Gold Weaker – Dollar Reverses Direction
Commentary for Friday Jan 6, 2017 (www.golddealer.com) – Gold closed down $7.90 today at $1173.40 probably because the Dollar Index rebounded from 101.50 to 102.25. Why the bounce in the dollar is a bigger question? The jobs number came in at 156,000 for December but this was under expectation – the street was looking for 180,000 so go figure.
So gold was somewhat weaker today and if you are a trend watcher the real picture develops with the 6 month pricing chart. During that time gold traded between $1350.00 and $1150.00 with a generally downward trend reacting to the promised higher interest rate environment by the Federal Open Market Committee. So technically gold has been off-balance – down, as they say but not out. Unless you believe all that fiat paper money being produced around the world has no consequence. The bigger question short-term is where do we go from here?
Note these two opposing views from the same Reuters post – “Chicago Fed President Charles Evans said the central bank could raise rates three times this year if economic data comes in a bit stronger than he expects, while Richmond Fed President Jeffrey Lacker said it may have to raise interest rates quicker than markets currently predict.
“For 2017, we think we are starting from a clean base, leaving room for seasonal drivers to breathe some life back into the yellow metal,” said Christopher Louney, commodity strategist for RBC Capital Markets, in a note.”
It is not likely that gold will explode in value as 2017 develops – but it will do better than most think in my opinion. My reasoning is simple – the Fed will not raise interest rates to any great degree this year because an aggressive interest rate policy will kill overseas business and the incoming president has promised to create jobs. Also keep in mind the US appreciates that the dollar was up 5% in 2016 and 7% in 2015 – this is common FOMC banter behind closed doors.
We are seeing higher prices in gold as physical demand comes back into the picture. At the same time traders are beginning to wonder – was gold oversold during the rather dramatic drop in prices seen from November through December? We moved from $1300.00 through $1150.00 in less than 60 days – this created value even if you are somewhat pessimistic.
So early on in 2017 it would be a safe assumption with the interest rate hammer hanging over everyone’s head that the price of gold might just consolidate. And the more attention this consolidation gets the more important gold bullion will become in financial planning – gold might even redeem itself in the American public’s eye if inflation heats up.
But for now all of this is conjecture – so just look for consolidation in the current trading range.
Note that while gold’s current price is moving to lukewarm gold does not seem particularly interested in world aggression these days. The latest moves by the Chinese and Russians should have raised red flags – but no one seems to notice or care. This may not always be the case.
Silver closed down $0.12 at $16.52. This has been a disappointing market of late because prices are now in the “sweet spot” of cheap but the public seems content to wait it out – hoping for even lower prices. In a way this does not make sense – if the American collective thinks that the Trump business renaissance is for real – silver will be an integral part of any infrastructure project.
Platinum closed down $5.40 at $970.60 and palladium closed up $20.15 at $758.35.
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 GoldDealer.com employees think: 5 believe gold will be higher next week – 4 think gold will be lower and 2 think 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: 32 people thought the price of gold would increase next week – 55 believe the price of gold will decrease next week and 13 think gold prices will remain the same.
Precious Metal Closes & Dollar Strength – Jan. 2 – Jan. 6
The GoldDealer.com Unscientific Activity Scale is a “6” for Friday.
The CNI Activity Scale takes into consideration volume and the hedge book: (Closed last Friday and Monday) (Tuesday – 4) (Wednesday – 4) (Thursday – 5).
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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