Gold Steady – Watching the G-20

Gold Steady – Watching the G-20

Commentary for Friday, June 28, 2019 ( – Gold closed almost unchanged today up $1.30 at $1409.70. I think everyone is too focused on the outcome of the G-20 – it is important because it’s large. This Group of Twenty is an international forum of governments and central banks which include the European Union. There are a lot of moving parts. With that many different points of view and that many super-egos all in one place the chances of getting out the “bubbly” to celebrate progress is not good.

If Trump and the Chinese can’t get along the best they can do is promise a better tomorrow – and Trump has no problem with more tariffs if he does not get concessions – so what do you think will happen? The outcome will support gold prices. And the building angst is not the primary reason the future is looking up for gold. The European’s are not raising interest rates and most believe there is already one US rate cut baked into our cake by year end.

Gold was firm overnight in Hong Kong – it opened steady in domestic trade and then sold off testing $1406.00 before reversing just as quickly and moving back to unchanged and then up a few bucks. This pattern is typical in that the paper trade is back to testing “weak hands”.

It’s too soon to say this market is simply “consolidating” – so let’s look at the 30 day picture. This past month gold moved from $1280.00 through $1420.00 and then took a breather which figures. This $1400.00 top goes back to the summer of 2013 and there is nothing but blue sky between $1400.00 and $1600.00. Still some traders remain optimistic and shorting gold these days might turn out to be something like standing in front of a train.

The professional trade, for now is content with watching this market sort itself out. 

Most bullion products remain cheap (still plenty of sellers) but premiums on US Gold Eagles are moving higher. You might want to consider that the Europeans are paying more for this product but that is just speculation – although this has happened in the past (Germany).

At any rate I would describe the US market as surely “waking up” but still not totally convinced this latest rally is the “big deal” most were expecting. Don’t get me wrong, the latest rise in gold could well be predicting something unexpected – perhaps right around the corner.

This idea of gold bullion being the financial “canary in the coal mine” used to be accepted as gospel. But today there are so many derivative trades, sophisticated computer driven schemes and central banks fiddling with the numbers that it is hard to say who is holding the best hand.

The US dollar is a good example – today the Dollar Index is choppy around 96.00, the monthly chart trending down from 97.5 so generally supporting higher gold prices. Look at the index 10 years ago and a number around 75.00 made sense. So you could make a decent case that in the longer term, especially with interest rates trending lower that the index could easily drop 20%. And this would still remain within its historical norm. The consequences of such a drop are obvious – gold would make new highs and the physical market would go crazy. 

I don’t think you will have long to wait for gold to sort out the shorter term question. Whether this latest move above $1400.00 is just a flash in the pan or something more promising – the reason being that the international stakes could not be higher and Trump is not afraid to push the envelope. Let’s hope all this works out but if the central banks of the world have been buying gold for financial protection I think following their lead makes sense for the rank and file.    

This from Zaner (Chicago) – “Global equity markets overnight were mixed with Asian and Pacific Rim stocks weaker, European and US stocks showing minimal gains. Economic data released overnight included Japanese housing starts for May which were down by very significant 8.7%. Japanese construction orders were also off very sharply with a decline of 16.9%. From Germany import prices contracted but not as much as expected, French producer prices came in much weaker than expected while French consumer price index readings were a touch stronger than expected on a month over month basis. French consumer spending came in at 0.4% to beat expectations and the Spanish GDP for the first quarter on a year-over-year basis managed to match the previous reading. Also out from Spain overnight were retail sales figures for May which came in much stronger than expected with a 2.4% gain. Swiss KOF leading indicators for June came in below expectations and below the prior month. Other data points overnight had UK GDP matching previous readings of 0.5%, UK total business investment came in softer than expected with Italian prices coming in stronger than expected in a number of measures. Finally to complete the early overnight data flow euro zone consumer prices in June came in at 1.2% matching expectations and the previous month. The North American session will start out with May personal income which is expected to have a modest downtick from April’s 0.5% reading. May personal spending is forecast to have a minimal uptick from April’s 0.3% reading. April Canadian GDP is expected to have a moderate decline from March’s 0.5% reading. The June Chicago PMI is forecast to have a modest downtick from April’s 54.2 reading. A private survey of June consumer sentiment is expected to have a minimal uptick from the previous 97.9 reading. San Francisco Fed President Daly will speak during afternoon US trading hours. Earnings announcements will include Constellation Brands before the Wall Street opening.

Our take from the overnight headlines is that both the US and China are maintaining their hardline stances ahead of this weekend’s meeting and therefore the odds of anything more than a simple delay in tariffs are very low. In fact given the Chinese stories overnight suggesting the US President is facing political pressure and suggesting that China could hold out longer than the US would seem to discount progress and therefore increase the chance of dollar support for gold and further economic uncertainty buying of gold. In fact the Chinese President has complained again about the US bullying and President Trump finished his comments on the upcoming trade meeting with another promised to invoke another tranche of tariffs if he is disappointed with the “progress”. Another minor geopolitical support for gold came from the UK where there is talk of preparing an emergency budget for a no deal exit. Also helping gold overnight is an upward short-term price target adjustment by UBS with a net addition to that targeting of $50 and a target of $1430 (cash) which is effectively $50 above this morning’s price. According to Bloomberg Exchange Traded funds added 70,951 ounces of gold to their holdings yesterday bringing this year’s net purchases up to 2.96 million ounces and extending the chain of purchases to 12th trading session. We also suspect that the party line at from the G 20 meeting will be all about easing and stimulating the global economy and that should provide lift to gold. In perusing today’s US scheduled data it would not appear as if the numbers are set to drive gold and silver prices without some very surprising results. Traders should also watch the September dollar index as a decline in the dollar below 95.56 could be cause for gold to return to its overnight high up around $1427. While we suspect that volatility will remain low as the outcome of the trade meeting will remain unknown, we suspect that a fresh trend decision will be seen from the G20 meeting but that Sunday’s night action will be the main event as the results of the trade meeting will set mentality for the coming week.

Once again the palladium market showed its resiliency with a reversal from a two day corrective setback in a fashion that re-emboldens the bull camp and threatens the bears again. While some may suggest part of the gains were the result of hope for trade progress, that theme has not shown a tight correlation with daily price changes. Uptrend channel support in September palladium is moved up to $1,514.45 and targeting remains the March high up at $1,563.70. Perhaps the palladium market was lifted by upward stock price targeting for North American Palladium shares from a Bank on Thursday, and perhaps investors will begin to see the stellar gains in palladium futures as a signal to buy palladium ETF’s and palladium companies.

At least in the early going it would appear as if gold has thrown off the corrective track from the prior three trading sessions with hopes for dovish G20 promises providing strength to support levels on the charts. We would suggest that dialogue from Chinese and US leaders heading into the G20 meeting also favor the bull camp as both were hardline posturing again. The recent pattern has been negative iterations from the trade battle which pressures the dollar and in turn supports gold. We see close in support at $1423.40 and then a more important support point at $1412.70. Pushed into the market today the bull camp should have an edge with the biggest risk to fresh longs an unreactive market.”

Silver closed up $0.04 at $15.25. Silver bullion buyers are the “steady Eddie” in this bullion market. Most are quietly buying physical day in and day out – nothing big, buyers range from a few thousand to several hundred thousand – but they keep showing up in this range. 

Platinum closed up $22.90 at $835.50 and palladium closed up $0.20 at $1532.40.

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: 8 believe gold will be higher next week 1 thinks 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: 53 people thought the price of gold would increase next week – 28 believe the price of gold will decrease next week and 19 think prices will remain the same.

Precious Metal Closes & Dollar Strength – June 24 – June 28

Gold Steady – Watching the G-20

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