Gold Settles into the Weekend

Gold Settles into the Weekend

Commentary for Friday, Feb 1, 2019 – Gold closed down $2.80 at $1316.90. The jobs number roared today, normally this would have created headwinds for gold the thinking being that with higher employment numbers the Fed would be more likely to raise interest rates. The next FOMC gathering will be March 19th and 29th but this last friendly talk seemed to indicate that they were interested in “extensive deliberations” which most believe means any hawkish talk about interest rates is now on the back burner. So if the dollar was a bit weaker today – the Dollar Index moving lower by a quarter point why is gold soft?

Most likely because this sell-off at $1322.00 is just a round of profit taking going into the weekend. Keep in mind that gold has been on a tear moving from $1280.00 through $1320.00 this past week so this soft weekend finish makes sense.

Technically the bulls are still happy but the bears may be holding a shorter term trump card in that gold prices have shown traditional weakness at $1350.00 for the past 5 years and paper players like to lock in profits when short-term gains are on the table.

But what do you think about the real increase in safe haven buying which has made these recent gains possible? ETF physical numbers are moving higher, world angst continues and central bank buying is coming back to life. So there are real reasons gold is trending higher and a break above that important overhead resistance number ($1350.00) would be a world wake up call.

And what if you think this latest small pullback is just the beginning of a downward trend in gold? You might be right but let’s wait and see what the numbers say. The bullish crowd is looking for a traditional consolidation here – some backing and filling closes which show there is plenty of support still in place to create the next push to higher ground.

I don’t think anyone can actually tell you when gold will bust to the upside – but I can proffer. This will happen when no one really expects that break – in other words it will be surprising. We may be a bit premature here in that gold does have everyone’s attention but this new reality has not been the norm.

Two years ago most deep thinkers thought gold was going to break down at $1050.00 and there were better places to look for monetary protection.

Today that sage advice has turned into the generally accepted notion that gold and silver bullion is still a reliable foil to government hyper intrusion into your personal life. Skyrocketing prices will come when eventually the dollar is challenged – we are not close to that new paradigm but that too will come to pass and gold ownership in the United States will become a necessity.       

This from Zaner (Chicago) – “The bull camp has to be a little discouraged this morning with gold and silver prices falling back modestly in the face of a weaker dollar and disappointing economic data flows overnight. Perhaps it is possible that the metals are becoming a little concerned that the net result of economic developments will be for slowing conditions and not economic turmoil and that is typically bearish to precious metals and other commodities. However the gold and silver markets did leap sharply higher yesterday in the face of much softer than expected claims data and that could set up a similar reaction this morning if US nonfarm payrolls come in softer than expectations for a gain of 165,000. However after gold and silver markets ranged up sharply yesterday and fell back sharply from their highs that could be a sign that the markets have become overbought and or are waiting for the official statements from the trade talks. Even though the Dollar rejected a washout and climbed back into positive ground yesterday, the dollar chart remains negative, economic uncertainty following US scheduled data has returned and gold is catching a lot of bullish press. In addition to positive press stories regarding surging Central Bank gold demand, the gold bulls are also embracing ideas that the Fed will be on hold for even longer. Going forward, gold should draft support from the World Gold Council comments this week that central banks added 651 tonnes to official gold reserves last year. In fact, the WGC indicated that global central bankers bought the most gold in any single year since “1967”. Furthermore, the WGC also noted improving demand for gold bars and gold coins last year and therefore the strong demand angle has certainty been given added breadth and credence.

With divergence within the PGM complex yesterday, we are somewhat less bullish toward the complex today. In fact, the lack of sustained positive leadership from palladium has not been a good environment for platinum in the recent past, and therefore both markets looked vulnerable going forward. The palladium market forged a large $52 trading range yesterday and finished poorly which leaves the $1,300 level a potential failure point today. Obviously the overall big picture macroeconomic outlook was undermined as a result of yesterday’s US scheduled data, and again by Chinese readings overnight. We also suspect that the economic outlook is tempered further following comments that a total trade deal would not be agreed to until the middle of February. Therefore, the demand outlook for palladium has been tempered as the week has progressed and pushed into the market today, we favor the downside. However, the platinum market showed very impressive action yesterday, as it ranged up, closed positively and reached the highest level since January 11th in the process. However, given the weakness in palladium and the deterioration of economic sentiment, it is possible that the gains in platinum were the result of long palladium/short platinum spread liquidation and not fresh long interest. Critical pivot point/failure pricing in April platinum today is seen at $823.40.

While the path of least resistance looks to remain up in gold and silver we detect some corrective potential today unless US data is very soft and gold rallies right on the 7:30 jobs release. However, bullish sentiment toward gold is surfacing in mainstream press coverage with various analysts/investors touting the likelihood of a long term uptrend. While the US dollar rallied off its low yesterday, US scheduled data was definitively disappointing and that should ultimately leave the dollar within its current downtrend pattern. However a fresh trend decision in the Dollar and therefore in gold should be expected today. It should be noted that the gold market yesterday filled an overhead gap with a trade above $1,328.70, and for some that might point to an intermediate top. On the other hand, in the event that the March dollar index falls back below 94.94 following US payroll data this morning, gold could quickly streak to the top of an old spike high of $1,337.80. While the silver market fell back from its highs yesterday by as much as $0.20, the market was able to close above $16.00 and that should give credence to that level as a value zone. As long as March silver holds above $15.90, we will remain bullish.”

Silver closed down $0.14 at $15.88. Looks like a big jump in 100 oz silver bar sales, have not a clue as to why. I think most think this latest interest in silver bullion gets played out above $16.00 – still action there but no rush if you know what I mean. But you never know – silver guru David Morgan (Kitco) says “We will see people flocking to $30.00 silver.” And he is right – that is just the nature of this metal and today’s market, even at $16.00 still presents a big discount to recent old highs.   

Platinum closed up $2.10 at $822.60 and palladium closed up $13.70 at $1352.00.

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: 5 believe gold will be higher next week 2 think 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: 49 people thought the price of gold would increase next week 34 believe the price of gold will decrease next week and 17 think gold will remain the same.

Precious Metal Closes & Dollar Strength – Jan. 28 – Feb. 1

Gold Settles into the Weekend

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