Commentary for Wednesday, November 1, 2017 (www.golddealer.com)

Gold Market Newsletter with Richard Schwary

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

Gold closed up $7.10 at $1,274.10 in a kind of confused and choppy market. We opened unchanged – moved above $1,280.00 and then settled quietly lower. This small pop in prices to the upside is hard to figure – the Federal Open Market Committee (FOMC) release does not amount to much and the Dollar Index remains flat – holding higher ground just under 95.00. Most will claim the FOMC release today which kept interest rates unchanged was responsible for the higher gold close – but I wonder – everyone already expected they would do nothing this time around.

If this is a short-covering rally, then what spooked the paper players? There is not much different on the geopolitical front with North Korea – the terror attack yesterday is another wake-up call and physical demand across our counters has been muted. We did not see any buzz created by gold’s most recent sell off in early October from $1,300.00 even though this market looks like it wants to hold the $1,270.00 support having tested that number twice since early October.

Could it be that traders sense yet another reversal on the FOMC position concerning interest rates? I think most at this point expect a small rate hike in December but if this turns out to be yet another balk gold price would firm exactly like they have been lately – push back above $1,300.00 and once again cool off as confirmation about rate hikes once again takes center stage.

I still like my original price position – gold will trade on both sides of $1,250.00 in a holding pattern waiting for something really fresh to push prices either higher or lower. But this “push” will not be anything to write home about in my opinion. The price of gold might remain in a kind of holding pattern – similar to what has been on the table since early 2013.

The US gold trade thinks this market is weak – but still has a lot of respect for that sideways action we have seen for years – meaning the base number is stronger than most thought possible given an aggressive FOMC.

But there is still that threat of returning inflation coupled with physical demand (which comes and goes lately) and the potential of an explosive geopolitical scene.

The North Korean threat was initially laughed at but now has morphed into a real worry – it is the combination of a rogue country and this edgy President that has everyone a bit nervous. Perhaps this alone is enough to support prices even if nothing further develops.

For now gold traders remain fixated on the next FOMC interest rate move and the buying or selling public gain more time to make up their minds and place their bets.

One thing is sure – you could make a convincing case for either higher or lower numbers between now and the last FOMC meeting this year which will be on December 12 and 13. The actual longer term trend will become more apparent by the first quarter of 2018 – or not. This market reminds me of a great comment by veteran trader Peter Hug (Kitco) some time ago – I’m paraphrasing here – “gold is going up – no it’s going down – no it’s going up”.

Have another cup of coffee and tell me what you think.

This from Zaner (Chicago):

While the action in the gold market yesterday had to be very discouraging to the bull camp a definitive recovery this morning has not only reversed bearish sentiment but it has probably sparked a wave of fresh speculative buying in the early going today. With the dollar trading slightly higher the $10 plus rally in gold overnight is certainly not the result of currency related forces and with global equities also flashing into higher ground again it would not appear as if safe haven arguments are feeding the run up. Some might suggest that expectations of an on-hold Fed are providing the market with buying fuel but we would suggest that classic physical demand is likely the source of the buying pulse. Certainly seeing Chinese January through September gold output decline by almost 10% is supportive but the news of a 15.4% January through September increase in Chinese gold consumption means that gold is probably feeding higher off the latest influence of the Chinese commodity demand machine. In fact if Chinese gold production continues to divergence with consumption, that should make China a positive 800 pound gorilla import influence in the gold “space”. It is also possible that the gold market is garnering a delayed lift from news yesterday from Gold Fields Mineral Services that global gold production in 2017 might decline. The market has clearly discounted news that October gold sales from the Australian Mint declined as that news isn’t necessarily a key leading indicator of global demand for gold. On the other hand the Perth Mint did note a sharp 43% increase in silver sales for the month of October and that should give a rather quiet silver market a minimal demand lift. While the December gold contract has climbed above a three-week-old downtrend channel resistance line with the rally overnight and it also rejected the 200 day moving average again the market will face a critical junction later today in the form of the Fed decision and statement. While many economists suggest that inflation is not yet a concern for the Fed and that growth from the numbers is disjointed we have to wonder if the Fed will be nudged toward hiking rates because of the irrational exuberance action in the stock market. With the gold market sliding sharply over the last two months it is likely that an on hold Fed later today will allow for more short covering action.”

Junk Silver

Silver closed up $0.48 at $17.13. Another weird close in my opinion – a move of almost half a dollar in this market should be noted because the silver press has been negative – the trade expected a weaker print here – so something might be brewing – or not.

Platinum closed up $17.20 at $933.00 and palladium closed up $19.00 at $999.55. I think these numbers make sense – there is not much downside in either of these metals at current prices and I’m surprised we have not seen more platinum bullion buying by the public.

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

This is our usual ETF information – All Gold Exchange Traded Funds: Total as of (10/24/17) was 68,505,871. That number this week (10/31/17) was 68,520,887 ounces so over the last week we gained 15,016 ounces of gold.

The all-time record high for all gold ETFs was 85,112,855 ounces in 2013. The record high for Gold ETFs in 2017 was 68,561,598 and the record low for 2017 was 62,348,156.

All Silver Exchange Traded Funds: Total as of (10/24/17) was 646,233,849. That number this week (10/31/17) was 645,352,631 ounces so over the last week we dropped 881,218 ounces of silver.

All Platinum Exchange Traded Funds: Total as of (10/24/17) was 2,374,400. That number this week (10/31/17) was 2,409,754 ounces so over the last week we gained 35,354 ounces of platinum.

All Palladium Exchange Traded Funds: Total as of (10/24/17) was 1,531,881. That number this week (10/31/17) was 1,525,221 ounces so over the last week we dropped 6,660 ounces of palladium.

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