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Gold Remains Sleepy

Gold Remains Sleepy            

Commentary for Wednesday, May 23, 2018 ( – Gold closed down $2.40 today at $1289.30. Trump’s comments on the China/US trade negotiations sent stocks lower and introduced some confusion in the ranks but gold ignored the entire process. The 30 day gold pricing chart tells the story – a weaker technical picture for sure in that gold has moved from $1330.00 through $1290.00 but seems to have steadied around this lower number for now.

This rather timid follow through selling might suggest the short paper simply covered and moved to the sidelines. A bit puzzling considering the strong dollar – the Dollar Index is up a half point (94.01) today and was 93.16 a week ago – for gold to stabilize around $1290.00 suggests two things (1) Someone is interested not wildly but sellers have dried up and (2) we might be entering another consolidation phase – waiting for fresh news which might move the needle.

I still don’t see much real gold bullion buzz at the US dealer level and ETF’s this week are moving in the wrong direction. The price of crude oil seems surprisingly solid around $72.00. But the connection between higher crude oil and higher inflation is not getting press.

So gold considers higher crude oil – the Iran/Israeli problem – Venezuela telling US diplomats to get out of the country – President Trump continuing to push the envelope and nervousness over the upcoming North Korea Summit (June 12th).

Under “normal” conditions any one of these should be worth $20.00 to the upside in gold but for now it remains sleepy and flat even though higher interest rates could be right around the corner.

Is this lack of interest or should we be happy pricing has not broken down further?

Actually I think you can make a good case that while gold is certainly not exciting yet – it is trading in a range which will be seen as value related. Yes – if the FOMC becomes really aggressive gold will trade lower but for now they seem content to threaten higher interest rates and at the same time understand that derailing Wall Street is not a great idea. And a big plus gold still has in its corner is that interest rates are still really cheap. In other word there is plenty of room for the FOMC to splash around and still not upset the apple cart.

So for now I like the idea of buying weakness. In the recent past the Asian trade shunned gold above $1300.00 and bought physical product around $1280.00. If this lower limit breaks down again it could mean prices might test $1220.00 but I think this unlikely. Keep in mind that the American public can run hot and cold over gold but for the rest of the world it’s just a matter of price and we are already in the “fair value” range for longer term players.

This from Zaner (Chicago) – “While the gold market is showing somewhat positive price action early on it has waffled around both sides of unchanged and remains within the prior session’s trading range in a manner that suggests the bulls have a very slim edge. However we are surprised that gold has managed to maintain a positive bid at all considering newfound strength in the dollar and the looming release of the Federal Reserve May FOMC meeting minutes. In fact Indian gold prices were weaker and the risk on vibe from earlier in the week appears to have been lost. We have to think the Fed will not leave the market with a definitive expectation of a June rate hike as inflation has by the Fed’s own words merely “trendied” toward their inflation “target”. It would also seem as if the Fed thinks the job market is improving but is not yet at full employment levels and that should have left the Fed in a position to allow for more inflation and more growth. However the dollar has shown resilience and it could judge a minimally hawkish Fed stance as a big positive for the greenback. The bull camp in gold also has to be concerned about disappointing growth and inflation readings from Europe as that gives the dollar a win by default benefit. Another development that seems to favor the bear camp this morning is news that North Korea is now expected to dismantle its nuclear test site over the coming few days. Perhaps North Korea is seeing a huge threat to its survival following news that the UN hopes to gain cooperation from those selling oil to those who are illegally bringing in oil for transfer to North Korean ships at sea. In other words, completely isolating the North Korean economy from an energy supply perspective could effectively shut down the North Korean economy as they struggle to maintain control over already desperate economic conditions.

Clearly the platinum market outperformed the palladium market yesterday in a move that suggests traders are playing the PGM markets for a near term recovery in classic industrial demand. However it would appear as if there has been a slight downshift in sentiment for industrial commodities today in the face of renewed dollar strength and risk off flowing from equities. Another issue undermining the PGM complex this morning is disappointing growth and inflation readings from Europe. Cushioning the PGM markets against overnight negatives is strong Japanese export data earlier this week, some remaining hope for a US & China deal and some residual support from positive chart action in the first two days of the week. Furthermore, the market over the last weekend was presented with news that Chinese auto production on an annual basis continued to be strong with production at 2.4 million in April compared to 2.14 million last April. Downtrend channel resistance in July platinum today is seen at $920.15 with close in support now situated at $896.30. Downtrend channel resistance in June Palladium is seen up at $1,021.20today and at $1,019.10 on Friday. Close in support in June Palladium is seen in the middle of the May consolidation at $977.50.”

Silver closed down $0.17 at $16.34.

Platinum closed down $8.00 at $897.70 and palladium closed down $15.70 at $973.30.  

This is our usual ETF information – All Gold Exchange Traded Funds: Total as of (5/15/18) was 70,446,587.  That number this week (5/22/18) was 70,175,783 ounces so over the last week we dropped 270,804 ounces of gold.

The all-time record high for all gold ETF’s was 85,112,855 ounces in 2013. The record high for Gold ETF’s in 2018 was 70,763,846 and the record low for 2018 was 68,169,590.

All Silver Exchange Traded Funds: Total as of (5/15/18) was 653,672,289.  That number this week (5/22/18) was 649,922,638 ounces so last week we dropped 3,749,651 ounces of silver.

All Platinum Exchange Traded Funds: Total as of (5/15/18) was 2,372,995.  That number this week (5/22/18) was 2,339,586 ounces so last week we dropped 33,409 ounces of platinum.

All Palladium Exchange Traded Funds: Total as of (5/15/18) was 1,054,896.  That number this week (5/22/18) was 1,035,280 ounces so last week we dropped 19,616 ounces of palladium.

The Unscientific Activity Scale is a “3” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (Friday – 2) (Monday – 2) (Tuesday – 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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