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Gold – Treading Water 

Gold – Treading Water      

Commentary for Monday, April 16, 2018 – Gold closed up $2.70 at $1347.50. There is plenty going on around the world but the price of gold seems uninterested. A somewhat weaker Dollar Index helped support gold prices today – the index moving from 89.80 through 89.4 but the longer term 5 day index turns choppy at this lower number.

You could also make the case that the President’s talk this morning put pressure on the dollar but I will leave that up to you. And I would have thought that the unilateral air strikes on Syria over the weekend would have created more of a stir for gold but such is not the case as traders see this as an isolated event according to MarketWatch. Technically gold is still very much in the fight since late March when we saw its most recent short term bottom ($1310.00).

Since that time it has moved above $1350.00 twice but failed the much talked about “break” to the upside – which to me would be something sustainable above $1360.00. Still the fact that traders bought the “dip” this morning is something worth noting. Perhaps the bulls are preparing for another attempt at gaining control of higher ground but I can’t say that US dealers are overly bullish based on their physical business. And summer is not far away – a traditionally slower time for across the counter sales.

As long as gold holds up at the higher end of its current range it encourages all kinds of apocalyptic commentary. Stock market crashes – hyperinflation and ruinous financial collapse might be right around the corner – or not. Actually I think there are great reasons to own gold and silver bullion none of which fall into the above categories.

I have been saying this for years but the best reason to take out a little financial insurance is twofold. The first reason being that gold is less popular than it was when the 2008 financial crisis began and therefore represents a better value. The second reason is more profound and has less to do with value and relates more to the bigger picture of who is in control of your destiny.  With real gold or silver bullion you don’t have to trust that politicians will act in your best interest.

And if you think about that for a short time this notion financial independence becomes revolutionary. It sometimes blossoms into a life style that well known author Gary North has be espousing for years – being less dependent on everything.

That does not mean you should consider living in a cave but it does suggest we could all get along with “less” in this electronic world and save a lot of money in the process.

A penny saved is a penny earned comes to mind. Some quote Ben Franklin as the source of the old wisdom and suggest that you actually get much more in the bargain – you are a penny up rather than a penny down, hence “twice got”.

For now however it’s worth remembering that the bullish price leg which began in late 2016 ($1150.00) is still in place. What will keep it in place is the next down leg which might be instore for the US dollar.

The Dollar Index has been generally lower this past year moving from 100.00 through 90.00. It has been flat to lower since February with talk of higher interest rates. But some believe that “lower” for the dollar is only a matter of time as US debt explodes – they are looking for a number around 80.00.

A 10% fall from current levels would push gold nicely above the $1400.00 and allow for those still on the fence to join the party. Stay tuned as they say.

This from Zaner (Chicago) – “Like the crude oil market, we suspect that the attempt to bounce in gold and silver off the lows at the end of last week was partly the result of pre-weekend geopolitical speculation, and given the lack of an escalation of global anxiety following the US strike we aren’t surprised that gold prices are mixed to slightly weaker to start. While there are still a number of geopolitical issues capable of inspiring further anxiety, we think the US missile attack over the weekend temporarily clears anxiety especially since the “Russian retaliation” wasn’t immediately seen and the “moment” is lost for a military reaction from them. We would also think strength in crude oil from last week has turned into noted weakness and we get the sense that last week’s trends in a number of markets will be corrected. However, from a longer term perspective, traders should keep in mind that South African gold production continues to decline and there have been reports recently of strong Chinese demand for gold ETF’s and those issues combined could be a paradigm shift in favor of the bull camp in gold. The Commitments of Traders Futures and Options report as of April 10th for Gold showed Non-Commercial and Non-reportable combined traders held a net long position of 185,478 contracts. This represents a decrease of 10,811 contracts in the net long position held by these traders and that could leave the market less vulnerable to stop loss selling ahead. We continue to think that silver has probably found a long term value zone around the $16.19 level, especially given that the net spec and fund long positioning has now fallen down to the lowest long in modern trading history! The long has shrunk to a level that comes in below an extremely bearish period for silver back in 1997. The Commitments of Traders Futures and Options report as of April 10th for Silver showed Non-Commercial and Non-reportable combined traders held a net long position of only 3,578 contracts.

While the sharp range up action in palladium at the end of last week suggests that the market is capable of benefiting from safe haven and the prospect of supply disruptions from Russia, the Russians did not retaliate against the US missile strike and therefore some back and fill retracement action might be expected as supply fears from additional sanctions might be downplayed directly ahead. However it does appear as if the $950 level has become some form of value that could be considered a longer-term low. While the net spec and fund long in palladium has clearly risen with the low to high April rally of nearly $100, the positioning was still at a fairly low level of 8,320 contracts as of April 10th. On the other hand palladium this morning has forged a quasi-double top which leaves a key pivot point just above the market at $984.35. Clearly the platinum market has failed to respond to the events of the last two weeks, and that clearly suggests it lacks the same supply threat as palladium. As in the palladium market, the platinum markets net spec and fund long remains at a fairly low level and that should reduce stop loss selling in the event of a back and fill action in palladium. The Commitments of Traders Futures and Options report as of April 10th for Palladium showed Non-Commercial and Non-reportable combined traders held a net long position of 8,320 contracts. The Commitments of Traders Futures and Options report as of April 10th for Platinum showed Non-Commercial and Non-reportable combined traders held a net long position of 23,366 contracts.”

Silver closed up $0.03 at $16.66. We saw a decline in primary mined silver production in 2017 of 4.1% (852 million ozs). Industrial fabrication demand was up 4.0% (599 million ozs). Investment demand was down 40% from 2016 (153 million ozs). Prices for silver are holding up well in light of this drop in investment demand – this is a fundamental plus. Gold – Treading Water 

Platinum closed down $1.60 at $925.70 and palladium closed up $22.80 at $1004.75.

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