Gold Settles into the Long Weekend
Commentary for Friday, Jan 18, 2019 – Gold closed down $9.70 at $1281.30. So if you are like me this market has you scratching your head – your generally upbeat but can’t quiet figure out why gold is struggling mightily with that $1300.00 level. Especially since the democratic vote of the people cannot be consummated either here or in England.
The Brits don’t like anyone telling them what to do so it was inevitable that a break from the European Union was in the cards. And while Theresa May survived a no confidence vote she can’t work out the politics necessary to carry out the popular Brexit vote.
The same is true of Trump – a government shutdown drags on as the Democrats and Republicans argue over funding and the wall.
I would not argue the sense in either of these apparently voter approved (the Wall or Brexit) but I would say that with so much confusion on both sides of the ocean gold should be moving higher.
Today is a good example, however of why this is not the case. China places an offer on the table to perhaps cool the trade war inclination and even though politics remain a mess – Wall Street trading moves into the green and gold’s safe haven value is questioned.
And of course the dollar remains primary factor. The Dollar Index has moved from 95.00 through 96.00 this past week raining on the gold bulls.
There will likely be no new FOMC information until late March and even this meeting might be the confirmation that the Fed is turning dovish enough as to suggest they will not take further action until summer – much to the delight of the gold bullion community.
Or will they change their minds again? If Wall Street roars and confidence in the economy is once again promised the FOMC might just revert to its old rhetoric – more interest rates in store.
In the meantime what are the technicians looking for? The near term trading range has everyone’s attention. It will be used to determine if gold is just resting, ready for that next leg up or breaking down looking to test new recent lows.
The key level gold must hold is something between $1280.00 and $1290.00. A break in these numbers which have been in place since early January and we all could be looking at $1240.00 or perhaps in a worst case scenario $1220.00.
While all of this is working itself out look for gold to keep churning – we are up something like $70.00 since December. A churning market might imply gold is having trouble moving higher just because in the past 5 years it has lost momentum at least 3 times at $1350.00. This defines a kind of background tension which could develop into profit taking.
It is interesting that Wells Fargo recently turned bullish on the metals but added that if gold moved above $1350.00 it would change its mind.
If gold moved above $1350.00 I would move all in – a break to the upside at those levels would confirm, at least in my mind that things in financial River City are in real disarray and this latest push to higher ground is just the beginning of a potential large comeback in gold.
So once again gold faces a critical juncture in this long consolidation pattern.
Don’t look for certainty in this current gold market. It is plain that gold remains a critical part of financial planning as the world tries to figure out its financial future. But the amount of fiat paper money continues to build in dramatic fashion. Lots of free money creates a sense of security in the financial world – as long as the top keeps spinning.
We will be closed this Monday (Jan 21st) for Martin Luther King Day – the commodity markets, the banks and the post office will also be closed.
This from Zaner (Chicago) – “After gold and silver tightened their coiling patterns earlier this week a failure this morning in the gold market sets a decidedly bearish tone for the last trading session of the week. While dollar gains are modest this morning and the Dollar is probably contributing to the weakness in gold it is likely that gains throughout global equity markets from trade rumors have pulled a wave of safe haven longs from gold and silver. While the markets were tossing around the idea that the US might be poised to remove tariffs as a show of good faith in the negotiations administration officials have failed to confirm that prospect. Certainly some of the selling in gold this morning is fresh outright selling considering the failure to hold what had become a fairly solid consolidation low zone on the charts. However the gold market ends this week with total gold derivative holdings reaching up to the highest level since June of last year, while silver derivative holdings have dipped down to the lowest level since December of 2016. It is possible that the gold market is seeing some liquidation off reports that recent gold price gains have deterred Indian and Chinese buyers and that is partially confirmed by anemic buying in Indian in the face of an expanding gold price discount. Not surprisingly Chinese gold prices continue to register a premium of six dollars to nine dollars but regional sources suggest that demand has been soft. In fact some Chinese dealers have indicated that buying head of the lunar New Year celebrations has already taken place.
While the sharp range up explosion in palladium prices yesterday saw prices close nearly $50 an ounce below the high the market has flashed higher again today as if the upward track remains in place. In the end the palladium market yesterday forged a very expansive range of $76 which should be pushing the market toward an exhausted technical condition. This week we have seen more market coverage of the reason behind the rally in palladium than we have seen in many years. Most of the coverage focused on strong auto catalyst demand, a 1.1 million ounce world deficit and the inability to expand supply. With the expanded press coverage of the massive rally and wide swings in prices that could suggest that the bull story is becoming saturated. Certainly there are minor supply-side threats from ongoing labor developments in South Africa, but the trade hasn’t focused intensely on that situation. In the month of January alone, palladium has forged a low to high rally of $210 (or 17%) and we suspect two-sided volatility will expand dramatically and a top could follow further near term blow-off gains. However, given thin conditions and a lack of a clear credible fundamental driving force, a top could be $1,400, $1,450 or even $1,500. If there were actively traded put options on palladium futures, we would be looking to purchase puts.
Clearly the initial damage today on the gold chart has resulted in a downside breakout of a recent consolidation range and that should foster added stop loss selling. Perhaps the trade rumors have severely punctured the safe haven argument. In our opinion longs should be exiting because of trade hope, soothing US Fed news, generally favorable US economic news and equity market gains as conditions that have clearly lowered economic uncertainty. In retrospect the equity markets have traversed the latest UK exit debacle without anxiety, China has stepped forward to cushion its economy and equity action is fostered optimism. The failure below $1286.50 would seem to set a near term target down at $1280.90. However we don’t get the impression that gold prices are set for a massive wholesale liquidation. The silver market has also forged another lower low for the move but is clearly within an extremely uniform lower high and lower low downtrend channel pattern that projects near term downside targeting in March silver at $15.40.”
Silver closed down $0.14 at $15.33.
Platinum closed down $10.00 at $797.80 and palladium closed up $28.40 at $1374.10.
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: 7 believe gold will be higher next week 1 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: 45 people thought the price of gold would increase next week 20 believe the price of gold will decrease next week and 35 think prices will remain the same.
Precious Metal Closes & Dollar Strength – Jan. 14 – Jan. 18
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