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Gold Trends Higher – Santa Approaches

Gold Trends Higher – Santa Approaches

Commentary for Wednesday, Dec 22, 2022 ( – Gold closed up $13.70 at $1801.60 and silver closed up $0.29 at $22.79. Just a reminder – we will be closed Thursday and Friday for Christmas and send our best wishes to each of you for a joyful holiday season. As always, we suggest an extra piece of pie this year, oh go ahead, you deserve it! Gold’s close above the important $1800.00 mark was a nice surprise today. These stronger prices supported by a weaker Dollar Index even as consumer sentiment improves. Still, most expect quiet trading through the New Year, holding current levels with little drama. But the holidays also offer thin volume and so could be subject to trading mischief.

Everyone knows the FOMC will have their hands full next year trying to reach a “middle ground” on interest rates. Small interest rate hikes will keep gold defensive but are likely already reflected in current pricing. Markets might dip on the real news but recover with little downside. There is also a small chance of seeing less inflation. This would keep a lid on interest rates – supporting gold prices. Both scenarios increase trader uncertainty because both the bulls and bears lack conviction as the Fed steps lightly. Finally. the way I heard the story is that Santa and his helpers have been vaccinated and are bringing lots of goodies if you have been good. Stay safe with God’s blessings and enjoy the holidays with friends and family.

Last Friday gold closed at $1803.80 / silver at $22.51 – on the week gold was down $2.20 and silver was up $0.28. Another week of surprisingly steady prices.

The good news is that delivery on 2021 US Gold and Silver Eagles is getting better (still not “normal” but improving). And we are finally receiving early .9999 fine silver round orders. The bad news is that “any new orders” are 3 to 6 weeks coming from the manufacturer.

A trend worth noting. The Canadian Royal Mint is raising premiums. Likely because of inflationary pressures, transitory or not. Look for similar moves by other world mints.  

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” and insist on new product – 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, please ask your rep for other options and thank you for your understanding.

Gold turned defensive Monday as the DOW sinks over renewed Omicron fears worldwide. And in a big disappointment Democrat Manchin failed to support President Joe’s massive $1.75 trillion infrastructure bill. This past 5 trading days the Dollar Index has been steady between 96.00 and 96.50 but this morning developed a mild downward bias which gold ignored. And we are looking at risk off sentiment which gold also ignored. Consider however, this is a short and likely quiet trading week – Christmas approaches. Gold remains stuck trying to resolve that 6-month consolidation channel between $1760.00 and $1800.00. There is not enough information to suggest the bears are gaining a deflationary edge. But it’s a possibility. This scenario to some degree has reinvented itself twice this year. Possible danger signs, gold could not hold $1800.00, oil is moving lower, hedge funds are turning bearish betting on higher interest rates.

This from Zaner (Chicago) – “As indicated late last week, we remain skeptical of the bull case in gold and silver and with definitive risk-off sentiment applying early pressure we are emboldened in our bearish views. In addition to a failure at the spike high last Friday, the gold market is also facing a potential upside breakout in the US dollar. In retrospect, the rally last week was impressive considering that it took place in the face of three distinct hawkish central bank pivots. While it is possible that some of the gains last week were flight to quality gains (especially with equities displaying newfound concern for the latest coronavirus surge), a further surge in infection fears could prove to be deflationary and therefore negative to gold and silver. From a technical perspective the strong rally above $1,800 and the 200-day moving average temporarily shifted the technical set up in favor of the bull camp, but a close back below $1,800 and a settling right on the 200-day moving average of $1,797.70 last Friday could signal a near term top. The net spec and fund long in gold has been moderated but remains near the upper portion of the last 15 months range. Gold positioning in the Commitments of Traders for the week ending December 14th showed Managed Money traders reduced their net long position by 17,932 contracts to a net long 75,490 contracts. Non-Commercial & Non-Reportable traders are net long 240,865 contracts after net selling 14,403 contracts. With March silver futures last week forging a low to high rally of $1.27, silver ETFs liquidating 8.3 million ounces last week and prices failing at a downtrend channel resistance line, a return to levels below $22.00 is likely especially in thinned trading conditions. The December 14th Commitments of Traders report showed Silver Managed Money traders net sold 8,291 contracts and are now net long 9,569 contracts. Non-Commercial & Non-Reportable traders reduced their net long position by 7,695 contracts to a net long 36,394 contracts.

While we were skeptical of the recent rallies in gold and silver prices, we are less suspicious regarding strength in palladium. Certainly, it is a leap to conclude the sharp gains in palladium last week were attributable to potential hostilities between the Ukraine and Russia especially expecting those hostilities to ultimately result in some form of global embargo against Russia which in turn could disrupt PGM export flow. Obviously, the amount of PGMs produced in Russia is significant to the world scheme and therefore some supply risk premium should have been injected into prices. However, with the most recent positioning report in palladium showing the spec and fund traders holding the largest ever net spec short, we suspect some of the rally was classic short covering buying. The Commitments of Traders report for the week ending December 14th showed Palladium Managed Money traders hit a new extreme short of 3,209 contracts. Managed Money traders added 765 contracts to their already short position and are now net short 3,209. Palladium Non-Commercial & Non-Reportable traders hit a new extreme short of 4,231 contracts. Non-Commercial & Non-Reportable traders added 1,109 contracts to their already short position and are now net short 4,231. Platinum positioning in the Commitments of Traders for the week ending December 14th showed Managed Money traders added 4,090 contracts to their already short position and are now net short 7,866. Non-Commercial & Non-Reportable traders reduced their net long position by 2,779 contracts to a net long 9,630 contracts. Late last week, the Deputy Foreign Minister for Russia indicated they have presented to the United States proposals regarding the tensions between Russia, Ukraine, and NATO as they hope to turn military scenarios into a political process. In our mind, it appears that Russia is attempting to deter military retaliation if they make an incursion into the Ukraine! In the end, we see the markets interjecting premium into the price structure just in case Russian PGM supplies are blocked from the market. Keep in mind, that some Russian mining companies have expanded holdings vertically and have built “funds” to hold physical supplies, with those supplies potentially being the primary buffer between world supply and demand flows. It should also be noted that platinum ETFs last week reduced their holdings by 78,282 ounces!”

Gold closed down $10.10 at $1793.70 and silver closed down $0.23 at $22.28.

On Tuesday gold opened choppy in a tight trading range between $1790.00 and $1800.00. While today featured some profit taking from last week’s gains, current pricing is very stable for several reasons. The stalled Biden infrastructure bill – for now anyway, a strong Dollar Index (96.00) and rebounding stocks should have provided more headwind for gold. And even with an increasingly hawkish FOMC gold’s 200 day moving average ($1799.00) is solid and managing to ignore Fed promised interest rate hikes next year.

Granted there are good folks who will make the case that our shiny friend topped out a year ago ($1950.00) and today’s pricing is nothing exciting. But I disagree. In that same year gold put in a solid bottom ($1700.00) and recovered nicely. Has quietly delt with decreasing safe haven demand as pandemic worry recedes and dodged the elimination of the Fed’s massive bond buying program. It has even managed to live with the large number of investors which turned to stocks in an attempt to increase capital return on dollars invested.

Of course, there are storm clouds forming for both gold and silver in 2022. But if you think about it – there is always someone who wants to knock physical possession of gold or silver bullion. Yet, pretty much, over the long haul the metals continue to present unquestioned liquidity in a world which is always distracted with the latest investment idea. I’m not knocking new ideas; innovation is an American cornerstone. But let’s not forget faithful old friends.

Zaner (Chicago) – “Gold got a lift overnight on a weaker dollar, but the move was not very convincing, as the market stayed inside yesterday’s range. Silver did manage a sharp rebound, as it made through Friday’s high to trade to its highest level since December 1. Other “industrial” metals like copper, platinum, and palladium were also higher, but silver was the most impressive. A deflationary vibe had seemed to shift into place with recent disappointing data, fears of further physical activity restrictions, and sinking oil prices, but the resiliency in silver overnight seemed to undermine that theory. On the other hand, silver might be overreacting in a pre-holiday, low-volume environment that could be exaggerating the move. Perhaps silver will lead gold higher if it can maintain its upside momentum, but we are concerned that the potential for deflationary selling of gold is stronger than the potential for inflationary buying. Fears of slowing from Omicron has been upending most physical commodities recently, and the news that the strain now represents more than 70% of new cases contributes to that concern. The odds are for infection rates to accelerate, which could foster fresh lockdown fears and deflationary selling.”

On the day gold closed off $5.80 at $1787.90 and silver closed up $0.22 at $22.50.

On Wednesday gold moved modestly above $1800.00 for the second time this week – supporting the bullish technical picture. This from Jim Wyckoff (Kitco) – “Technically, February gold futures bulls have the overall near-term technical advantage. A bull flag pattern has formed on the daily bar chart. Bulls’ next upside price objective is to produce a close above solid resistance at the December high of $1,815.70. Bears’ next near-term downside price objective is pushing futures prices below solid technical support the December low of $1,753.00. First resistance is seen at this week’s high of $1,804.60 and then at $1,815.70. First support is seen at this week’s low of $1,785.00 and then at $1,775.00. Wyckoff’s Market Rating: 6.0”

Zaner (Chicago) – “We see the gold market in a corrective track on the charts with fresh fears of deflation/slowing fostered by the latest US infection count of 288,579 for December 20t! Omicron has become the dominant variant in the US, representing more than 70% of new cases. It is highly transmissible, but the idea that it is less severe, at least for the vaccinated, seemed to bring a risk-on vibe to the market yesterday. Unfortunately for the bulls, the inflation story that had supported gold in recent weeks has died down with the emergence of Omicron. And with talk of a possible rate hike next year, the Fed seems ready to move to squelch inflation sentiment. August gold tried to rally on Tuesday but ending up lower. Furthermore, additional risk off sentiment from equities could today add to the steady erosion in gold prices that began last Friday. In a positive development for silver, ETF holdings yesterday jumped by 2.7 million ounces for a single day gain of 0.3% bringing the year-to-date “gain” up to 1.1%. It didn’t help gold and silver prices yesterday that bond prices fell sharply for the second straight day, which means higher interest rates, making non-interest-bearing instruments like gold less attractive. However, March silver yesterday took encouragement from the risk on mood to trade to its highest level in three weeks, presenting a bullish technical setup to counter gold’s vulnerable fundamental positioning. PLATINUM In addition to bullish press coverage overnight, palladium is bolstered from the prospect of significant ongoing short covering especially with the violation of key chart resistance levels. Not surprisingly, the PGMs benefited from the risk on mood yesterday, with both platinum and palladium rebounding from Monday’s selloff but neither able to make it through last week’s highs. The ebb and flow of Covid news could drive the PGMs in either direction over the next few days, as reports of soaring infection rates act as triggers for trader anxiety. Ultimately, a strong global economy and a loosening of supply chain bottlenecks will boost auto catalyst demand, which would support palladium and to a lesser extent platinum. Key resistance for March palladium comes in at $1,865, with support at $1,688. January platinum resistance is at $942.20 with support at $909.20.

The Omicron surge has moved inflation off the headlines for now, leaving the gold bulls on the defensive. February gold fell back to the 21-day moving average on Tuesday, and that level, $1785, could be key support today. March silver broke through last week’s high to trade to its highest level since December 1st, and a series of higher lows and higher highs is bullish. However, the wide range on Tuesday may contain the market over the next couple of days. Retracement targets of the Nov-Dec selloff come in at $22.98 and $23.48 in March silver.”

On the day gold closed up $13.70 at $1801.60 and silver closed up $0.29 at $22.79.

Platinum closed up $40.60 at $968.10 and palladium closed up $96.20 at $1887.10.

My Brothers and Sisters, thank you once again for your business and friendship. If you have unusual circumstances, need cash, a special visit or product – talk to Harry. Our in-house staff have been vaccinated and many now have the booster! We continue to enforce rigorous safety standards between people and product. Be careful, the more contagious Omicron variant is dangerous and now accounts for most US infections. At the same time trust that God will soon get us back to normal lives and business. Richard Schwary

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