Commentary for Monday, May 1, 2017 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc ……
Gold closed down $12.80 at $1,255.50 in another defensive round. It actually opened rather flat which has been the case lately – pitched higher and then reversed itself testing the $1,254.00 level before catching much of a bid. Also worth noting is that the European markets are closed for the traditional May Day celebration of spring and flowers – price moves when the other guys are drinking beer should be taken with a grain of salt.
Let’s consider the gold’s moving averages once again – 50 DMA ($1,249.00) the 100 DMA ($1,218.00) and the 200 DMA ($1,251.00) – so the close ($1,255.50) is above all three technical indicators but the “feel” of this market has been lethargic this past three weeks.
Gold did rise in early trading but quickly sold off deciding to ignore the “miss” in ISM (Institute for Supply Management) numbers. The ISM slowdown is no big deal but under other circumstances may have suggested that the Federal Open Market Committee (FOMC) should further deliberate raising interest rates. But in this generally positive environment we will see that promised rate hike this summer.
The FOMC is meeting this May 2 and 3 (Tuesday and Wednesday) but this is one of their minor gatherings for lack of a better word – this June 13 and 14 will be the formal “Meeting associated with a Summary of Economic Projections and a press conference by the Chair”.
And it is not only the interest rate hike which has gold treading water – the geopolitical scene which created a stir these past few weeks has turned cold. It is not that these problems have disappeared – the Iran/Russia/North Korea/French election “stories” could flare but the tension levels have decreased and cooler heads seem to prevail. Provocation is one thing – action is another and it seems that “action” is waning both at the international and local levels.
Congressional members reached a deal on Sunday which will fund the government through September and this was seen as “positive” supporting Wall Street. Generally speaking stocks both here and in Europe have seen improvement and this has detracted from the safe-haven buying prevalent in the early months of 2017.
Still the market seems to be consolidating around $1,260.00 perhaps waiting for the next shoe to fall. A break below this support level would portend a test of $1,240.00.
I would add that a small interest rate hike in June is probably already factored into these prices so while gold has lost the big early year momentum it does not figure to have much downside given some stirring in renewed gold consumption by both China and India.
This market has become increasingly difficult to put into a “box” which answers questions because it “reacts” to “everything” these days.
So does the stock market – today being a good example. All it took was for Bernanke to call Trump’s growth plan a long shot and the stock market got shaky.
As I mentioned last week we could be entering into a new phase relative to the price of gold – perhaps something similar to what Bernanke sees for the US growth picture – much slower than perceived – not terrible but not stellar – livable. Perhaps the days of big explosive growth are over for the short to medium term and we all will have to settle for “modest” gains or losses in both stocks and the precious metals.
Silver closed down $0.42 at $16.84. Silver was particularly hard hit today and closing below $17.00. We have recently traded above $18.00 but volume numbers dropped off at these higher levels. Lower oil prices have had a negative effect on inflationary expectations and the price of oil is often tied to the price of silver.
Silver dipped slightly below $17.00 in March and we began the year at $15.99. Recent US Silver Eagle monster box sales by the US Mint has been off as they report less than nine million ounces sold to distributors versus 19 million ounces this time last year.
This area will get “hot” – it always does when Monster Boxes sell for less than 10 grand. And a closing note regarding silver eagle premiums – they are moving lower both in mint state and proof – buy this stuff like generic potato chips – avoid high premiums.
Platinum closed down $16.50 at $932.20 and palladium closed down $12.25 at $814.45.
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 – 4) (last Wednesday – 3) (last Thursday – 3) (last Friday – 4).
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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