Precious Metals Market Commentary for Monday, August 14, 2017 (www.golddealer.com)

Gold Market Newsletter with Richard Schwary

By Ken Edwards and Richard Schwary of California Numismatic Investments Inc ……
 

Gold closed down $3.50 at $1,284.20 – a let-down for those considering another try at the vaulted $1,300.00 level. As promised the North Korea/Trump rhetoric has cooled and the dollar rebounded, which encouraged the bears. The Dollar Index also looks like it put in a bottom (93.00) last week and today has moved back into the 93.40 range. We will also get more insight into Federal Open Market Committee (FOMC) thinking when minutes of the late July meeting are released this Wednesday – any surprises will keep this pot boiling and traders focused.

On the plus side for gold is talk that the bullish stock market may be showing signs of old age – at least for the short term. Actually with the multiples they are charging for some stocks and the notion that Trump will not be able to walk on water as advertised I’m surprised we have not seen a larger pull-back by now but such is the power of cheap money in the hands of Wall Street.

Make no mistake, the “free money machine” (FOMC) remains on “wide open” these days regardless of all the talk about raising interest rates. According to CNBC the last rate hike (June 14, 2017) brought rates into the 1.00 to 1.25 percent range. The FOMC rate projection is still at 1.4 percent by the end of 2017 – so someone expects another rate hike by December although the CME probability meter comes in at a weak 35 percent.

Let’s assume the Fed raises in December now subtract “inflation” – the real cost of money is cheap – something less than 1%. In the good old days an interest rate of 3% or 4% was considered “normal” – today you can throw that word out the window.

For now however the psychologically important $1,300.00 level for gold will have to wait – it sold off in overnight markets (Hong Kong and London) – reaching $1,278.00 before seeing what seems like a traditional bounce to higher ground as traders buy the dip in prices.

As usual there are two views – the first is bullish – these now similar bounce backs in price indicate underlying strength in gold and so it’s only a matter of time before $1,300.00 is breached. The second is not so optimistic – higher interest rates will keep the bears happy.

Gold Market has the ZZZZZsI’m in the middle somewhere – gold will remain range bound until there is something more substantial on the table. Geopolitical threats have always been transitory – not to say this pot couldn’t boil over but typically look for either dollar information or demand information.

The dollar looks stable for now but there are plenty of people who believe the only direction given current monetary policy is lower – the dollar will weaken over time, which will ultimately support the price of gold.

As far as demand is concerned – this too is transitory but China and India are always buyers – it’s just a matter of price. Today China reported a 10.4% advance in retail sales and recently Frank Homes (Forbes) has been looking carefully at India – “Strong Monsoon Season May Flood Indian Gold Market With Buyers”. Homes points to the current stellar monsoon season – more rain puts more money in everyone’s pocket and produces more gold buyers. He also notes that India’s wedding season, a traditionally strong time to purchase gold is only a few months away.

For now expect a continuation of the summer doldrums – gold trading on both sides of $1,250.00. The real fireworks will begin when it breaks above $1,300.00 – anything else is just warming up the crowd.

This from Zaner (Chicago) – “While the bull camp should have been cheered by the recent $43 an ounce rally in December gold, the inability to break through the $1,300 mark and the reversal this morning would seem to hint at a temporary overvalued condition. When one adds in a return to risk on in most global equity markets overnight, strength in the US dollar and weakness in a long list of physical commodities, it would appear as if the environment today favors the bear camp in gold and silver. While some thought the weekend phone conversation between the US and Chinese leaders signaled positive progression on the geopolitical front, that potential was dealt a blow by US trade maneuvering against China on trade practice issues. While gold and silver are not significantly overbought, they have clearly added to the length of the speculative contingent with the last five days of impressive gains. In fact, the Commitments of Traders Futures and Options report as of August 8 for Gold showed Non-Commercial and Non-reportable combined traders held a net long position of 160,615 contracts. While that positioning represents an increase of only 11,360 contracts in the net long position, the COT report was calculated at the lowest level since the close on July 26 and therefore it is clearly understated significantly! The Commitments of Traders Futures and Options report as of August 8 for Silver showed Non-Commercial and Non-reportable combined traders held a net long position of 39,473 contracts and that positioning is also understated significantly. It should also be noted that silver derivative holdings have continued to decline since their record high posted last month!”

Silver closed up $0.05 at $17.09.

Platinum closed down $17.30 at $972.40 and palladium closed up $6.45 at $903.15.

The walk-in cash trade and phones were surprisingly active today – very steady.

The GoldDealer.com Unscientific Activity Scale is a “4” for Monday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Tuesday – 2) (last Wednesday – 3) (last Thursday – 4) (last Friday – 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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