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Gold Settles Lower

Gold Settles Lower 

Commentary for Thursday, March 8, 2018 ( – Gold closed down $6.10 at $1319.90 today reacting to a number of factors. Traders are so afraid of higher interest rates that they continue to hang on every word which comes from either the FOMC or ECB. And the latest on the “threat watch” comes from our friends in Europe.

The European Central Bank has opted to keep interest rates unchanged and to continue its asset purchase program until September – that means the status quo for at least the next 6 months – traders ignored this and focused instead on bias easing (a fancy word used by the ECB when they want to sell a potentially important idea without really doing anything substantial).

The ECB basically dropped a statement saying it stands ready to increase bond purchases in case the economic outlook deteriorates according to CNBC. Professional traders are a curious lot – a hair trigger is necessary for survival so this hint that the future might be changing was enough for them to push the sell button and gold moved lower in value.

At the same time there was news that the Trump Whitehouse will move ahead with limited steel and aluminum tariffs. Surprisingly this news was bypassed by traders perhaps sensing that a pared back approach would hold off ECB retaliation.

But this tariff talk should not be ignored – a trade war is not likely because what is good for the goose is good for gander – that means you and I pay more money for the stuff we need.

Gold prices today were also influenced by its technical picture. Gold lost $7.60 yesterday and this may have sealed its short term fate as “momentum selling” and becoming “technically challenged” join forces.

The 60 day pricing chart clearly shows that gold is struggling with a technical double top.

In other words this it has attempted on two occasions (January and February) to push into higher ground. In this case the Promised Land would have been something over $1360.00 but on both occasions gold failed and trended lower – each time reaching $1320.00.

This now two-time failure is interesting in that on both occasions there was enough buzz to suggest that gold might break higher into new ground. When it did not the psychology of trading turns to the dark side and professionals consider whether the latest support points will holdup.

A look at the 6 month gold pricing chart will show why $1320.00 is so important. A breakdown here indicates that gold could push lower – we really don’t see much support before $1280.00.

It is too soon to jump out the window but China and India like $1280.00 much better than $1320.00 and they don’t give a toss about holding out for lower prices if they sense weakness.

This from Zaner (Chicago) – “Gold hovered near unchanged overnight, as there was still a great deal of uncertainty over the fate of the tariff proposal with the White House hinting at some flexibility about exemptions. Representatives of the EU have threatened retaliation against a variety of US exports, and this keeps the “trade war” talk elevated, which is bearish for the economy but could be a mixed bag for precious metals. On the one hand, it could boost safe-haven interest in gold and it could also put the Fed in a less hawkish stance, which could pressure the dollar and support the metals. But on the other hand, a sharp selloff in equities and commodities could spill over to gold and silver. Yesterday, the Federal Reserve’s Beige Book reported modest to moderate growth during January and February, with prices increasing in all districts and wages and benefit packages increasing in most districts due to the tight labor market. These findings appear to leave the door open for more rate hikes, which is bearish for the metals. Tuesday’s resignation of White House advisor Gary Cohn sparked some safe-haven flows into gold and silver yesterday, but a combination of a recovering Dollar, some mildly hawkish Fed commentary and better than expected readings for the ADP employment survey and unit labor costs helped repair risk sentiment, which in turn put the precious metals back on the defensive. The next big test will be the monthly US jobs report on Friday. Holdings in the world’s largest gold ETF declined 0.25 tonnes on Wednesday.

Traders are concerned that the proposed tariffs will interrupt the supply chain for auto manufacturers, which could raise the price of cars and thereby reduce the demand for auto catalysts like palladium and platinum. The Beige Book indicated that at least two districts are seeing higher steel prices in anticipation of the tariffs. The World Platinum Investment Council (WPIC) reported that it expects the global platinum market to be balanced in 2018, as a drop in supply should pull last year’s 250,000-ounce surplus down to “negligible” levels. WPIC says falling consumption by automakers is being offset by stronger industrial and jewelry demand. Total mining supply is expected to fall by 4% to 5.85 million ounces, mostly due to reduced output from South Africa. Platinum has broken out of the bottom end of recent consolidation area, while palladium is threatening to do so.”

Silver closed up $0.01 at $16.44.

Platinum closed down $0.90 at $950.80 and palladium closed up $6.55 at $975.45.  

This is our usual ETF information – All Gold Exchange Traded Funds: Total as of (2/27/18) was 68,571,066.  That number this week (3/6/18) was 68,478,824 ounces so over the last week we dropped 92,242 ounces of gold.

The all-time record high for all gold ETF’s was 85,112,855 ounces in 2013. The record high for Gold ETF’s in 2018 was 69,101,962 and the record low for 2018 was 68,169,590.

All Silver Exchange Traded Funds: Total as of (2/27/18) was 643,970,759.  That number this week (3/6/18) was 645,718,384 ounces so over the last week we gained 1,747,625 ounces of silver.

All Platinum Exchange Traded Funds: Total as of (2/27/18) was 2,429,206.  That number this week (3/6/18) was 2,426,661 ounces so over the last week we dropped 2,545 ounces of platinum.

All Palladium Exchange Traded Funds: Total as of (2/27/18) was 1,165,892.  That number this week (3/6/18) was 1,161,512 ounces so over the last week we dropped 4,380 ounces of palladium.

This is our Thursday Chicago Mercantile Exchange report covering the last 5 trading days – so we are looking at the trading volume numbers for the “February” Gold contract: Thursday 3/1 (322227) – Friday 3/2 (314822) – Monday 3/5 (309292)- Tuesday 3/6 (312047) – Wednesday 3/7 (296537) and the trading volume numbers for the “February” Silver contract: Thursday 3/1 (148864) – Friday 3/2 (147117) – Monday 3/5 (148293)- Tuesday 3/6 (148382) – Wednesday 3/7 (145885).

The Unscientific Activity Scale is a “3” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Friday – 5) (Monday – 3) (Tuesday – 2) (Wednesday – 2). 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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