Commentary for Friday, September 27, 2019 (www.golddealer.com)
By Richard Schwary of California Numismatic Investments Inc ……
Gold closed down $8.80 today at $1,499.10. This past Monday gold closed at $1,523.70 so on the week we have moved lower by $24.60 – not the end of the world – over the past year gold has moved up by more than $300.00 but with the world in probably one of the biggest transition periods I have seen in my career I had hoped for more fireworks – or if not that at least more bargain hunting after Wednesday’s drop of $27.50.
With the pricing pattern we are looking at going into this weekend we will have to settle for a kind of mediocre picture as gold fights to regain the initiative. It opened flat in overnight trading, sold off to $1486.00 and spent the rest of the trading day firming up – once again looking at $1,500.00. I think this is not a particularly bullish statement but it does show that few traders want to be short over the weekend.
And if you are of the optimistic persuasion you can claim that gold’s pricing action is not bad considering the dollar is trading at two-year highs.
Crude oil seems steady at $55.00 which suggests traders don’t take the latest news out of the Middle East seriously. This is a mistake – there is plenty of trouble brewing over there – more serious than we have seen in years and I can’t figure out why everyone is still complacent.
Still, there are plenty of reasons why gold should be creating more buzz. The European Union is embracing negative interest rates, the FOMC will lower rates again before year’s end, the German economy is in trouble and this food fight between China and Trump is not going to go away regardless of how hard each side tries to put lipstick on this pig. Chinese trade has been hurt and maybe, more importantly, they will not be taken to task (at least publically) by Trump.
Technically I still like gold, you can’t really argue with success – a market that has pushed from $1,420.00 through $1,540.00 these past two months offers great promise. But gold traders and even the safe-haven buying public have short memories.
This market has struggled to make new highs since early August – failed, tested support and consolidated around $1,500.00 – all that without much Asian demand and against a strong dollar.
In the process, I don’t think gold has hurt itself technically but it has given up most of the positive buzz which led folks to talk about $1,600.00 before year end. Not that these uber-bulls have given up – they have not – but the dollar has now become a powerful obstacle.
So the standoff between the bulls and bears continues. From a local viewpoint we have actually seen little selling of gold bullion which should not be surprising. The gold bulls are not even close to throwing in the towel and the silver bulls are gathering more steam.
This from Zaner (Chicago) – “Global equity markets were mixed overnight with markets in Tokyo Moscow and Hong Kong lower and the rest the world posting minimal gains. Overnight economic news included inflation readings from Tokyo which were softer than expected while German import price readings also showed signs of deflation. In France producer prices and consumer spending for August were both unchanged on a month over month basis. On a positive note, Spanish retail sales for August jumped 3.2% on year-ago levels. Data from Italy showed softer consumer and business confidence readings and a noted drop in producer prices. Overall Eurozone services sentiment and consumer confidence were better than expected but consumer, industrial and business climate readings were all in negative territory. The North American session will start out with August personal income which is forecast to have a modest uptick from July’s 0.1% reading. August personal spending is estimated to have a modest downtick from July’s 0.6% reading. August durable goods are forecast to have a moderate decline from July’s 2.1% reading. A private survey of September consumer sentiment is expected to hold steady with a previous 92.0 reading. Fed vice Chair Quarles and Philadelphia Fed President Harker will speak during morning US trading hours.
Gold and silver start the last trading session of the week under some technical pressure and the bull camp that has to be discouraged with the lack of upside sensitivity off the impeachment situation. However the gold market is faced with yet another higher high for the move in the dollar this morning which has put the currency index at a new 2019 high. Apparently the gold market is also uninterested in news that Chinese gold imports from Switzerland and Singapore in August jumped significantly and that failure to react is even more surprising considering news earlier in the week that Chinese imports from Hong Kong in August jumped by more than 60% on a month over month basis. Another underpin for gold and silver that is being discounted this morning is the fact that ETF’s continue to see inflows with gold ETF’s posting the ninth straight day of inflows. So far this year gold ETF’s have added almost 10 million ounces and have reached the highest holdings level in 12 months. The market overnight saw another prediction of record gold ETF holdings, this time with the prediction targeting a new record within the next six weeks. Silver ETF’s also added to their holdings bringing this year’s net purchases to 98.6 million ounces. While stories overnight suggested the potential for improved Indian Festival buying ahead a combination of high gold prices and a weak Indian currency has discourage some Indian buyers in recent months and therefore it could take a further correction in gold prices to foster noted seasonal buying from an important demand source. However the Diwali festival is the primary Indian demand window and some analysts have suggested slack imports last month suggests there is pent-up demand from India waiting in the wings. Unfortunately gold looks set to post a negative weekly trade as the market is showing a lack of sensitivity to the threat against the US President and gold looks to remain under modest pressured as a result of the latest “hope” for progress on a trade deal. In the end, ongoing inflows to ETF instruments, signs of strong Chinese gold demand and the prospect for improved Indian seasonal buying ahead should make a return below $1,500 a buying opportunity.
While the palladium market did not forge a definitive upside extension with the recovery effort yesterday, it is apparent that the market remains in vogue and should continue to carve out gains in new high territory ahead. In fact suggestions from a key global palladium production leader, targeting an extension of the bull market because of a lack of investment, would seem to give the bull case sustainable fundamental credibility. Uptrend channel support in December palladium is $1,618.20, with initial/thin resistance at $1,648 and the next upside targeting seen at $1,654.90. While the platinum market continues to see record ETF holdings posted on a regular basis, the futures trade has not rendered the platinum market as attractive as the palladium market. The latest reading on platinum ETF holdings was 2.782 million ounces which means holdings have risen by 770,000 ounces this year! It should be noted that recent trading volume in platinum has also increased, open interest has shown fresh strength and the market saw that same action prior to the late August rally. On the other hand, October platinum futures must hold above $923.70 to avoid another definitive chart failure.
Apparently the safe haven storyline of impeachment isn’t fully offsetting lingering hope for trade progress and more new 2019 highs in the Dollar Index and that should keep gold and silver off balance today. In other words the potential for impeachment of the US President would not appear to be a major uncertainty yet and that uncertainty has not caused noted volatility in US equity markets nor has that situation resulted in noted safe haven flow into other flight to quality markets like Treasuries and the Yen. In the near term, we can’t rule out a temporary probe’s below $1,500 in December gold but given the prospect of improved Indian buying next month and given the trend of the geopolitical environment we see declines below $1,495.00 should be con a place to accumulate longs.”
Silver closed down $0.26 at $17.55.
Platinum closed down $5.10 at $931.00 and palladium closed up $10.00 at $1654.30.
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