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Gold Tests $1300.00 – Again

Gold Tests $1300.00 – Again

Commentary for Friday, Aug 18, 2017 – Gold closed down $0.70 at $1285.70 – the good news is that gold pushed through overhead resistance at $1300.00 in early trading – the bad news is that traders took immediate profits and the market settled lower. This is the first time in nine months that gold has tested this magic number but it was not unexpected – prices have been generally higher these past 30 days – gold moving higher from $1240.00 – seeing resistance at $1270.00 and turning choppy between $1270.00 and $1290.00.

Today’s spike was not created by a weaker dollar – the Dollar Index this past week has been fairly flat – today we are trading around 93.50. This index has been considerably weaker since June numbers – we moved from 97.00 through 93.50 but it looks like we have bottomed out for the present – traders probably waiting for a final FOMC interest rate fix in December. No hike would push the index lower and certainly help the price of gold – but December is still a long ways off and in this environment who knows what the FOMC is thinking.

The most recent “pop” to the upside was likely the long paper “testing” – gold has tried to move above this important psychological number now 4 times since February – failing each time and leading the “bouncing price ball” we now have seen between $1200.00 and $1300.00.

It was political and economic angst which pushed this market in each of these 4 attempts at $1300.00 and physical demand which created the bounce off the solid support at $1200.00.

Today’s effort may fall into this trend with North Korean troubles – the Trump White House in its usual state of distraction – a sudden weakness in stock prices – terrorism raising its ugly head in Spain – and the apparent contradiction between the FOMC governors over interest rates.

There are others who will see this move above $1300.00 as the beginning of something “big”. I would agree that gold has put in a solid bottom – meaning any price in this range should represent “value” in the longer term and waiting for much lower prices is not a good idea.

But the jury is still out relative to immediate upside. I don’t want to be a wet blanket here but would suggest that gold must not only hold above $1300.00 – it must show it can move above a wall of overhead resistance at $1400.00 which has been in place since February of 2013. That is a big order with what could become a hawkish FOMC by this December.

It is too early to claim the next bull market is at hand – we are still dealing with the old “will they or won’t they” from the Federal Open Market Committee – but there is now the possibility that a December rate hike will not happen driven by sub-par inflation suggesting a possible recession.

This “in-flux” picture offers the public the opportunity to establish “core” positions of bullion gold and silver at discount prices – a lesson that China and India have already mastered.

This from Zaner (Chicago) – “The gold market saw a number of safe haven developments that help to lift prices above the prior two session’s highs yesterday, and those issues have left gold and silver prices well bid this morning and into a fresh upside breakout. December gold prices have now reached up to the highest level since early June. We think the most prominent issue lifting gold this week was put in place on Wednesday in the wake of dovish Fed comments and that might be difficult to extract from the equation. Another prominent bullish force yesterday came from the terrorist incident in Barcelona, but that story might only have a limited shelf life unless other attacks are seen as part of a wave of incidents. Bullish conditions should also remain in place because of ongoing deterioration in the political capital of the current US administration, from ECB concerns that a strong euro exchange rate is increasing risks to the European economy and lastly because of developing anxiety toward global equities. Traders should not discount the importance of the resignation of any key Trump officials, as that type of news could definitively knockdown confidence toward US stocks and in turn ratchet up safe haven interest in gold and silver even further. All things considered, the path of least resistance looks to remain up in gold and silver and the thrust above $1,300 in gold should put a bullish buzz in gold and silver today. An issue that might undermine gold and silver temporarily later this morning is the prospect of improvement in University of Michigan Sentiment readings.”

Silver closed down $0.05 at $16.98.

Platinum closed up $0.70 at $973.50 and palladium closed up $0.95 at $929.50.  

This is our usual Chicago Mercantile Exchange report covering the last 5 trading days – looking at the trading volume numbers for the “August” Gold contract: Thursday 8/10 (371145) – Friday 8/11 (374468) – Monday 8/14 (373043) – Tuesday 8/15 (371896) – Wednesday 8/16 (376411).

We have introduced “Silver” to our CME run down – so we are looking at the trading volume numbers for the “August” Silver contract: Thursday 8/10 (112506) – Friday 8/11 (103727) – Monday 8/14 (3101652) – Tuesday 8/15 (98458) – Wednesday 8/16 (101652).

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: 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: 28 people thought the price of gold would increase next week 58 believe the price of gold will decrease next week and 14 think gold will remain the same.

Precious Metal Closes & Dollar Strength – Aug. 14 – Aug. 18

Gold Tests $1300.00 - Again

The walk-in cash trade and phones were mixed today – but steady.            

The Unscientific Activity Scale is a “3” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 4) (Tuesday – 3) (Wednesday – 4) (Thursday – 3).

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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