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Gold – Surprisingly Firm, Considering

Gold – Surprisingly Firm, Considering

Commentary for Friday, March 26, 2021 (www.golddealer.com) – Gold closed up $7.30 today at $1732.20. And because it continues to deal with bearish news the trend of selling into strength remains in place. Yet we have pushed towards important, short-term overhead resistance ($1740.00) enough times to suggest there are bullish factors at play which are lost in the negative rhetoric. If gold manages to break above $1740.00 it will set up a needed positive short-term scenario, in the meantime trading ranges remain narrow but supportive. This past Friday gold closed at $1741.40 so on the week we are down $9.20.

Look for bullion delays of 4+ weeks in some gold and silver products, especially 2021 gold and silver eagles from the US Mint. Should you decide to use our Delayed Delivery Program please talk with your service rep and understand how this program works. It is handy if you want to lock in the price “now” but is not for everyone. Just like us – you must pay upfront to “lock in” prices and you can’t “change” your mind. So, unless God has blessed you with patience ask your rep for other options. Thanks!

Gold opened Monday of this week choppy – with a $10.00 trading range reacting to short-term profit taking and a Dollar Index coming off weekly highs. The initial mild downdraft turned into an almost unchanged trade before market close. This kind of trade once again defines the lack of buzz in a technically bearish gold market as investors look for higher yields anywhere, they can be found. At the same time traders cannot seem to justify why the physical gold market has welcomed what John Miles (Zaner) calls a “stealth rally”. What a great way to describe what our shiny friend has been up to as the world suggests that the primary reason for gold’s safe-haven demand will disappear as the pandemic haze begins to clear.

In the middle of this still evolving picture Fed Chief Powell assures markets that interest rates will remain at zero through next year. And implies this timeline is flexible. In other words, our central bank will do whatever is necessary to make sure the US recovery remains in place. Jerome’s latest release is powerful and inflationary, but the gold trade is so insecure in its core belief that reminders are needed, or it loses its resolve and concentrates on day-to-day trading. Demand in India seems weak – yes, but they simply look for better pricing above $1700.00. The gold ETF outflows continue negative, yes, they are – but the number of ounces sold represents a small percentage of the total. What about higher yields or gold’s purported competition? Well, there certainly is no buzz but these shadow arguments are typical in my 40 years in the physical business. Gold is doing exactly what it is supposed to do – act as financial thermometer in a troubled world. Higher prices more uncertainty – lower prices less uncertainty. Keep the bigger picture in mind, ignore financial noise and appreciate that most of the time gold is boring. Remember however to follow the lead of world central banks. Use gold bullion as a financial hedge against systemic risks over the long term and remain flexible. On the day gold closed down $3.60 at $1737.80 and silver closed down $0.55 at $25.74. 

On Tuesday of this week gold weakened as the dollar moved higher. Both Powell and Yellen will speak to Congress and answer questions about President Joe’s $1.9 trillion dollar stimulus already being distributed and another whopping $3 trillion dollar infrastructure bill. So, money from Congress and the FOMC blessed by Treasury Secretary Yellen continues to flow as the Federal balance sheet moves higher. MarketWatch – “Optimism about the speed of the recovery from the pandemic and the possibility of rising inflation have left investors skeptical about the Fed’s plans for interest rates and bond purchases. That has made Powell and Yellen’s testimony a more highly anticipated event as investors reassess their expectations for a fast and widespread global recovery.” So why is gold moving lower as traders worry about inflation? This is one of those Fed dilemmas which carries a lot of sway. Even through Powell claims inflation is not a problem, traders cannot see how the Fed will continue to add trillions of dollars to the money supply without creating an inflation spike. If inflation moves higher the Fed will raise interest rates and the dollar will become even stronger. With obvious negative consequences for the stock market, the economy, and the price of gold.

How this will work out in the wash remains uncertain. The traditional way of looking at the consequences of Fed spending might not hold water in a post-pandemic world. The Fed for example might welcome higher inflation. This is the old-time explanation as to how central banks pay back the money they borrow today. With inflated dollars tomorrow.

Still today’s bearish gold sentiment remains in place and we may see further testing of support numbers, but declines will be orderly. We have moved from highs around $2000.00 to solid support between $1600.00 and $1700.00. And we know that bargain hunters show up in force at the lower end of this range. If you like the privacy of gold or silver bullion welcome the opportunity of lower prices. Keeping in mind that we value gold in dollars, a strong currency. At the same time gold receives support from the rest of the world hedging weaker currencies. On the shorter term expect turbulence and consolidation. Gold’s plus today is that most bearish news is common knowledge. If Powell is right and inflation is not a problem this consolidation will require patience. Yellen expects higher inflation this year and if she is correct this will support gold prices nicely. But sooner or later “someone has to pay the bill” as my Mom was fond of saying. So now is the time to get your “inflation house” in order because everything is on sale. On the day gold closed down $13.10 at $1724.70 and silver closed down $0.54 at $25.20. 

Gold opened supportive Wednesday and held up well even through the Dollar Index pushed to new recent highs (92.5). This was likely due to a pull-back in US Treasury yields and virus lockdowns across the Euro zone which lifted safe haven demand. “Despite a strong US dollar, gold is steady at $1,730 as the bearish pressure seen in the last few weeks looks to be waning,” ActivTrades chief analyst Carlo Alberto De Casa said in a note. “From a technical perspective, the medium term remains negative but the pressure from sellers is slowing down.” (Reuters)

Today is one of those “push – pull” days. Gold is helped by the new $3 trillion infrastructure package, inflation possibilities and lower yields but hurt by a stronger dollar and continued ETF outflows. The technical trade saw the open as another opportunity to sell into a rising market but by midday gold was pushed towards $1740.00 which suggests short covering and less bearish sentiment. Gold has failed at this important overhead resistance twice since early March but if this time around it pushes above $1740.00 and suggests higher numbers it would change the short-term technical picture. Many traders know the basics for a turnaround in gold are in place but there are so many variables that even short-term direction is very uncertain. I still favor consolidation at these levels – all things considered and hope that this does not turn into “long and boring” which creates lack of interest and tumbling product premiums. But with all this supercharged money floating around it is hard to envision a bland result with no fireworks. So at the back of my mind, I am thinking more along the lines of the “big bang” theory. On the day gold closed up $8.20 at $1732.90 and silver closed unchanged at $25.20.

This from Anna Golubova (Kitco) – The pandemic ‘changed the world’ and gold price will reap the benefits – CPM Group – After a record year, gold is bound to see more gains in the medium and long-term, according to the CPM’s Gold Yearbook. The pandemic has changed the world, making some of the existing problems even worse and setting gold up to benefit, the CPM Group said. “While the pandemic will eventually pass, it has left the world changed and has in fact compounded and worsened some of the factors that are supportive of gold prices,” the CPM Group said. The biggest drivers that will support gold as the world reopens include sovereign and private sector debts, deficits, and ultra-loose monetary policies. Governments around the world will struggle to reverse the fiscal policies introduced as a response to the pandemic, said the CPM Group, citing lackluster economic growth in coming years.

“This scenario positions gold well for further gains in the medium to long term,” the Yearbook stated. “The pandemic has deepened these problems and will make it harder to reverse some of these issues, which will help to keep investors interested in the metal.” During the Prospectors & Developers Association of Canada (PDAC) 2021 virtual conference, CPM Group’s vice president of research Rohit Savant said that gold could rally back to $1,995 an ounce this year, which is a 5% gain from last year’s closing price. This outlook comes as gold struggles to make new gains after a period of consolidation. At the time of writing, June Comex gold futures were trading at $1,727.70, down 0.73% on the day. The CPM Group attributes gold’s most recent weakness to a surge in the 10-year U.S. Treasury yields and a higher U.S. dollar.

“Trends in U.S. interest rates seem likely to be the key factors that will move gold prices higher and lower over the course of 2021. Low nominal rates and negative inflation-adjusted rates will keep longer-term and fundamentally driven investors interested in gold, while any sign of upward movements in interest rates will serve as a brake against rising prices due to shorter-term investors working off of valuation models based on U.S. Treasuries, as was the case during the first quarter of 2021,” the Yearbook said. It is important to keep in mind that parts of the world could struggle with the pandemic well into 2022 and even 2023.

“As more fiscal stimulus is poured into the system, monetary authorities will have to stretch themselves further to offset any negative fallout from such fiscal stimulus on bond yields, which should be supportive of gold prices,” the CPM Group noted. “While the Fed does not plan to control the increase in rates at this time, if rates continue to rise strongly it should not be surprising to see the Fed become more aggressive in seeking to keep longer-dated yields from rising too far too fast.”

The CPM Group projects a softer U.S. dollar in 2021 but does not see a total currency collapse. “The dollar, however, derives its value in relation to other currencies. Compared to most of the dollar’s major peers, the U.S. economy and dollar still are in better shape, which should provide downside support to the value of the currency.” The stock market is forecasted to keep climbing despite looking top heavy. “The returns from these markets may not be as attractive as those seen over the past couple of years. A combination of top-heavy equity markets and low yields on debt make gold an attractive portfolio diversifier,” the CPM Group said.

Also, the U.S.-China relationship is a key driver to keep a close eye on this year. “Irrespective of how these relations end up, the deteriorating relations will leave a lot of wreckage on the way,” according to the Yearbook. The use of gold as a portfolio diversifier is expected to grow this year, which should help the prices move higher. Investor demand will also remain strong this year, with net additions holdings projected to reach 42.8 million ounces. Investors’ approach to gold this year will differ from that of 2020.

“This year, they are expected to buy gold but wait for prices to soften on temporary dips before they step in as big buyers. This buying pattern is expected to have a different impact on prices than what was seen in 2020. Instead of rising sharply as investors chased gold prices higher as was the case in 2020, this year prices are likely to stay at elevated levels but could struggle to rise sharply as investors take a more cautious approach,” the CPM Group said.

Central banks are projected to remain net buyers of gold in 2021, with about seven million ounces estimated to be bought. “Many central banks, especially in developing countries, continue to want to diversify their assets away from the U.S. dollar and euro and are likely to continue adding to their holdings in the foreseeable future,” the Yearbook said. Total gold supply is forecast to climb to 131.2 million ounces in 2021, led by increased mine production.

Gold on Thursday opened lower but quickly turned around, challenging $1750.00 most likely reacting to Fed Chief Powell’s comments about economic progress and rollback of Fed asset purchases. Traders sold into these higher numbers in typical fashion and profit taking eventually pushed gold into the red on the day. So, gold remains unconvincing but not as negative as the technical bears would suggest. The bear gold trade embrace economic recovery which has pushed the Dollar Index towards 93.00 discouraging higher gold prices. And the gold bulls cannot shake negative chart patterns, lack of buzz and continued ETF gold outflows. But the short paper trade is also cautious at these now discounted levels. While the bearish scenario remains intact the reality that gold is holding up ($1700.00) has created some pause in negative case. Will gold and silver get cheaper? Perhaps but the now large discount carries weight. It has encouraged buyers in the physical gold trade who discount the Fed claim that shorter term inflation will be transitory. Last month we saw record volume numbers and this month looks like a repeat. The American public for now seem content in ignoring bearish storm clouds and looking for value using a more traditional inflationary scenario. On the day gold closed down $8.00 at $1724.90 and silver closed down $0.18 at $25.02.

Gold was surprisingly firm on Friday considering the Dollar Index was up more than a point this week. Reuters – “Dips are being bought and rallies are being sold into (in the gold market) there are clearly two definitive sides of a coin and this is the main focal point,” David Meger, director of metals trading at High Ridge Futures said. A firmer dollar and rising yields, pressuring gold are one side of the coin and rising coronavirus cases and the Federal Reserve’s low-interest rate policy lifting it are another side, Meger added, noting it remains unclear which side will ultimately prevail. Gold’s modest gains came despite a firmer dollar and an uptick in benchmark yields, that have weighed on the metal’s appeal recently. A stronger dollar makes holding greenback-denominated bullion more expensive for those holding other currencies, while higher yields raise the non-yielding metal’s opportunity cost. “A stronger dollar and higher yields continue to spur further liquidation primarily from the ETF community,” said Joseph Stefans, Head of Trading at MKS.”

For now, the gold trade appears a bit sleepy with a negative bias. If you are looking for a more optimistic view, consider the Dollar Index. It pushed from 90.00 through 93.00 since January over higher treasury yields and optimistic recovery promises. I do not want to rain on this parade, but this much optimism under the circumstances is suspicious. Gold has already priced in a sterling economic recovery. Anything less will weaken the dollar and support gold. We could easily lose 3 points on the Dollar Index even if the recovery was just modest. And that alone would be worth a hundred dollars to the upside in gold. This is obviously a minority opinion, but it is just one of the reasons I always prefer physical gold ownership. Especially when everyone gets happy over economic predictions from a government who is underwater with red ink. On the day gold closed up $7.30 at $1732.20 and silver closed up $0.07 at $25.09. 

Silver closed up $0.07 at $25.09. The physical market is solid at these levels. All buyers.                         

Platinum closed up $23.80 at $1177.50 and palladium closed up $59.70 at $2670.40.               

My Brothers and Sisters, we appreciate your fellowship and thank you for your business. If you have unusual circumstances, need cash or are looking for a special visit – talk to Harry. Many on our staff have now received the vaccine as we continue to enforce rigid safety standards. Be careful, this virus remains a danger. At the same time trust that God will soon get us back to normal. Richard Schwary

This from John Miles (Zaner / Chicago) – “Global equity markets overnight were all higher with gains reaching 2.27% in the CSI 300 index. Overnight economic news of importance included a slightly deflationary Tokyo CPI results for March, as expected GB retail sales, a softer than expected Spanish GDP reading for their 4th quarter, surging Business and Consumer confidence readings in Italy, and better-than-expected German IFO business climate, current assessment, and expectations readings for March. The North American session will start out with February personal income which is expected to have a sizable downtick from January’s 10.0% reading. February personal spending is forecast to have a moderate decline from January’s 2.4% reading. The February goods trade balance is expected to have a moderate increase from January’s $83.7 billion monthly deficit. February wholesale inventories are forecast to have a mild downtick from January’s 1.3% reading. A private survey of March consumer sentiment is expected to have a modest uptick from the previous 83.0 reading.

Just as the early March rally felt like a “stealth rally”, the decline of from the midmonth high has also been very gradual and devoid of fanfare. In looking back gold and silver have not seen a definitive lift from positive risk on trading conditions, which to us indicates the focus remains on either interest rates or the direction of the dollar. Therefore, a softer dollar (very minimal weakness this morning) should provide cushion against possible selling emanating from the slight rise in interest rates this morning. Looking back yesterday’s 7-year treasury note auction showed very poor demand, and that in turn signals even higher rates ahead as the US treasury market is forced to offer higher rates of return to offload US debt supply. With some press outlets pointing out gold’s potential for its first weekly decline in 3 weeks and gold ETFs posting another outflow yesterday negative sentiment remains in place. While the gold market has not shown definitive correlation with virus headlines, the doubling of the US vaccination goal to 200 million shots in the first hundred days of the new administration, clearly failed to lift gold yesterday as if it was-hopeful of improved physical demand. If anything, we are surprised that gold has not already fallen to $1700. While the silver market saw an aggressive washout yesterday and that could portend additional declines ahead, the sharp rejection of that spike down and the market’s ability to regain $25.00 could be a sign that value was found by the trade. However, silver ETF holdings declined by 3.2 million ounces yesterday in a sign that investors see still deteriorating prospects for silver prices. In our opinion, as-long-as gold and silver lack bullish headline buzz, and the charts remains negative we expect more erosive action.

While the PGM markets have not tracked tightly with the daily ebb and flow of gold and silver prices, they appeared to be dragged lower yesterday by weakness in other precious metal markets and in sync with a broad-based deflationary style trading environment. In our opinion, the mid-month palladium rally was an “opening up” rally factoring in fresh hope for improved demand for palladium used in auto catalyst production. Therefore, the palladium market should see some modest lift this morning along with rising equities. Unfortunately for the bull camp, economic data from China has been nearly absent and the palladium market did not show a definitively positive reaction to the better-than-expected European PMI data released on Wednesday. Palladium ETF holdings on Thursday gained 1,692 ounces but the large outflow in the Wednesday readings leaves the net impact from investors slightly negative to palladium prices. Therefore, we see very critical support at the Wednesday low of $2,592.50. Our outlook for platinum remains bearish with fresh chart damage yesterday likely to facilitate downside follow-through today. As in nearly every other physical commodity, the trade appears to be somewhat skeptical of the current pace of global activity especially with equities continuing to chop in a fashion that has fostered economic anxiety. In other words, a risk off/deflationary type environment has cycled in and out of the headlines this week and that sets platinum downside targets at $1,136.90 and again down at $1,128.30.

Without a fresh and significant favorable development on the US virus battle front (US daily infection rate yesterday jumped significantly from levels seen earlier this week), we find it difficult to embrace bullish views toward precious metal prices in the near term. In fact, we think the path of least resistance remains down and further slow erosive type price action will be seen. In conclusion, the path of least resistance remains down in gold with a suspect initial support level this morning at $1720.30 and another more substantial support/target level at $1716.60. As indicated in the silver market, chart damage yesterday was severe and probably undermines a-number-of “would be” buyers, but the sharp wash and recovery action could also be a sign of exhaustion by the sellers. It should also be noted that the $25.00 level in May silver has been the center point of the last 6 months trading range and that might dispel beliefs that silver is headed sharply lower.”

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