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Gold – Rocking Santa’s Sleigh

Gold – Rocking Santa’s Sleigh 

Commentary for Thursday, December 22, 2022 ( – Today gold closed down $28.90 at $1787.00 and silver closed down $0.56 at $23.48. Just a confusing reminder that we are closed on Friday (the markets are open) and Monday (the markets are closed) for Christmas. Wishing you all a blessed holiday season. Gold pitched lower this morning over a round of positive US economic signals suggesting growth is better than expected. This should have encouraged Wall Street, but the DOW yawned. Suggesting that no one can stay on the same page for long these days as the world fears higher inflation, recession, and war. And yet these very factors underpin the importance of gold and silver bullion. Because of this uncertainty I would not be surprised to see a sideways pricing market with erratic pricing until future FOMC action is better understood. Last Friday gold closed at $1790.00 / silver at $23.15 – on the week gold was off $3.00 and silver was up $0.33. Another week of swirling FOMC interest rate opinion creating a bumpy price ride. With little real change in prices on the week.     

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On Monday gold was quietly moving toward the Christmas weekend. The pricing spread was tight ($12.00) which is somewhat surprising. The Dollar Index moved a half point higher in early trading, which should have pushed this market lower. Because traders are now preparing for anything which supports expected hawkish FOMC sentiment.

Reuters – “Gold steadies in thin trading as investors look of fresh drivers – Gold prices were little changed on Monday as weakness in U.S. dollar and equities countered pressure from expectations of higher interest rates amid thin trading as markets look for fresh catalysts.”

Holiday trading is typically quiet, but this market continues to invent significant pricing cross currents. The most important one being the strength of the dollar. The Dollar Index lost roughly 8 points this past month. Obviously supporting the bullish gold scenario.

In the short term, however, the index is in a downtrend and technically weak. But at current levels gold has a great support going back to the summer months. Which might suggest that the index is now able to bide its time. Waiting for the FOMC interest rate pattern to fully develop. Chief Powell’s “chosen” or “forced” path should be clear by the first quarter of 2023.

On the day gold closed down $2.30 at $1787.70 and silver closed down $0.12 at $23.03.

Zaner (Chicago) – “The gold and silver bulls hope that the constant buzz of rising rates moderates this week with the markets potentially benefiting from talk that the Chinese government will step up to support its economy next year. In a surprising development gold ETFs on Friday saw the largest inflow in 6-months with funds adding 177,397 ounces. For the week gold ETF holdings increased by 328,719 ounces, while silver ETF holdings declined a massive 8 million ounces last week. Unfortunately for the bull camp, gold ETF weekly holdings (since the beginning of July) have posted only two net weekly inflow readings. However, weekly inflows to ETF holdings were exclusively positive from mid-January through the end of April which in turn sparked the belief some investors were returning to precious metal investments. In the end, year-to-date gold ETF holdings have declined by 4% and silver ETF holdings have declined by 15%. While we think the gold and silver trade has begun to shift to a new paradigm, the recent barrage of aggressive central bank rate hikes and fears of significant global slowing are not conducive to that shift yet. Therefore, gold, and silver look to remain almost exclusively focused on the direction of the US dollar with the bull camp potentially needing a slide and close below last week’s spike low down at 102.875 in the March dollar index to take some lingering control from the bear camp from last week. While the bull camp might draft minimal support from a Commerzbank prediction that February gold will return to $1,850 next year, it expects gold to retest $1,750 into the remainder of the world central bank tightening cycle. In counter intuitive thinking recent moderation of key US and UK consumer inflation readings should help underpin gold and silver prices above the December lows as that news punctures bullish sentiment toward the dollar again and provides impetus for interest rates to remain near 4-month lows. Despite the initial plunge in gold prices last week, the net spec and fund long position as of early last week was near the lowest levels since the beginning of August leaving the market technically vulnerable to fresh stop loss selling and a return to key support at the December low of $1,778.10. The December 13th Commitments of Traders report showed Gold Managed Money traders are net long 56,554 contracts after net buying 18,936 contracts. Non-Commercial & Non-Reportable traders added 12,928 contracts to their already long position and are now net long 153,123. While the massive 4-day washout of $1.66 last week in Silver culminated in a very aggressive rejection of the $22.735 level given silver’s reliance on industrial/physical demand the outlook for the global economy remains a headwind for the silver bull camp. Furthermore, the most recent COT report’s positioning showed the net spec and fund long in silver at the highest level since May! The December 13th Commitments of Traders report showed Silver Managed Money traders are net long 22,034 contracts after net buying 7,377 contracts. Non-Commercial & Non-Reportable traders net bought 5,413 contracts and are now net long 39,270 contracts. Total silver ETF holdings last week were 842-million ounces with a 26 month low posted in September at 832-million ounces and a 2022 high of 947-million ounces. From a shorter-term perspective the March silver contract has established a fresh uptrend channel support line at $22.785, drawn from the November and December lows.”

On Tuesday gold was again full of happy surprises for the bullish scenario. From the open the New York cash market moved to daily highs ($1820.00) and began to move sideways between $1815.00 and $1820.00! Normally traders would look for continued weakness in the dollar on such a jump in price. But in fact, the Dollar Index is holding steady around 104.00. There is some buzz as the Bank of Japan raised interest rates on the 10-year bond. Japanese citizens are big savers, and this might encourage them to keep money at home rather than invest in markets outside Japan. Could this account for higher prices? That is another stretch. Could this be momentum buying because gold’s technical picture now favors the bulls? Not in my estimation. Finally, Reuters claims that cities across China are scrambling to install hospital beds over Beijing’s surprise decision to let the virus run free. New analyses by various modeling groups predict the reopening could result in as many as 2.1 million deaths. That may be another one of those lynchpins considerations which stokes international fear levels.

To me, this modest rally at the higher end of gold’s recent trading range looks like a small return to the “fear” trade. Suggesting that while world markets have calmed down at the possibility of a more dovish FOMC hand, they are not all that convinced we are out of the financial woods.

Somewhere in this developing puzzle there has to be increased safe haven buying coming from this kind of complex reasoning. I would not, however, get too excited because gold has plenty of heavy lifting to do before the powerful paper trading engines continue to bless the remaining, and rather hard-core bulls in this market. Gold must show continued strength above $1800.00. And the Fed must pivot on its interest rate policy. Both of these requirements are big orders if Chief Powell continues to bark at Wall Street and the US economy.

On the day gold closed up $28.20 at $1815.90 and silver closed up $1.06 at $24.09.

Grant on Gold (Zaner) – (1) Gold jumped to a 5-month high of $1824.51 early last week before retreating into the range to close 0.2% lower. (2) Silver ended last week with a loss of 1%, but not before extending to the upside and achieving an 8-month high at $24.13. (3) Platinum fell 3.6% last week, dropping out of the bull channel. The first lower weekly close in four – $796.33 to $1080.14, which comes in at $938.24. The 100-day SMA comes in right around this level as well. (4) Palladium fell to new lows for the year last week and extended lower on Monday.

On Wednesday gold pushed higher but could not hold gains, in a trade which has been typical this week. The pricing spread was $1816.00 through $1823.00 with an upward bias. Still a quiet holiday trade which by the end of the domestic market closed unchanged.

This pattern may prove typical through the New Year – thin trading conditions and tight spreads. But you never know these days, things change fast, so keep your seat belt fastened.

Gold bulls should be happy Santa has delivered a surprise. Gold is still struggling for a price above $1800.00. The price of gold fell to a two year low in late September on hawkish Fed sentiment. But has since risen $200.00 on the expectation of slower rate hikes.

That is the driving force in today’s market as traders anticipate a Fed pivot in interest rates. At the same time the still strong dollar caps higher gold prices. Yet the bulls hold on to the theory that the dollar must eventually lose value. It is difficult to see how these opposing forces can exist in the same trading space. One or the other must eventually give way.

On the day gold closed unchanged at $1815.90 and silver closed down $0.05 at $24.04.

Jim Wyckoff (Kitco) – “Technically, February gold futures bulls have the firm overall near-term technical advantage. A six-week-old uptrend is in place on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at the December high of $1,850.00. Bears’ next near-term downside price objective is pushing futures prices below solid technical support at $1,775.00. First resistance is seen at today’s high of $1,833.80 and then at the December high of $1,836.90. First support is seen at $1,820.00 and then at $1,800.00. March silver futures prices hit an eight-month high today. The silver bulls have the solid overall near-term technical advantage. Prices are in a choppy 3.5-month-old uptrend on the daily bar chart. Silver bulls’ next upside price objective is closing prices above solid technical resistance at $25.00. The next downside price objective for the bears is closing prices below solid support at the December low of $22.19. First resistance is seen at today’s high of $24.525 and then at $25.00. Next support is seen at $24.00 and then at $23.50.”

On Thursday gold again faded on better-than-expected economic news. Reuters – Gold drops 1% after U.S. data lifts dollar, prolonged Fed hike hopes – “Gold turned negative after U.S. economic data showed the country’s economy rebounded faster than previously estimated, boosting the dollar and potentially setting the Federal Reserve on a keener path to fight inflation. New claims for unemployment benefits increased less than expected last week in the United States, while the economy rebounded faster in the third quarter, rising 3.2% against the previously estimated 2.9%. “The economic numbers we’re seeing indicate that there’s most likely going to be a more prolonged increase in interest rates,” said Jeffrey Sica, chief executive officer of Circle Squared Alternative Investments.”

There are other factors as well which may produce a heavy gold trade. The Dollar Index today bounced from early lows (103.80) to daily highs (104.50) creating the typical drag on bullish sentiment. Independent analyst Ross Norman highlighted the issue of book-squaring ahead of year-end or early new positions being put in ahead of the new year rush. “It would be dangerous to read too much into gold’s price action just now given so many market participants are absent for the festive break… and thin markets are often prone to exaggerated moves on small volumes.”

On the day gold closed down $28.90 at $1787.00 and silver closed down $0.56 at $23.48.

Platinum closed down $17.40 at $997.60 and palladium closed up $5.60 at $1650.00.

Zaner (Chicago) – “With an extremely active scheduled report slate today, gold and silver are likely to experience significant knock-on impacts from the dollar. On one hand, February gold managed a 6-day high yesterday and held nearly all this week’s gains. On the other hand, without a declining dollar, the bull camp is without a strong bull case. In fact, if the US dollar continues to build consolidation support, gold is vulnerable to week ending long profit taking selling from this week’s low to high rally of $37.00. However, the bull camp is attempting to entrench the view that the historically aggressive global central bank rate hike cycle is “priced”. Unfortunately for the bull camp, talk of disinflation has surfaced and traders should brace for a brief period of volatility through the Friday morning PCE release. Uptrend channel support in February gold today is $1,804.10 and resistance is $1,836.90. The action in silver prices yesterday was impressive with the trade holding within striking distance of 8-month highs and the rally on Tuesday forged on a significant increase in trading volume. Uptrend channel support in March silver today is $23.25, and targeting is the top of a gap at $24.75 from late April!”

We are closed on Friday (markets are open) and Monday (markets are closed) for Christmas. Wishing you all a blessed holiday. Consider this holy insight – Elizabeth Barrett Browning – “Earth’s crammed with heaven, and every common bush afire with God; and only he who sees takes off his shoes; the rest sit around and pick blackberries.”

My Brothers and Sisters, thank you for your friendship. If you have unusual circumstances, need cash or a special visit – talk to Harry or Eric. Most employees have been vaccinated – if this is a concern ask for more information. We continue to enforce ridged safety standards between people and product. Be careful, the contagious Omicron variants remain dangerous. At the same time trust that God will get us back to normal and our traditional business model. As always, thank you for your patience. Richard Schwary

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