Commentary for Thursday, November 19, 2015 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc….
Gold closed up $9.20 on the Comex today at $1078.00. The trading day was typical – opened with a negative bias and trending lower but reversed direction and settled in a relatively flat pattern between $1078.00 and $1086.00 – we closed at the lower end of this range. Considering we are at 5 ½ year lows this small move to the upside is not impressive.
Gold was helped today as the dollar trended lower – consider the weekly Dollar Index chart to better understand the trend. In the past 5 days the index has moved from 98.50 upward touching 100.00 before pulling back – we are now trading a full point lower around 99.00.
So if the Fed is going to raise rates why is the dollar weaker? Good question – the reason we are seeing short-covering in gold and higher prices is because traders already felt that a rate hike was right around the corner – in other words it was factored into the price of gold.
This is the old way of thinking that market makers are ahead of the curve and trading is efficient – meaning by the time you get the information any action is after the fact. This is just a theory of course but my point is coming – what the market further gleaned from the FOMC minutes was that further hikes in interest rates would be gradual.
This is actually big in a small way because the market understood that a ¼ or ½ point rise in rates would not rock the boat. What everyone was afraid of was that big follow-through supposedly happening in 2016. The assurance from the FOMC that rate increases in the future would be gradual moved the dollar lower and gold higher.
The other factor which helped gold move higher today was technical. Look at the 30 day chart of gold and you will see we have moved from challenging $1200.00 down to yesterday’s close of $1068.70 – that is pretty severe and suggests that a short-covering rally is logical. In other words the gold market was in oversold territory and traders took profits moving to the sidelines. A good move considering we are approaching the end of the week and the terror attacks are still fresh on everyone’s mind.
Also keep in mind that China lowered its interest rate again today and the ECB (European Central Bank) will meet in a few weeks and they have already signaled that their own brand of quantitative easing will continue.
This is our usual Thursday Chicago Mercantile Exchange report covering the last 5 trading days – so we are looking at the trading volume numbers for the “December” Gold contract: Thursday 11/12 (193,969) – Friday 11/13 (191,543) – Monday 11/16 (194,026) – Tuesday 11/17 (188,683) – Wednesday 11/18 (173,288).
We have introduced silver to our CME rundown – so we are now looking at the trading volume numbers for the “December” Silver contract: Thursday 11/12 (73,618) – Friday 11/13 (70,345) – Monday 11/16 (71,593) – Tuesday 11/17 (70,321) – Wednesday 11/18 (66,615).
Silver closed up $0.16 today at $14.24.
Platinum closed up $10.00 at $857.00 and palladium closed up $9.00 at $541.00.
The walk in cash trade was active and so were the phones – as you can see by our Activity Scale things are moving along – meaning there is plenty of buying activity at these lower prices.
The GoldDealer.com Unscientific Activity Scale is an “8” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Friday – 7) (Monday – 8) (Tuesday – 7) (Wednesday – 7). 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 generally increasing – it would indicate things are busier – decreasing numbers over a longer period would indicate volume is moving lower.
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