Gold – Where is the Buzz?
Commentary for Friday, May 10, 2019 – Gold closed up $2.20 at $1285.70 today. The possibility (or reality) of trade wars has not created much interest in the metals – another expected outcome which has not materialized. And the traditionally slow summer months are right around the corner.
There is a trend here which might provide clues as to where gold is heading after yet another round of consolidation which began in mid-April around $1275.00.
Keep in mind this bounce off that support line was a bit of a technical surprise – most thought the price breakdown from $1320.00 in late March was severe enough to create even more downside trouble but such was not the case.
Political tension and surprising safe-haven buying at $1270.00 created an unexpected short-covering rally. And we have been grinding back and forth between $1270.00 and $1283.00 for almost a month now.
The reality of this market suggests that the longer prices move in this tight trading range the more bored everyone gets and the less action, especially in the physical market. And when price momentum is removed from the paper trade I think over time they look for lower prices.
The shorter term technical picture has been weak for 5 months – beginning when gold rallied early in the year and again faltered at the strong overhead resistance of $1350.00.
And as I have pointed out before you could make the case that this latest narrow trading range is just a continuation of a sideways and rather flat trading pattern which began in 2013. This long consolidation goes through the typical cycles – bullish as prices rise – bearish as they fall.
But it should be clear by this time that gold is back – that subdued but rather solid long term support line has been supported in the physical sector as world tensions rise or prices get cheap. It is also interesting that Russia and smaller central banks are active buyers regardless of price.
And with uncertainty levels growing for years it’s amazing that today’s financial sector does fear the debt burden created by this business expansion.
And as a side note – there are legions of people who are worth a million dollars today – yet few consider gold or silver bullion as insurance money. Every one of them should have 100 grand in bullion hidden away in case of emergency – yet few appreciate the growing danger.
So most of this is not news but it’s a mistake to let this “quiet” time provide anyone with a false sense of security. We face bigger problems today than ever before and solutions are elusive. Gold is higher than it was 10 years ago and during that time was significantly higher during times of stress. This reality contributes to the underlying faith that gold is the only fail-safe protection against government spending and increased personal intrusion.
In the 1970’s I used to laugh at talk about the US government confiscating the wealth of its citizens. With increased socialistic talk coming out of our own Congress no less I’m not so sure anymore. This “socialistic” creep might be the most dangerous trend in this country today and in the end present a bigger danger to personal freedom than inflation or government spending.
This from Zaner (Chicago) – “While the gold market started out Thursday morning with a lot of upside promise, the gains ultimately proved to be less than impressive. In fact, given that the US dollar tracked lower this week and more importantly forged a downside breakout on its charts yesterday, the modest gains in the gold market Thursday suggest that the market might not be poised to streak higher. However, geopolitical and macroeconomic anxiety should remain high from; trade issues, the Iranian situation and from what appears to be an avalanche of economic reports today. In fact, many times geopolitical issues can “flare-up” ahead of weekends and in the event that US/Chinese trade talks are extended, that will certainly leave the potential for uncertainty in place over the coming 72 hours. In retrospect, the gold market has not seen a tight inverse relationship with the action in the dollar this week but a sustained trade below 97.01 and more importantly below 96.87 could return the currency influence to a key driving force. In retrospect, there has been a lot of bullish long-term classic demand news that should eventually lift gold prices higher. However, the most important demand side development/reconfirmation is a buying wave by central banks as that action isn’t typically influenced by the ebb and flow of economic conditions and the amount central banks are buying is significant to the gold trade. On another bullish track, with another decline in South African gold production, one can even suggest classic supply fundamentals also favor the bull camp. Unfortunately, the near term direction of gold will be heavily influenced by trade negotiators but given the trend of the news, the bull camp holds an edge.
About the best argument the bull camp can make following the Thursday action in palladium, is the markets capacity to reject a portion of a massive washout on the charts and add to that bounce moderately this morning. In fact, the June palladium contract managed a recovery in excess of $58 from yesterday’s low but the charts will remain negative unless prices are able to crawl back above $1,317.40. In fact in the event that July fails to hold above $1,285.30 today there might not be solid support be seen until $1,257. Obviously the shifting sands of the trade talks are causing dramatic shifts in expectations for palladium demand from China, and palladium obviously continues to hold significant premium off a severe tightness theme that has been trumpeted for nearly a year! In conclusion, it is very difficult to throw off the bearish view unless negotiators pull out in 11th hour deal. Like the palladium market the platinum charts are also depicting more downside action with a probable failure of support at $847.10 likely before the end of the week unless global equity markets recover in the wake of a return to upbeat macroeconomic psychology. The next lower support/targeting level in July platinum is seen down at $843.80.
While we give the bull camp an edge in gold, that edge is thin and a large measure of volatility in prices should be expected directly ahead. However, the market has had plenty of time this week to anticipate a breakdown in talks and that seems to be a general consensus into the last trading session of the week. It is also possible that a downtrend channel resistance line off of the 2019 highs at $1,293.70 will be seen as a bull/bear point going forward. The bulls control but the failure to hold above $1,278 in June gold could signal a complete reversal.”
Silver closed up $0.02 at $14.73.
Platinum closed up $13.80 at $862.40 and palladium closed up $67.70 at $1355.40.
This is our usual ETF information – Gold Exchange Traded Funds:
Total as of (5/1/2019) was 68,175,653. That number this week (5/8/2019) was 67,713,036 ounces so we dropped 462,617 ounces of gold.
The all-time record high for all gold ETF’s was 85,108,867 ounces in 2013. The record high for Gold ETF’s in 2019 was 70,515,544 and the record low for 2019 was 67,713,036.
Silver Exchange Traded Funds: Total as of (5/1/2019) was 612,344,190. That number this week (5/8/2019) was 616,192,547 ounces so we gained 3,848,357 ounces of silver.
Platinum Exchange Traded Funds: Total as of (5/1/2019) was 2,798,562. That number this week (5/8/2019) was 2,792,350 ounces so we dropped 6,212 ounces of platinum.
Palladium Exchange Traded Funds: Total as of (5/1/2019) was 727,679. That number this week (5/8/2019) was 716,424 ounces so we dropped 11,255 ounces of palladium.
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: 7 believe gold will be higher next week 1 thinks 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: 55 people thought the price of gold would increase next week – 25 believe the price of gold will decrease next week and 20 think prices will remain the same.
Precious Metal Closes & Dollar Strength – May 6 – May 10
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