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Commentary for Wednesday, October, 2015 (www.golddealer.com)

Gold Market Newsletter with Richard Schwary

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

Gold closed up $14.30 on the Comex today at $1180.10. This amounts to about a 3.5 month high for gold and moves this most recent strength from “choppy to higher” into a more serious consideration from the technical point of view.

 Also of some importance is the strong after-market – you can always check the strength of the after-market Comex close on our site by comparing the close with the live price indications in the box above the close. It’s easy and gives you a good idea of trader sentiment short-term and what might happen tomorrow. In this case the after-market is almost $8.00 higher than the close which indicates solid follow-through buying.

Considering how negative this market has been toward gold ownership everyone should now at least be paying attention. This latest move is a combination of momentum buying and short-covering both of which has been encouraged by dollar strength.

A look at the Dollar Index will show that while the 5 day chart has been weaker but choppy – today’s numbers broke to the downside. Compare today’s previous close (94.76) to range (94.04 through 94.76) and then look at where we are as of this writing (94.03) and it’s easy to see the dollar is moving lower. The reason of course is that the Federal Reserve seems to have changed course relative to that pesky interest rate hike they promised.

The Fed Governors claim a hike in interest rates is the right thing to do before year’s end but the most recent economic numbers have disappointed with weak economic sales. Is it possible that Mr. and Mrs. Joe America have decided to save what money they have left? The great thing about the American public is that you never really know when they are going to throw “typical government rhetoric” overboard. And if they don’t spend – nothing happens.

This is the real problem much of Europe is facing – cheap money may not make a difference if the working poor decide they don’t need that “next fancy” item. At any rate the jury seems to be on a break relative to our own “recovery” – I’m not saying we are headed back into recession but something is not right in River City.

And this, at least hesitation coupled with the continued drag in Europe is enough for traders to question whether the FOMC will raise interest rates this year. So the dollar is trending lower and gold buffs are at least happier than they were a few months ago.

Gold’s moving averages also support a better technical picture when you compare today’s close ($1180.10) to the 50 DMA ($1129.00) – 100 DMA ($1141.00) and 200 DMA ($1177.00).

Breaking above the 200 DMA is worth noting because all the trading computers are now paying attention. But let’s not get carried away – a bit of contemplation is helpful. What do the actual physical Exchange Traded Fund numbers have to say? You will find the numbers below and while there was a gain in gold ounces the trend across all the metals is a mixed bag and we are still at the lower end of the range.

Finally this “latest move to the upside” while impressive has not created much in the way of “buzz” – the public is not exactly kicking down the front door relative to gold bullion.

Now this could change in a minute if they become “believers” but for now our current customer base, especially on large order size are those convinced that government largess must eventually lead to higher gold prices which is an old story and big “fresh” money is lacking.

This is our usual ETF Wednesday information – Gold Exchange Traded Funds: Total as of 10-07-15 was 49,553,254. That number this week (10-14-15) was 49,572,903 ounces so over the last week we gained 19,649 ounces of gold.

The all-time record high for all gold ETF’s was 85,112,855 ounces in 2013. The record high for Gold ETF’s in 2015 is 53,901,867 and the record low for 2015 is 48,751,079.

All Silver Exchange Traded Funds: Total as of 10-07-15 was 607,511,233. That number this week (10-14-15) was 605,191,288 ounces so over the last week we dropped 2,319,945 ounces of silver.

All Platinum Exchange Traded Funds: Total as of 10-07-15 was 2,593,387 ounces. That number this week (10-14-15) was 2,593,588 ounces so over the last week we gained 201 ounces of platinum.

All Palladium Exchange Traded Funds: Total as of 10-07-15 was 2,964,261 ounces. That number this week (10-14-15) was 2,926,616 ounces so over the last week we dropped 37,645 ounces of palladium.

Silver closed up $0.20 at $16.10. So it is decision time – physical silver bullion sales will slow at these higher numbers as the public decides to “wait” for some sort of retracement. Whether this is prudent is not up to me but consider that silver bullion at $16.00 or $17.00 an ounce is still cheap relative to old highs and with this improving technical picture prices might run – it’s just the nature of the silver paper trading market.

Silver’s moving averages are also encouraging – 50 DMA ($15.03) – 100 DMA ($15.29) and 200 DMA ($16.00). Today’s close has moved above its 200 DMA but just barely.

Platinum closed up $3.00 at $994.00 and palladium was higher by $16.00 at $700.00. Platinum is now trading at $186.00 less than gold so this discount is decreasing.

This from Lucia Mutikani (Reuters) – Weak U.S. retail sales, inflation data cast doubt on rate hike – “U.S. retail sales barely rose in September and producer prices recorded their biggest decline in eight years, raising further doubts about whether the Federal Reserve will raise interest rates this year.

The weak reports on Wednesday were the latest suggestion that the economy was losing momentum in the face of slowing global growth, a strong dollar and lower oil prices that are hampering capital spending in the energy sector. Job growth braked sharply in the past two months.

“The softness of September’s figures supports our view that the Fed probably isn’t going to hike interest rates until early next year,” said Paul Ashworth, chief U.S. economist at Capital Economics in Toronto.

The Commerce Department said retail sales edged up 0.1 percent last month largely as cheaper gasoline weighed on service station receipts. Giving the report a weak tone, sales in August were revised down to show them unchanged instead of rising 0.2 percent.

Retail sales excluding automobiles, gasoline, building materials and food services slipped 0.1 percent last month after a downwardly revised 0.2 percent gain in August.

These so-called core retail sales correspond most closely with the consumer spending component of gross domestic product.

September’s weak number and the downward revision to August’s core retail sales could see economists trimming their third-quarter GDP estimates, which were slashed last week after the trade deficit widened sharply in August. Third-quarter growth estimates are currently running below a 2 percent annual rate.

The economy expanded at a 3.9 percent rate in the second quarter. Core retail sales previously were reported to have advanced 0.4 percent in August.

“It suggests that consumers are beginning to tighten their purse strings,” said Millan Mulraine, deputy chief economist at TD Securities in New York. “This will be a particular concern for the Fed as this segment of the economy remains the key source of support for the economic recovery.”

Discretionary spending, however, appears to be fairly healthy, with consumers spending more on hobbies, clothing and eating out. That points to underlying strength in domestic demand, which should provide some cushion against softening global growth.

U.S. stocks were trading slightly higher and prices for U.S. government debt rose. The dollar fell against a basket of currencies.

Weak Inflation – In a separate report, the Labor Department said on Wednesday its producer price index fell 0.5 percent in September, the largest drop since January, after being unchanged in August.

In the 12 months through September, the PPI fell 1.1 percent after declining 0.8 percent in August. It was the eighth straight 12-month decrease in the index.

Most economists expect the Fed will raise its benchmark overnight interest rate in December, but financial markets are only pricing in an increase early next year.

The weak inflation environment is one of the obstacles confronting policymakers who are contemplating raising rates for the first time in nearly a decade. The U.S. central bank has kept its short-term interest rate near zero since late 2008.

Economic growth has softened in recent months, mainly because of weak exports, a persistent decline in energy sector investment and a so-called inventory correction, which have hurt manufacturing activity.

Another report from the Commerce Department showed business inventories were unchanged in August for a second straight month. Inventories increased by more than $100 billion in each of the last two quarters, a record back-to-back rise that was seen as unsustainable.

Retail sales in September were held back by a 3.2 percent fall in receipts at service stations, the largest drop since January, after declining 2.0 percent in August. Excluding gasoline, retail sales increased 0.4 percent last month.

Sales at auto dealerships increased 1.7 percent after rising 0.4 percent in August. There were increases in sales at clothing and furniture stores. Consumers also boosted spending at sporting goods and hobby stores as well as at restaurants and bars.

But receipts at building materials and garden equipment stores fell. Electronics and appliance stores failed to get a boost from Apple’s (AAPL.O) new iPhone. Online sales also fell last month.”

The walk in cash trade today was again on the slow side but the phones seem to be picking up – the Activity Trend is trending lower.       

 The GoldDealer.com Unscientific Activity Scale is a “4” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 6) (last Friday – 6) (Monday – Closed) (Tuesday – 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 generally increasing – it would indicate things are busier – decreasing numbers over a longer period would indicate volume is moving lower.

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