Gold Settles into the Weekend – FOMC Looms
Commentary for Friday, Sept 14, 2018 – Gold closed down $7.00 today at $1195.00. Gold was weaker most likely because the dollar is a bit stronger – the Dollar Index moved from a low this morning of 94.36 to a high of 94.79 and I think the three month picture shows a nice floor around 94.00 so the big 5 day index weakness we have seen may be coming to an end. This coupled with another increase in interest rates from the FOMC meeting to be held on September 25th and 26th might keep gold left-footed.
From the “glass half full” standpoint current pricing has most likely already been factored in but it is disappointing that gold’s big move from $1175.00 in mid-Aug has failed the important $1210.00 overhead resistance on two occasions. It’s positive that we are now looking at side-ways action but ultimately this grind may lead to a breakdown in prices.
My guess is that paper traders are eyeing technical support ($1190.00) at the same time considering possible safe-haven buying from countries with paper currency and debt problems like Brazil, Venezuela and Turkey. If this latest line in the sand breaks down the next stop might be $1175.00.
I would say gold commentary is back to mixed – but consider that before the last push higher there were a lot of bears in the woods. So the picture is more upbeat but still overshadowed because this last pitch higher was not sustained.
Gold closed today at $1195.00 so let’s look at the moving averages. The 50 DMA ($1211.50) the 100 DMA ($1250.40) and the 100 DMA ($1285.80) – the close is lower than all three so on top of a coming interest rate hike gold is facing a technical problem as well.
Much has been said about tariffs being inflationary – and they are but trade wars (if they develop) could have a negative effect on the metals.
Surprisingly enough some of the trade thinks the “bottom” is in and we can expect a back and forth fight between now and the end of the year. This type of narrow ranged action is the hardest on the rank and file consumer because they get the worst of both worlds. They don’t get the satisfaction of higher prices which encourage repeat sales and by the same token they don’t get blow-out numbers which encourages core buyers.
There are some observers that believe gold’s shorter term choppy to lower action will stop after Fed raises rates in late September. They also believe that the last interest rate hike forecast for December will not happen and gold might trade towards $1300.00 by Christmas.
That is a bit too optimistic for me but it could be true if gold’s safe-haven and bargain hunting picks up – especially as we enter the “festival” season through Christmas. The walk-in traffic this past two days has been hectic with both buyers and sellers – small deals to big boys so the public remains interested.
Finally keep in mind that these markets can sometimes be “bent” by the big net short positions put on by non-commercial gamblers – this adds to the uncertainty. These speculators can sell huge amounts of metal that does not or ever will exist and in the process create a volatile stew that can cut either way.
This from Zaner (Chicago) – “Overnight, gold gained a bit of what it lost yesterday, as the dollar tested its August lows. The weaker than expected CPI number yesterday, which lessened that chances of multiple Fed rate hikes in 2019 and for some even threw a December rate hike into question, pressured the dollar and supported gold. This was the second day of weak inflation data, as the PPI came in lower than expected on Wednesday. Gold failed to break out above its August 28th high yesterday, and this may have sparked some profit taking after the 2-day bounce. It might take a break below support in the dollar to carry gold up into a higher trading range. The markets have seen a dramatic change in psychology this week with the suddenly optimistic tone on the trade front. Beijing has welcomed the Trump Administration’s invitation to resume trade talks, and details are reportedly being worked out. However, President Trump stated on Thursday that the US was under no pressure to make a deal with China. Tariffs are expected to be levied in coming days. Like gold, silver sold off after an initial rally off the CPI data and ended up lower on the day. Only two sessions ago, December silver was looking at new contract lows, so it may be too much to ask for this market to stage a big recovery rally. Still, the market is oversold, and further weakness in the dollar could spark some short covering.
Despite seeing the lowest prices in ten years, platinum miners are still churning out production, with a surplus of some 311,000 ounces expected in 2018. South Africa represents 70% of global production, and the downtrending South African rand keeps operating costs low relative to platinum prices, which are quoted in US dollars and allows miners to continue producing. Like gold and silver, platinum had a bullish reaction to the CPI data (and the weaker dollar) on Thursday but then sold off when it tested and failed to move above a key resistance level, in this case the 50-day moving average. The market is approaching short-term overbought levels. Specs were heavily short in the most recent COT report, and there doesn’t appear to have been enough upside action to correct that situation. Therefore, there may be more short covering fuel if the market moves through resistance. It may take further selloff in the dollar to spark such a move. December palladium is holding firm but it is technically overbought. A key resistance level for October platinum comes in at $812.50, the aforementioned 50-day moving average. Resistance for December palladium comes in at $978.30.”
Silver closed down $0.10 at $14.04. The closer this market gets to $14.00 the more action we see across the counter – Monster Boxes, bags, silver rounds are all hot.
Platinum closed down $4.70 at $797.40 and palladium closed up $1.80 at $998.80. Sale of platinum bullion is picking up somewhat but considering the big discount to gold I would have expected more action.
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 3 think gold will be lower and 1 thinks 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: 40 people thought the price of gold would increase next week 38 believe the price of gold will decrease next week and 22 think prices will remain the same.
Precious Metal Closes & Dollar Strength – Sept 10 – Sept 14
The GoldDealer.com Unscientific Activity Scale is a “6” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 5) (Tuesday – 4) (Wednesday – 4) (Thursday – 5). 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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