The market may be overbought, but there is no sign of a top. April platinum seems capable of following palladium higher, but it needs to break out above $863.50, its spike high from earlier this week.

The fate of the gold market seems to rest with the dollar, and if the dollar resumes it downtrend, February gold should be in a position to retest the recent high at $1,300.40. Look for support at $1,280.20 and $1,278.10. March silver may have critical support at the 200-day moving average, which comes in at $15.60 on Friday. Silver has probed below that average a couple of times this week, and a close below it could spark a more substantial correction. Additional support comes in at $15.56, with resistance at $15.83 and $16.00.”

Silver closed up $0.02 at $15.58.

Platinum closed down $8.30 at $813.00 and palladium closed up $5.50 at $1276.20.

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 employees think: 7 believe gold will be higher next week none think 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: 52 people thought the price of gold would increase next week 33 believe the price of gold will decrease next week and 15 think prices will remain the same.

Precious Metal Closes & Dollar Strength – Jan. 7 – Jan. 11

Gold – Quiet yet Attentive

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