Gold – Range Bound and Interesting
Commentary for Friday, April 13, 2018 – Gold closed up $6.40 at $1344.80 so we reclaimed some of Thursday’s big loss as this market continues to oscillate at the higher end of its current range. What a week and what will it take for gold to break either higher or lower? The initial interest in gold’s safe haven buying has been prompted over the sometimes intense talk and action between the US and China over trade tariffs.
Now add to this still developing backdrop another reason for bullish traders to be encouraged. On Monday President Trump’s tweet – suggesting US missile strikes over Assad’s use of mustard gas on his own people was eminent. Gold pushed to a new recent high ground ($1362.00) and now everyone was paying attention – in an otherwise range bound market with relatively close price ranges but at the higher end of the recent spectrum.
Once again gold could not hold the higher ground – it settled waiting for the next shoe to fall. Then the President seemed to backtrack on the timing of the strikes and gold sold off but remained interesting. The price of gold is up just over $10 on the week – silver followed suit higher by $0.30 with some safe haven buying in both areas but like I noted Wednesday the phones are not ringing off the hook – but there is renewed American interest.
Platinum was also in the green about $20.00. The big winner was however palladium – up about $80.00 which is nearly 20%. The PGMs are a proxy for Russian/US tensions. Russia produces more palladium than anyone and sanctions can keep their product off the market.
So where to now? It seems like gold wants to grind higher but what makes this market really interesting is that the bulls and bears can each make a reasonably good case. The bears rightly point to potential interest rate hikes while the bulls still enjoy the shorter term technical advantage. Gold’s close today ($1344.80) is right in the middle of its most recent 30 day price range in which we have seen a low of $1310.00 and a high of around $1355.00.
But also consider that higher “price pressure” is building – inflation is stirring and while the world enjoys cheaper prices they know inflation will return – the “plan” if you want to call it that is simple – everyone is just hoping it does not get crazy.
Another plus for gold short term is that the price of crude oil is getting hot – it spiked this week to 3 year highs ($67.00) – that is a semi-big deal but you can’t be sure this higher pricing is the result of higher international demand (inflationary) or the increased tension in Syria.
What is clear is that traders will be watching historical prices – in 2014 crude oil was trading for $100.00 a barrel and prices like that today might be the catalyst which sparks inflation and renews US physical demand for bullion gold.
This from Zaner (Chicago) – “One can hardly predict the timing and content of geopolitical headlines but it would appear as if the early action today will show slightly reduced volatility in gold. However the latest volley from a Russian envoy overnight that “war cannot be excluded” clearly fans anxiety. In addition to the geopolitical buzz regarding Syria the gold market should also garner fresh support from weakness in the dollar but the magnitude of that support could be restricted given the modest weakness in the dollar. With the breakout in gold prices earlier in the week and stories overnight suggesting Chinese investors are flocking to gold ETF’s it is clear that investors are part of the recent strength of gold and that gives the bull case significant credence. In fact SPDR gold holdings this week also reached the highest level in 10 months in a development that clearly signals some type of change has come over the gold market. While the gold market seemed to find little support from news Thursday that South African gold output in February declined by 7.1% over year ago levels that should mean supply and demand are leaning in favor of the bull camp. It should also be noted that South African gold production has been declining for years and perhaps that long term trend is about to leverage increased demand into a bull market in prices! The world’s largest gold ETF saw their holding rise by 5.90 tonnes on Thursday and reach their highest levels since June of 2017.
Weakness in palladium yesterday was clearly the result of the idea that the US response to Syria might not be imminent but that news was countervailed overnight by Russian Envoy suggestions that war cannot be ruled out in the event of a US military response in Syria. As in gold, the palladium market did not seem to garner support yesterday from news that South African PGM output in February declined by 8.8% versus year ago levels. However, given rising speculative and investment interest the long term tightening of supply from South Africa combined with the threat against impeded Russian supply of palladium (in the event of war or aggressive Russian sanctions) could shift the April short covering recoveries in the PGM complex into bull markets. Certainly some retrenchment and profit-taking of the long play was justified given what was perceived to be a downshift in the timing of a US response yesterday, but that issue remains highly fluid and one should be on the lookout for signs that investment interest in the PGM complex is about to make supply news more important. We expect palladium might to rise up and away from consolidation low support at $950.00 with the next upside target seen up at $991.35.”
Platinum closed down $1.70 at $927.30 and palladium closed up $21.80 at $981.95.
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: 6 believe gold will be higher next week 2 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: 53 people thought the price of gold would increase next week 36 believe prices will decrease next week and 11 think gold prices will remain the same.
Precious Metal Closes & Dollar Strength – March 9 – March 13
The GoldDealer.com Unscientific Activity Scale is a “2” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 3) (Tuesday – 2) (Wednesday – 2) (Thursday – 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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