Gold Stands Pat 

Commentary for Tuesday Jan 10, 2017 ( – Gold closed up $0.60 at $1185.50. At least the trading price pattern has been consistent over the past week. Since last Tuesday gold has moved between $1162.00 and $1185.50 – the higher number also being the highest close during that time. Not much of a spread but it does show that traders are buying the dips. In other words physical demand is percolating along – it’s most likely Asian in nature. It’s also a pretty safe bet that paper traders are not in a big hurry to short this market hoping to get the jump on the next increase in interest rates.

As always this market condition remains very liquid and will change on a dime but I think there is a basis for my guess – there is more optimism on the floor today than there was at the end of 2016. That is not to say everyone is optimistic – it just means this interest rate question continues to be vague even though the Fed claims that we will soon see further rate increases. This may also be a bit contrived in that the FOMC may be taking a page from the ECB Draghi playbook. When it comes to central banks talk is not cheap – it gets a lot done.  

This from Peter Hug (Kitoc) – Momentum Remains Elusive – “Gold continues to trade higher but is struggling to find momentum. Gold, up some 5% from the December lows, is trading inversely to the dollar. Yesterday’s dollar softness created a push to the $1,186 level, but overnight gains in the greenback has gold defending the $1,182 area this morning. Physical buying has picked up ahead of the Chinese New Year, but North American demand remains anemic. The markets will focus on president-elect Trump’s news conference tomorrow to glean more specifics on his stance on Russia, China, North Korea and of course his master plan to make the economy great again. Looking for gold to hold the $1,182 level to maintain recent strength, but a possible dip to the $1,177 area is possible. The upside is bordered by small resistance at the $1,187 level, with a possible intra-day target of $1,192, should selling pressure in the equity markets continue for another day.”

Once again Hug hits the nail on the head. Price traction for gold remains hit or miss. The 1 year price chart looks like an upside down bowl – we have moved from $1100.00 to $1350.00 back to $1100.00 worrying about interest rates, the dollar, the Russians and physical demand. I am not a big fan of the “big sell off” theory (it’s really not a theory I just made that up) but this notion does hang over the collective physical gold conscience. Will the price of gold plunge lower as America’s economic machine pulls the entire world out of its growth malaise? I think the answer is “no” because there is no way to put that fiat money genie back in the bottle.

At any rate we are once again trading at the lower end of a trading range for gold which was established in the summer of 2013 and gold has bounced off that lower edge at least 8 times in the following 5 years or so – it’s reasonable to believe at this time that physical demand will continue to support this line in the sand. The problem is that as Hug notes this market is not that interesting to the American public. It’s not that they are asleep – Coin World notes that in 2016 the US Mint chalked up its highest sales of the popular American Gold Eagle since 2011.

The mint also claims that early 2017 sales of these popular gold bullion coins are up 15% when compared to this time last year. This should be taken with a grain of salt, this sales number is accurate but at that time the price of gold had yet to begin its last big climb to $1350.00.  

Still the gold market remains sleepy. The reason is obvious – a short trading price range does not create buzz – and in the physical gold and silver market buzz creates sales. Without some motivation factor most folks are content to wait these markets out and see what happens.

Silver closed up $0.17 at $16.85. Still no long lines at the silver bullion cue – there is action but it also remains subdued.

Platinum closed up $0.20 at $982.80, another sleepy market. Palladium closed $8.10 higher at $785.25.  

The walk in cash trade was just average – the rain continues in LA. The phones were surprisingly busy today – I expected less given the rather flat pricing pattern.   

The Unscientific Activity Scale is a “5” for Tuesday.

The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 4) (last Thursday – 5) (last Friday – 6) (Monday – 4).        

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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