Commentary for Tuesday, December 20, 2016 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc ……
Gold closed down $9.10 today at $1,133.60 in choppy trading. The gold and silver markets closed weaker because the dollar pushed higher in early trading. The Dollar Index closed yesterday at 103.13 and reached a high today of 103.63 before settling almost unchanged on the day.
I think the fact that gold did not recover as the index reversed direction is just another symptom of a weak technical market. And even though prices have trended lower gold bulls have fought back – today’s market is a good example.
At one point gold touched $1,125.00 before turning around and settling more than $10.00 higher – a key price point here might be last week’s low of $1,129.00 – a close below that number may signal further short-term selling – holding above that mark may indicate strength is building.
The dollar was already at the higher end of its price curve before the Federal Open Market Committee (FOMC) raised interest rates but the last hike pushed the Dollar Index to recent highs and added weight to gold’s deteriorating technical picture.
The problem at this point is that yields from a record DOW and the anticipation of a better US economic picture in 2017 leads most to the conclusion that the Federal Reserve will continue to raise rates in the New Year. They claim we could see a number of interest rate increases and this will weigh on the price of gold all other things being equal.
Note the phrase “all other things being equal”. They seldom are and we all know gold is a different financial animal in that it can wear many hats – hats which might ignore rising interest rates given the right circumstances. CNBC quoted a well-respected analyst this morning as expecting rising inflation in the first quarter of 2017 – this is earlier than I would have expected but perhaps is the real reason the Fed actually did raise rates after so many promises.
Physical demand from China/India can turn on a dime if they see the market as “cheap”. We are now selling gold bars like hot-cakes – and so are dealers in Europe. This trend is strong enough to delay dealer orders from the manufactures by as much as a week.
If Trump “deregulation” leads to default problems the so-called “domino effect” will return to center stage and the “fear” factor will be revisited.
The news today that the Bank of Japan made no changes in their long standing quantitative easing program should ring alarm bells. It did not – this is an important point in that our banking system was brought to its knees in 2008 because the lending standard for home ownership went out the window.
No one really understands the number of bad loans on the books in Japan – the same is true for China and other less well healed countries. I’m not ringing the alarm bell just trying to point out that there are other factors to consider which might trump rising interest rates.
Finally consider that this latest “selling” wave in gold is getting older. This means many who thought about selling have already done so. The traditional question at some point is how many sellers are left? When the whole room is of the same trading mind the market is usually at a top or bottom because most have already acted on their investment thoughts.
Silver closed up $0.03 at $16.12.
Platinum closed up $6.70 at $924.00 and palladium closed down $7.85 at $670.85.
The walk-in cash trade and phones were surprisingly busy today considering the holidays.
I have always thought that as technology advances the counterfeit trade would grow and people sitting on real “cash” might decide gold bullion was a better choice. This has never come to much but counterfeit fiat currency is interesting as Coin World notes – “Officials make the largest seizure of counterfeit Federal Reserve Notes in History in Peru” the article goes on to say that Peru is the counterfeiting capital of the world producing 17% of the fake currency in the United States. The haul totaled $30 million dollars in Federal Reserve notes and euros and included over 1,600 printing plates.
As interesting as the Coin World article is there is no information as to the bigger question. How long has this worldwide operation been in operation and how much fake paper money was released into circulation before they were caught by authorities?
Christmas and New Year Schedules – GoldDealer.com will be closed Fri (Dec 23rd) and Mon (Dec 26th) for Christmas. And a reminder that delivery times can slow by as much as a week during the season. For the New Year we will be closed Friday (Dec 30th) and Monday (Jan 2nd).
Have a blessed Christmas. A wonderful Hanukkah and a great New Year!
The GoldDealer.com Unscientific Activity Scale is a “7” for Tuesday.
The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 4) (last Thursday – 7) (last Friday – 5) (Monday – 5).
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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