Gold – Volatile Uncertainty
Commentary for Friday, June 4, 2021 (www.golddealer.com) – Gold closed up $18.60 at $1889.80 and silver closed up $0.42 at $27.88. The gold market surprised to the upside today as most expected further downside action as seen on Thursday. The primary bullish driver was a weaker dollar but a slide in US factory orders and a slight miss in US non-farm payrolls helped refresh the bullish scenario. So, for now gold’s technical picture remains in the green but yesterday’s significant drop is still making this trade a bit on the heavy side. Last Friday gold closed at $1902.50 / silver at $27.99 – on the week gold lost $12.70 and silver has lost $0.11.
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 still 4 to 8 weeks coming from the manufacturer. My guess, however, is that delays will soon shorten.
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.
This past Monday was Memorial Day and US markets were closed.
Gold opened steady on Tuesday but sold off on positive economic news, an upbeat stock market after the long weekend and profit taking after this 5-month drive to higher ground. The sell-off looked at $1890.00 before traders bought the dip and the market finished the day almost unchanged. Surprisingly, the Dollar Index was marginally lower, but Treasury yields are rising as Wall Street again worries that solid economic news will embrace inflation. This may prompt the Fed to consider raising interest rates sooner than expected.
This is an old story but still carries trading weight. I think there is no chance of rising interest rates this year and perhaps even next, especially with President Biden’s massive $6 trillion dollar budget still in the works. Also keep in mind that other world central banks may not have this option if economic recoveries are poor. So, the Fed will watch other banks carefully and hope all fiat currencies move in the right direction (lower). Raising US rates will make America less competitive, hurt this Wall Street run, and make paying back massive debt more difficult. The Fed’s balancing act is not coming to end as the pandemic fades – it becomes more important.
Zaner (Chicago) – “While the August gold contract did not hold the upside breakout initially the market did forge the highest trade since January 7th and should be supported as a result of initial weakness in the dollar and surging crude oil prices. In fact, crude oil prices with the overnight rally reached up to the highest level since October of 2018 and that smacks-of-inflation especially when combined with surging grain prices. We suspect that gold and silver garnered some lift from favorable Chinese PMI readings which in turn prompted economists to suggest that exports from China will continue to propel their economy forward. Both gold and silver ETF holdings increased in the last trading session documented, but gold holdings on the year have declined 5.6%, while silver holdings on the year have gained 5.5%. From a technical perspective, the gold market came away from the month of May with the strongest gain in 10 months and the market continues to display positive follow-through momentum. In a surprising development, gold and silver prices in India ticked higher from improved spot demand but also because recent price gains have sparked fresh interest in both gold and silver prices before they become more inflated.” On the day gold closed up $0.40 at $1902.90 and silver up $0.09 at $28.08.
The gold pricing for Wednesday was tight in overnight trading but developed a small upward bias in the domestic trade. This may be a traditional pause in pricing in that for now numbers above $1900.00 present great overhead resistance. But the technical picture remains solid, and I think this good news overrides trader caution at least for the present. With the Dollar Index moving again above 90.00 this morning I would expect sluggish gold pricing.
This from Zaner (Chicago) – “The gold and silver markets start the Wednesday trade under moderate pressure, with strength in the dollar likely providing the brunt of the weakness. On the other hand, the markets overnight saw a slight uptick in US treasury yields and a significant decline in Perth mint gold sales in a possible sign that pricing near $1900 might be discouraging retail demand. On the other hand, European Producer prices came with a gain of 1% which should contribute to inflationary support of the precious metal markets. In fact, energy and grain prices overnight remain very strong adding to the interest in inflation sensitive instruments from the food sector. In other words, outside market forces continue to signal the chance for inflation, at-the-same-time that other scheduled price readings like ISM manufacturing prices paid and the PCE from last week continue to register their own form of inflation. While gold ETF holdings yesterday increased by 179,811 ounces silver ETF holdings were reduced by 131,938 ounces.”
Some analysts are saying the slowdown in gold sales from the Perth Mint is indicative of consumer resistance to $1900.00 gold. I wonder, the Perth Mint has set records for months of recent production and we have no trouble selling physical gold bullion coming across our counter. Still, the pricing territory above $1900.00 introduces the possibility of an all-time high challenge not seen since August of last year. So, some trepidation is to be expected. Gold on the day closed up $4.60 at $1907.50 and silver closed up $0.11 at $28.19.
Gold on Thursday broke down in early trading over several factors, some of which were foreshadowed earlier in the week. The ADP payroll numbers were the beginning of the bad news – employers significantly beat expectations hiring with both hands. At the same time the Dollar Index soared moving higher by half a point (90.45). The ISM nonmanufacturing Purchasing Managers Index came in hot (64%) suggesting solid economic growth. And finally, gold Exchange Traded Funds sold off yesterday suggesting a lack of longer-term conviction.
As gold’s bullish trend cooled, paper traders took profits and moved to the sidelines testing support at $1870.00. The problem with this breakdown is that gold moved through short term support at $1880.00 so computer models will now consider $1840.00.
The premise of lower gold prices is based on the Fed’s response to growing inflation. If the FOMC once again stands pat and does not at least threaten to use some of its inflation fighting tools traders will likely buy this dip and this standoff will continue.
Still today is a great example of what I have recently suggested. Gold moving back to all-time highs will be challenging and test conviction. However – such roadblocks in this still developing story are good for the metals. They will pare down the bullish sentiment, get rid of weak hands and leave a more committed core in this country and in the rest of the world. Gold and silver bullion have never been a choice of the majority – for that to happen the dollar would have to collapse and that serves no one’s interest. For now, ignore the “noise”, buy weakness, and watch the inflation numbers – like everyone else. Tomorrow’s employment numbers may also add to this turbulence so buckle up – but enjoy the ride as pandemic numbers continue to decrease! On the day gold closed down $36.30 at $1871.20 and silver closed down $0.73 at $27.46.
Gold opened flat on Friday but soon rebounded from two-week lows after the created jobs number missed for last month and the dollar weakened. Those hiding under the bed from yesterday’s drop will welcome this “relief” rally and look for more bullish news next week.
While today’s jump in the price of gold is modest – it is psychologically important. It provides a needed boost to the short-term technical picture. The weaker dollar makes gold more affordable to holders of other currencies, while the 10-year yields also move lower. “Part of what we’re seeing in terms of the strength in gold are inflation expectations and those are partly based on the stronger economic data, like higher jobs growth, broader recovery in the U.S., parts of Europe and China is still doing well,” said Jeffrey Christian, managing partner of CPM Group. “Gold prices will probably continue to trade between $1,855 and $1,920 an ounce levels.” (Reuters).
The jobs miss is an overreaction – it was only mildly off. But this suggests an underlying credibility problem with the Fed. It was still a miss – so it once again introduces the idea that they still have a developing mess on their hands and raising interest rates would make matters worse. At this point I think Christian’s viewpoint is the most playable lie – look for moderation within recent trading limits. This implies gold has solid recent support below $1900.00 (traders buying the dip theory). At the same time the middle ground allows the paper trade to take profits on rallies (a long-standing trend). Finally, keep in mind even with these crosscurrents gold still threatens all-time highs and is in the green $100.00 this past month.
On the day gold closed up $18.60 at $1889.80 and silver closed up $0.42 at $27.88.
Platinum closed up $1.90 at $1163.20 and palladium closed up $15.20 at $$2837.90.
My Brothers and Sisters, we always thank you for your business and fellowship. 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 between people and product. Be careful, this virus remains a danger. At the same time trust that God will soon get us back to normal. Richard Schwary
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