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Gold Reasonably Firm – For Now

Gold Reasonably Firm – For Now

Commentary for Friday, July 12, 2019 ( – Gold closed up $5.60 today at $1409.90. We closed Monday at $1397.00 so while the week offered a few surprises gold’s close today represented a rather modest gain of $12.00. It’s the surprise up a further $6.00 in the aftermarket that is worth noting going into next week’s trade. 

The overnight price of gold in Hong Kong and London was flat and the domestic market sold off a few dollars on the open but recovered quickly moving though $1409.00 before turning choppy on either side of unchanged.

This “buying the dip” in the price of gold is what the bulls want to see as the bears test recent support above $1400.00. This technical picture in my mind however remains tenuous short term – but supportive in the longer term.

The Federal Reserve is not going to change its dovish mind anytime soon – especially with pressure from President Trump to lower interest rates and troubles still developing in the European markets and the Middle East.     

While gold has recently seen a tight pricing range – something between $1390.00 and $1420.00 since late June – this market has since received a lot of clarification relative to shorter term interest rates – and that news supports the bullish scenario.

Still traders and the public are over-focused on day to day pricing and frankly neither the bulls nor the bears have much conviction – so I expect this to turn into a slug fest – both sides changing their minds on a dime.

And completely discounting the Trump/China/Mexico/EU tariff issues is a mistake. This remains a sleeping giant game changer. The reason it does not get much respect at the present is that there are a lot of misconceptions about tariffs.

It’s a common belief for example that if Trump levies tariffs against China that these will hurt the Chinese economy which is marginally true – but the real people who are hurt are the working folks of the levying country. A tariff is another hidden tax levied against workers of the issuing country – in this case the United States.

So do tariffs help or hurt the gold trade? They can help the gold trade only because they increase international tension and help encourage safe haven buying. So when Trump recently threated tariffs against Mexico – the world feared the resultant heat and reacted to the threat by using gold bullion as a hedge against an uncertain economic future.    

So as the international political sands shift expect the gold scenario to gain and lose momentum. And the trading range for gold to widen – something between $1340.00 and $1420.00.

Use the dips to add to your position if you are so inclined. If you still can’t make up your mind it’s probably a mistake to fixate on “cheaper prices” – look instead for that break above $1420.00. This will be the technical signal that something much larger is in the making – everything in between is simply the “huffing and puffing” of a rather large trading wolf.    

This from (Zaner) “Global equity markets were mixed in the early going with US stock measures showing some new all-time highs. Overnight Chinese trade balance figures for June saw a larger trade surplus but exports and imports were softer than expected. Inflation readings from the euro zone for June were on expectations with European industrial production in May coming in much stronger-than-expected on a month over month basis.

The North American session will be highlighted by the June producer price index which is forecast to have a modest downtick from May’s 1.8% year-over-year reading. The June core producer price index (ex food and energy) is expected to have a minimal downtick from May’s 2.3% year-over-year rate. Earnings announcements will include Infosys before the Wall Street open.

While the initial range up action in gold yesterday rekindled bullish optimism the disjointed two-sided volatility this week and the extension of the lower high a pattern from the June high leaves the bear camp with a slight technical edge. Gold was obviously undermined as a result of yesterday’s scheduled data as that data seemed to shift the needle slightly away from the dovish track entrenched from the first day of Fed testimony earlier this week. It would appear as if trade dialogue will end the week supportive of gold as the President has indicated China is not buying US agricultural products as requested when the next wave of tariffs were put on hold. The gold market also looks to get support from weakness in the dollar but the trend in the dollar could be set this morning following the PPI report as the CPI report yesterday provided a bit of inflation psychology. Another potential supportive force for gold into the end of the trading week is the fact that investors continue to push money into gold ETF’s. In fact ETF’s added 20,334 ounces yesterday to bring this year’s total purchases to 3.27 million ounces. Even silver saw positive investment inflow with a fourth straight day of inflows bringing this year’s net ETF purchases to 26.1 million ounces. It is also possible that gold will garner some buying interest from news that the London bullion market Association is requesting a new Basel liquidity rule to allow banks to trade more gold. In the end, it is clear that the gold bulls need soft PPI data to extend the initial rally straight away.

Apparently a portion of the trade took Goldman Sachs recommendations to take profits in palladium seriously, as the market ranged up above $1,600 and then fell back precipitously as if a top had been put in place. As of this writing, there has not been definitive news flow regarding the wage negotiations in South Africa, but news from that front might be expected before the close of business in South Africa today. While the palladium market has shown the capacity to maintain a uniform uptrend pattern on its charts, the last two days rally and reversal was forged on a noticeable expansion of volume and that could set the stage for a setback to support at $1,542.30.

While the gold market appears to have a slightly positive bias to start today the charts favor the bear tilt with this week’s rally seemingly hard-fought and potentially difficult to sustain. However the geopolitical front looks to be supportive as US/Chinese trade relations are heating up again following complaints from the US President that China was not purchasing enough US agricultural commodities. On the other hand the market trend today is likely to be set by the PPI report which is expected to be unchanged and that could provide a slight bid for gold. We see support at $1402.40 and a more significant support and a failure level at $1391.80. In order to shift the bias firmly to the upside probably requires a PPI report inspired rally above $1420.”

Silver closed up $0.09 at $15.16. Funny physical day today – both big buyers and sellers.

Platinum closed up $3.40 at $828.40 and palladium closed down $16.70 at $1538.90.

This is our usual ETF information – Gold Exchange Traded Funds: Total as of (6/26/2019) was 71,711,020. That number this week (7/10/2019) was 70,735,668 ounces so we dropped 975,352 ounces of gold.

The all-time record high for all gold ETF’s was 85,108,867 ounces in 2013. The record high for Gold ETF’s in 2019 was 70,971,710 and the record low for 2019 was 67,430,173

Silver Exchange Traded Funds: Total as of (6/26/2019) was 620,168,492. That number this week (7/10/2019) was 638,357,027 ounces so we gained 18,188,535 ounces of silver.

Platinum Exchange Traded Funds: Total as of (6/26/2019) was 2,828,826. That number this week (7/10/2019) was 2,919,087 ounces so we gained 90,261 ounces of platinum.

Palladium Exchange Traded Funds: Total as of (6/26/2019) was 664,029. That number this week (7/10/2019) was 642,399 ounces so we dropped 21,630 ounces of palladium.

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 and no one 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: 60 people thought the price of gold would increase next week 25 believe the price of gold will decrease next week and 15 think prices will remain the same.

Precious Metal Closes & Dollar Strength – July 8 – July 12

Gold Reasonably Firm – For Now

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