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Gold Wakes Up – Somewhat

Gold Wakes Up – Somewhat 

Commentary for Friday, Aug 24, 2018 ( – Gold closed up $19.30 at $1206.30. What a difference a day makes as they say – the bears running wild turns into a fine kettle of fish when Fed Chairman Powell turns a bit dovish on interest rates this week at Jackson Hole. It’s amazing that everyone is willing to bet the farm on a few words from academics. And everyone has those “few words” – the President chimes in when he thinks the FOMC is getting too hawkish – the Fed Chair chimes in at a resort meeting the FOMC has every year to look at the “big picture” and various other governors chime in when given the opportunity. It’s not that I’m against the system – these folks have a tough job and up to now they have kept us out of the financial soup – but at what cost? And is it not a bit weird how easily the physical community is swayed by this informed opinion. Those in charge (FOMC) talk about raising interest rates because our economy is looking good and gold weakens – whether they follow through or not. And dollar strength is an equal whimsy – not that its safe haven protection is illusionary. In this environment of complete trust the unbacked paper dollar has become a gold surrogate.

Now out of the blue, gold pops higher by almost $20.00 today – no big deal just another knee jerk reaction to free speech – but have we missed the point? Does the arbitrary movement of gold or the dollar suggest that the underlying system we invented have problems? At this point, at least in America the answer would be negative – if the US public actually questioned this debt driven Rube Goldberg the price of gold would be three or four times today’s number and rising.

The dollar dropped by 1/2% today to 95.18 and trade worries abound as the US/China talks break down and Nafta negotiations remain troublesome – despite assurances by President Trump.

Gold is simply reflecting some of these tensions by moving again over $1200.00 but this move looks more like an afterthought. The 30 day pricing chart points to a short-term bottom around $1175.00 but generally gold still looks uncertain – waiting for the second shoe to fall. Some believe that the short speculative position in gold moved to as high as 21.5 million ounces up 275% on the year. This will keep the bears pensive looking for any change in their recent narrative and while I don’t expect a large short covering rally – it remains a possibility if the geopolitical world comes back to life.

This is from Zaner (Chicago) – “All things considered we are surprised that the gold and silver markets are higher this morning (as well as many other commodity markets) especially given that trade talks yielded more conflict. In fact the promise of further retaliation from the Chinese Finance minister will surely result in the US levying previously threatened $200 billion worth of additional tariffs. However global equity markets are not upset with the lack of trade progress, which suggests the trade wasn’t expecting progress and or the trade war storyline is becoming commonplace. On the other hand the dollar is showing some weakness this morning and the trade is seeing a rising chorus of central banks acknowledging the likelihood of slowing growth as result of US/Chinese actions, and that tempers rate hike prospects. With the ECB overnight specifically pointed out slowing prospects from trade war protectionism that could be a signal that the Fed Chairman speech later today will also acknowledge the looming headwinds. Therefore gold, the dollar and commodities will be cheered by the prospects of a pause in US rate hikes. Certainly gold and silver markets garnered only minimal lift from the immediate aftermath of this week’s FOMC meeting minutes yesterday, but given the serious deterioration in trade tensions from the date of the last Fed meeting, we suspect that Fed Chairman Powell’s comments today will provide another temporary lift to gold and silver prices. In a minimally supportive overnight development Sibanye-Stillwater announced half-year gold production to have declined.

Clearly the palladium market has outdistanced the rest of the precious metals complex this week and therefore one could suggest it would be the most vulnerable to news that trade talks failed to yield anything substantive. In fact, the low to high rally in September palladium this week was a steep $34 and prices reached the highest level since August 1st but yet palladium this morning is tracking higher as if the trade rift is of no consequence! In fact with the platinum market ranging down sharply yesterday in the face of a wave of selling in physical commodity markets, and the platinum market initially making a lower low this morning, there is clearly a huge fundamental and technical divide between the two PGM markets. While the PGM markets have not paid attention to classic supply-side developments a mining company overnight suggested its South African PGM operations would probably reach the upper end of its projected output targeting and that is somewhat contrary to national South African production patterns. At least to start today the path of least resistance in the palladium market is pointing upward, with spillover support from gold, a weaker dollar, generally positive global equities and positive technical signals. Initial resistance and a breakout point in palladium is pegged at $920.50 and key support moves up to $906.50.”

Silver closed up $0.25 at $14.78.

Platinum closed up $11.20 at $786.40 and palladium closed up $17.40 at $943.60.

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: 8 believe gold will be higher next week 1 thinks 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: 63 people thought the price of gold would increase next week 26 believe the price of gold will decrease next week and 11 think prices will remain the same.

Precious Metal Closes & Dollar Strength – Aug 20 – Aug 24

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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