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Gold Welcomes 2022 Uncertainty 

Gold Welcomes 2022 Uncertainty 

Commentary for Thursday, Dec 30, 2021 (www.golddealer.com) – Gold closed up $7.60 at $1812.70 and silver closed up $0.18 at $23.03. Gold opened flat this morning in thin holiday trading as the Dollar Index remained steady. But soon pushed to weekly highs before settling for something more modest. This provided minor joy to those bullish traders looking for an end of year rally. Still, our shiny friend is holding up – considering the threat of 3 interest rate hikes by the FOMC in 2022. Technical gold traders should also be encouraged despite some weakness earlier in the week as gold moves above its 200-day moving average. So, while I’m not dancing in the street, it’s safe to say there is enough good news to give the bulls an edge. And perhaps suggest higher prices are in the making. Although a challenge to gold’s most recent November high ($1860.00) is unlikely. I’m surprised there is not more talk about safe haven buying as Omicron rages worldwide. And not surprised our inflation fears seem to be as changeable as the weather. It makes sense to be concerned about the pandemic, because at this point it does not look like it will just disappear. And a heavy hand from Uncle Sam is not the best approach. Likewise with inflation – it is a growing reality, just like the virus. My bet is that both threats will again focus the metals in 2022. The big surprise may be that Washington has less control over either threat than most believe. Just a note – our offices will be closed Friday. Thanks again for the business and friendship. Have a safe holiday and a wonderful New Year!

Last Friday gold closed at $1801.60 / silver at $22.79 – on the week gold was up $11.10 and silver was higher by $0.24. The good news is that delivery on US Gold and Silver Eagles is again 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 opened typically choppy Monday moving between $1804.00 and $1814.00 on both sides of unchanged – sliding mildly into the red by the end of the session. This loss however was more than recovered in the aftermarket – suggesting that traders are buying weakness. Which is mildly surprising given the Dollar Index has remained strong and steady between 96.00 and 96.25 since before Christmas and the DOW has gained a thousand points this past week.

Still crude oil pushing above $75.00, and the broader inflationary scenario coming in and out of focus holds trader interest, supporting gold prices. But professionals are defensive – watching a thinly traded market with little fresh information. And one which will likely stay in “holiday mode” until after this Friday’s New Year’s Eve celebration.

So, while the gold market seems sleepy – it is still looking at weekly highs and dealing with tough overheard resistance at $1815.00. For now, our shiny friend continues to ignore Russian aggression in the Ukraine. But gold prices are firming up over safe-haven demand as the Omicron threat continues to suggest worrisome virus adaptability. Still, it makes sense to favor higher inflationary gold prices over the lower price deflationary argument – for the present.

Zaner (Chicago) – “The razor’s edge between flight to quality interest and deflationary slowing selling in gold and silver extends into another trading week. Obviously, the surge of omicron infections favors the deflationary selling side of the equation to start the new trading week. On the other hand, with equities showing some pockets of strength overnight deflationary sentiment is not universal. However, investors remain cool toward gold, with ETFs posting a 6 straight day of outflows last Thursday. On the other hand, the Chinese government has promised to provide further support to its economy and that provides psychological support for equities and physical commodities. Surprisingly physical demand news for gold from China has been supportive with reports of a 30% surge in gold jewelry sales in Hong Kong “this year”. Unfortunately for the bull camp, the 30% gain is compared to the Covid ravaged shut down year of 2019 which in turn dramatically reduced weddings and social events associated with gold jewelry sales. Adding into the resistance hanging over gold and silver this morning are 2022 forecasts predicting gold will have difficulty in a “rising rate environment”. Despite the lower early trade, the February gold contract remains above its 200-day moving average of $1799.70 and above the psychologically important even-numbered $1800 level. Unfortunately for the bull camp energy prices are lower early, the dollar is tracking in positive ground and US treasuries are showing signs of “breaking out to the downside”. In conclusion, the bear camp has an early edge, but ranges might be narrow. While the silver market managed to breach the $23.00 level overnight weakness in industrial metals and energies leaves a fundamental cloud hanging over the market.”

Gold closed down $3.10 at $1808.10 on the day and silver closed up $0.05 at $22.98.

On Tuesday gold surged to monthly highs – reaching $1820.00 before this latest rally was sold in typical fashion and gold closed only slightly in the green. Reinforcing the bearish story line that gold is struggling with overheard resistance ($1830.00) going back to mid-2021. And paper traders are enjoying buying the dips and selling the rallies. So, while the technical picture for gold favors the bulls on the shorter term, it still lacks conviction. Especially if momentum stalls over only proposed interest rate hikes. Still, I’m happy gold is doing well even as new talk of a stronger dollar in 2022 grows – if covid fears continue lower.

Still, safe-haven demand across our counter remains solid – which is not new insight but is worth some attention. Large physical gold and silver bullion positions never last long. Our Delayed Delivery Programs offering new bullion from world mints are popular. Even though waiting times are increasing, primarily due to date retooling. This steady demand continues even as the buzz which usually drives the physical market is lacking which is surprising.

The big rumor in early trading today was that the dollar was finally weakening – supporting higher gold prices. And the index dipped in early trading – but quickly surged higher. So the bullish rumor turned into a wet blanket for hopeful bulls looking for a breakthrough rally.

So, what gives? The traditional thinking that the Fed’s massive dollar infusion over the past two years would eventually weaken the dollar has not happened. But this possibility at least supports gold prices as seen in this long consolidation. And who could have guessed that stocks would push to all-time highs through this covid mess? Or that Joseph would beat Donald?

With all this confusion it may be time to drag out my favorite and underappreciated Seinfeld / Opposite Strategy – George decides that making decisions based on well-reasoned thinking is the source of his problematic life, he will now make opposite choices and tempt fate. This upside-down thinking wins the girl of his dreams who normally would not give him the time of day. Perhaps this kind of logic might suggest that stocks, real estate, and the physical metals are all linked to cheap money. The corollary being that if the Fed does not get crazy with interest rates all three of these will trend higher over time. It sounds counterintuitive but why not? These past three years have not been logical, so why challenge the trend? Besides, Seinfeld still makes me laugh. And we all need something to laugh about in this new year. Its good mental health. In the process let’s thank God for doctors, pharmaceutical giants and first responders who faithfully show up to work with little fanfare – still inventing new ways to protect the world population.

Zaner (Chicago) – “While we see gold prices clawing out more modest gains ahead, we are highly suspicious of significant gains unless market sentiment regarding omicron being less severe are proven correct. In fact, investors remain cool toward gold, with ETFs showing a 7th straight day of outflows and Hong Kong November net gold exports to mainland China down 16% on a month over month basis. On the other hand, investment interest in gold during the holidays could be artificially low. Some traders overnight suggested the gold market was carving out gains on uncertainty from record Covid infection readings in various global hotspots, but that action/market focus has not been consistent recently. While the dollar index spent the entire Monday US trading session in positive territory, the index has remained within proximity to a key failure zone on the charts this morning located just below 96.00. While the trade did not see a distinct lift from fresh Chinese stimulus dialogue overnight, that news probably discourages some sellers from attacking the gold market on the current rally. With the gold market closing above its 200-day moving average for a 3rd straight day, the technical set up in gold is shifted slightly favor of the bull camp. However, the gold market remains relatively overbought in the net spec and fund long category with the net long still in the upper portion of the last 10 months net spec long range. The Commitments of Traders report for the week ending December 21st showed Gold Managed Money traders net bought 9,101 contracts and are now net long 84,591 contracts. Non-Commercial & Non-Reportable traders net bought 6,267 contracts and are now net long 247,132 contracts. The March silver contract showed significant volatility yesterday but forged the highest trade of the month of December and closed above the $23.00 level on the charts. While the holiday thinned trade might explain away low trading volume on the current rally, the bull camp does not appear to have significant breadth. However, the most recent positioning report showed an increase in fund long interest and that probably tips the scales in silver in favor of the bull camp. Uptrend channel support in March silver today is $22.86 and resistance in the second trading session of the week is seen at $23.19. Silver positioning in the Commitments of Traders for the week ending December 21st showed Managed Money traders were net long 11,103 contracts after increasing their already long position by 1,534 contracts. Non-Commercial & Non-Reportable traders net bought 989 contracts and are now net long 37,383 contracts. While the PGM markets yesterday saw initial strength, both markets failed to sustain and closed lower on the day to start the trading week. While Russian aggression stories have not surfaced in the headlines recently, we see that issue remaining an underpin for prices going forward. As in silver, low trading volume and falling open interest on the 2nd half of December rally in palladium could be explained as holiday thinned activity instead of a lack of bullish breadth. Unfortunately for the bull camp, the $2,000 level has become resistance given yesterday’s inability to take out that level. Uptrend channel support in March palladium is now pegged at $1,925.50. The April platinum contract managed a higher high for the move to start the new week and respected support at $950 in a fashion that leaves control with the bull camp. The December 21st Commitments of Traders report showed Palladium Managed Money traders net bought 140 contracts and are now net short 3,069 contracts. Non-Commercial & Non-Reportable traders reduced their net short position by 147 contracts to a net short 4,084 contracts. Key support today is seen at $956.60 while resistance is $979.60. Platinum positioning in the Commitments of Traders for the week ending December 21st showed Managed Money traders added 1,870 contracts to their already short position and are now net short 9,736. Non-Commercial & Non-Reportable traders were net long 8,276 contracts after decreasing their long position by 1,354 contracts.”

On the day gold closed up $2.10 at $1810.20 and silver closed higher by $0.13 at $23.11.

On Wednesday gold sold off on the open in a profit taking round as this market continues to worry over whether recent price gains are justified. On the plus side traders bought the weakness at $1790.00 and saw a nice bounce from lows of the day. And for the first time since early December the Dollar Index dipped below 96.00 which created a quiet kind of bargain hunting.

I expect professionals will be squaring up 2021 accounts and moving to the sidelines given the long weekend. And with 2022 interest rate uncertainty selling pressure in gold may continue. But today’s bounce does a small amount of fresh bullish conviction. Not enough to create the kind of rally necessary to challenge gold’s most recent high ($1810.00). But enough to suggest growing interest. It is also worth noting that the technical pros cite uptrends in gold, silver and platinum which always encourages the bullish base.

Zaner (Chicago) – “What a difference 24 hours makes as the gold market this morning is reportedly trading lower off less concern for the omicron breakout. Yesterday, gold and silver prices were lifted off a decline in omicron uncertainty. However, a pandemic record daily US infection count of 441,000 from Monday seriously challenges the declining omicron uncertainty argument. In other words, it could take confirmation of a less serious medical outcome from omicron, strong US scheduled data and/or a resumption of strong gains in equities to push the dollar into a downside breakout and in turn spark gold back toward $1,825. Furthermore, the charts have shifted from positive to negative with gains from earlier in the week completely reversed and prices as of this writing sitting $21 below yesterday’s high. In a negative for precious metal markets and many physical commodities, Bloomberg has released a leading economic indicators study of the Chinese economy and expects December to show only moderate growth. Adding into the bearish shift is a 4-day high/reversal in the dollar which could have the capacity to rally 40 more points before encountering substantial resistance. The 200-day moving average in gold today is $1,800 while uptrend channel support is seen closer-in at $1,805.50. Unfortunately for the bull camp in silver, the market forged a massive $0.48 trading range yesterday, spiking higher and closing just above its low of the day. With the $23.00 level violated on the downside early this morning and prices early this morning sitting $0.40 below yesterday’s highs, a logical drift lower to $22.90 is expected.”

On the day gold closed down $5.10 at $1805.10 and silver was off $0.26 at $22.85.

The good news for gold on Thursday was that traders bought the dip, always encouraging especially going into a long weekend. But I would not place too much emphasis on today’s close because these are still thinly traded holiday markets. Still gold did come back from earlier losses as treasury yields came off one-month highs according to Reuters. Crude oil continues to encourage the inflation scenario. Its November bottom ($66.00) has turned into a $77.00 challenge to $85.00 recent highs. My guess is that the proposed hawkish FOMC interest rate policy will turn into something manageable for Wall Street and support gold prices next year.

Zaner (Chicago) – “Gold and silver were slightly lower overnight on a slightly higher dollar, but they held inside yesterday’s ranges. The gold bulls were likely disappointed with yesterday’s action because with the US dollar breaking out to the downside and oil prices at times very strong, we would have expected February gold to have sustained its initial test of $1,810. Some traders are suggesting gold and silver are back into a flight to quality role and that stronger equity prices ahead would justify a return to and below yesterday’s low of $1,789.10. It could take a slide in the dollar index below the late November low of 95.50 to give them enough currency lift to throw off their bearish charts. Unfortunately for the bull camp, US Treasury yields have jumped, and Treasury auctions have seen very poor demand this week, which could signal even higher rates ahead. Going forward, we see a combination of crude oil, equities, dollar, and Treasuries driving gold and silver prices. A critical pivot point in February gold is seen today at $1,785.20, and to rekindle the last two weeks’ upward track, it would require a rally back above $1,812. While the silver market also managed to initially reject a sharp slide on Wednesday, the charts were damaged, and it seems to need very favorable risk-on conditions to resume the rally of the last three weeks. Critical support in March silver is seen at $22.445. To turn the tide back to the upside would require a trade above $23.20. PLATINUM While the March palladium contract managed to reject initial weakness yesterday, it spent the entire US trading session in negative territory. The market was lower overnight, but it spent the entire session inside yesterday’s range. From a technical perspective, the hard washout and reversal on Tuesday likely balanced a short-term overbought technical condition, especially in a market that has recently registered a record spec and fund net short. Critical support is pegged at $1,934.50 and then again down at $1,884.50. To turn the tide back to the upside, it would probably require a trade back above $2,021.50 today. April platinum edged lower overnight and fell through yesterday’s lows, making it the weakest-performing of the precious metals. The market looks overvalued, and it lacks the bullish fundamentals present in palladium. However, if palladium were to regain the $2,000 level, some spillover buying of platinum would be likely. Uptrend channel support for April platinum comes in at $958 today, with additional support at $950.20.”

On the day gold closed up $7.60 at $1812.70 and silver closed up $0.18 at $23.03.

Platinum closed down $4.60 at $963.60 and palladium closed down $5.60 at $1979.20.

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

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