Gold Remains Steady

Gold Remains Steady

Commentary for Wednesday, June 12, 2019 – Gold closed up $5.50 at $1331.90. To me gold continues to look choppy with a positive bias – today’s market opened higher, sold off and recovered in short order and then sold off again finishing the day midrange. World stock markets continue to worry some but I don’t see anything out there to suggest investors should be hiding under the bed.

Still there is a lot of uncertainty which obviously helps the gold bullion market. It is worth noting that gold is moving higher despite a stronger Dollar Index – which today moved from 96.6 through 96.9. No big deal but this is one of those small details which creates more intrigue.

Chris Mathews (MarketWatch) cites billionaire investor Paul Tudor Jones who wants everyone to remember “rate cuts 101”. Jones expects the Fed to cut interest rates before year end which will help the gold market. So this notion of lower interest rates is moving into mainstream thinking. This at a time when inflation numbers remain subdued but lower rates will push the dollar lower and gold higher. Chuck Butler (creator and editor of A Pfennig for Your Thoughts) thinks the dollar is in big trouble and he has been studying currencies for years.

I can’t believe the US will continue to escalate the notion of trade wars but you never know these days especially with a President who does not seem to blink in the face of political heat.

I do worry about posturing – if it gets out of hand the precious metals will benefit. 

So you might ask – if things are looking cloudy out there why is gold not roaring higher? Actually – the rule of late has been in times of uncertainty – park your funds in the dollar. This strategy has held up pretty well but gold enthusiasts believe that dollar strength will not last forever. And once this exit begins these funds will pour into gold bullion.

On the shorter term gold bulls still have an advantage but gold must show strength above $1350.00 to hold investors’ attention. We are not seeing a great deal of buying across our counters at current levels – mostly sellers. But these past few days there have been some big boys asking questions – which is an encouraging sign.     

This from Zaner (Chicago) – “Global equity markets overnight were weaker with the exceptions the Australian and Russian markets. Violent the protests in Hong Kong against an extradition treaty has some traders suggesting that the situation in Hong Kong in some way turns up the pressure on China in the trade negotiations. More importantly Chinese producer inflation slowed overnight and Chinese auto sales plunged in a sign that the Chinese economy is under duress. In fact despite factory gate price weakness the Chinese are apparently seeing food prices explode from African swine fever and adverse weather in fruit producing areas. Economic data released overnight included French nonfarm payrolls which on a quarterly basis posted more gains than expected, Spanish consumer prices which matched expectations and Chinese new loans for the month of May which came in below expectations but above the prior month. The North American session will start out with a weekly private survey of mortgage applications. The May consumer price index is expected to have a minimal downtick from April’s 2.0% year-over-year rate. The May core consumer price index (ex food and energy) is forecast to hold steady with April’s 2.1% year-over-year rate. The Atlanta Fed’s business inflation expectations survey will be released during mid-morning US trading hours. Earnings announcements will lululemon athletica after the Wall Street close.

In addition to comments yesterday from President Trump suggesting that “he” was holding up any trade deal the markets have picked up on the fact that no preparations for a meeting between the two leaders at the G20 are being made and that suggests a lack of fresh progress. Apparently the US has also indicated that its terms for a deal have not changed which in turn would seem to require Chinese concessions to make a deal. It should also be noted that the US and China both appear to be taking strategic steps to cushion their economies against trade actions with China providing fresh stimulus and the US reportedly turning to non-Chinese rare earth producing countries with efforts to develop their supply flow. Therefore it is not surprising to see gold tracking moderately higher this morning especially after two straight days of rather significant compacted selling. Even the dollar is providing support for gold and silver today as the charts appear to have reversed in favor of the bear camp even if the magnitude of the declines this morning are insignificant. Yet another supportive element for gold today is the developing pattern of weakness in global equity markets especially with the US market showing signs of forging second lower session. While hope for a Fed rate cut has been present consistently in the marketplace since the nonfarm payroll disappointment last week, the gold trade is beginning to look forward to next week’s Fed meeting as a possible junction for the Fed to acknowledge slowing concerns specifically because of the appearance that trade tensions are set to become a fixture.

Surprisingly the platinum market has forged a five day high in the early going today despite a story suggesting Toyota is planning to cut platinum use in new fuel-cell vehicles. It should also be noted that the PGM markets are managing gains despite a significant contraction in Chinese auto sales and a mild risk off condition flowing from equities. From a technical perspective the rally in platinum from the late May low has been accompanied by a consistent rise in open interest in a sign that investors/traders might be viewing the sub $800 level as value. While the charts in palladium are not impressive they are bullish with a very uniform pattern of higher highs and higher lows. However the market has moved within striking distance of the $1,400 level again but seemed to fall back from a test of that general area yesterday. Uptrend channel support today in September palladium is seen at $1362.40 with support in July platinum seen at $810.80.

With the moderately aggressive bounce to start today it appears as if safe haven interest in gold has been rekindled off the protests in Hong Kong, from press interactions between US and Chinese officials and also from signs of economic slowing in both the US and China. Because of the slowing and the unyielding stances in the trade talks the gold market has apparently rekindled support from expectations of a supportive Fed next week. In retrospect the $1325 level is given fresh credence as solid value and another trade back above 1350 is seemingly ahead. However the bull case could be thwarted in the event that August gold fails to hold above $1330. Unfortunately for silver bulls the charts are not as strong as gold and silver will see some headwinds from fears of global slowing. While we can’t rule out a retest of levels above $15.00 the failure to hold above $14.76 could signal an end to this week’s recovery attempt.”

Silver closed up $0.01 at $14.72.

Platinum closed down $3.70 at $809.10 and palladium closed up $15.90 at $1397.40.

This is our usual ETF information – Gold Exchange Traded Funds: Total as of (6/5/2019) was 68,536,947. That number this week (6/12/2019) was 68,317,590 ounces so we dropped 219,357 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 70,515,544 and the record low for 2019 was 67,430,173

Silver Exchange Traded Funds: Total as of (6/5/2019) was 611,170,344. That number this week (6/12/2019) was 614,241,286 ounces so we gained 3,070,942 ounces of silver.

Platinum Exchange Traded Funds: Total as of (6/5/2019) was 2,789,080. That number this week (6/12/2019) was 2,816,343 ounces so we gained 27,263 ounces of platinum.

Palladium Exchange Traded Funds: Total as of (6/5/2019) was 683,751. That number this week (6/12/2019) was 670,487 ounces so we dropped 13,264 ounces of palladium.

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