Commentary for Monday, December 28, 2015 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc….
Gold closed down $5.50 at $1070.50 today on the Comex in holiday trading. Gold was up $6.60 this past Thursday (12/24) so you can see we are drifting.
Everyone will blame oil for everything that went wonky in 2015. So this is a good place to look for possibilities in 2016. This past year crude has moved dramatically lower. It seemed relatively stable around $60.00 and then broke lower during the summer months and really has never recovered – first struggling to hold the $45.00 range and then moving even lower into the $30.00 range – today we are trading around $36.78.
The big shots in this industry fear that prices might stay cheap for a year or longer – cheap oil does nothing to help the price of gold and weighs on the price of stocks. But it’s hard to believe that stocks in general will break even this year considering how cheap interest rates have been.
Saudi Arabia announced an $87 billion budget deficit and they depend on oil revenue for funding of their budgets. This seems to emphasize that the Saudis will be pumping full blast even with lower prices to create revenue. Iran said they are ready to pump an additional 500,000 barrels per day once sanctions are removed.
There has been some talk that money may migrate from stocks into gold – this is a dark horse bet though it may have some legs for those looking to hedge earlier stock market profits but I wouldn’t hold my breath. The problem with an independent gold bullion bet at this point is that commodities in general have not had a good year and so sentiment is negative.
The Dollar Index remains on the high side but choppy because of the holiday season. Previous close was 97.88 – trading range being 97.81 through 98.03 – we are currently around 97.92 so very quiet – typical of the holiday season.
So gold today continues to settle in quiet holiday trading – I think there is little action either here or in Europe and this will be the story until after the New Year. And there is not much incentive in the short trade considering we are close to celebrating 2016 – most tax selling is over and what’s left will opt to close positions and wait to see what the New Year might bring.
Silver closed down $0.49 at $13.87. We keep dipping below the $14.00 mark but this has not created the usual rush of bargain hunters – still the business has been steady with 1 ounce silver leading the way at the present.
Platinum closed down $4.00 at $880.00 and palladium was off $7.00 at $552.00. Platinum is now trading for $190.00 less than gold. Platinum bullion action is solid – made up of outright buying and larger deals of trading gold bullion for platinum bullion.
Please note our New Year holiday schedule – GoldDealer.com will be closed this December 31 (Thursday) and January 1 (Friday) for the New Year and all the staff wish you and your family the best of health and good spirit for 2016!
This from Jan Harvey (Reuters) – Gold edges lower, heads for sixth straight quarterly loss – Gold edged lower on Monday in line with a retreat in oil prices, giving up some of last week’s gains, but moves were muted in thin liquidity in a holiday-shortened week.
Gold rose nearly 1 percent during Christmas week, but remains on track to fall for a sixth successive quarter, its longest run of quarterly losses since the mid-1970s. It is down 9 percent this year.
Spot gold was down 0.5 percent at $1,070.81 an ounce at 1440 GMT, while U.S. gold futures for February delivery were down $5.40 an ounce at $1,070.50.
Prices hit their lowest since early 2010 this month in anticipation of the first U.S. interest rate rise in nearly a decade. Though gold recovered lost ground in the wake of the announcement as dealers holding short positions covered, it remains under pressure, awaiting more clues on monetary policy.
“If you look at the last year’s decline, that was due almost exclusively to a much stronger dollar, and that was due to the Fed being the only central body to raise rates with any conviction,” ING analyst Hamza Khan said.
“The question of whether gold is going to recover in 2016 or not will depend not on whether the Fed hikes rates or not, because that seems to be a given, but whether it is the only one to hike rates.”
Oil prices fell more than 2 percent after the long Christmas weekend, with international crude and product markets still well supplied. Gold is positively correlated to oil as the metal is seen as a hedge against petroleum-led inflation.
Weakness in oil pressured shares in Europe and Asia in thin holiday trade in a number of financial centers. The dollar was little changed, with the London currency market among those still closed.
“Gold is drifting lower after failing to extend the pre-Christmas rally,” Saxo Bank’s head of commodity research Ole Hansen said. “Although the near-term direction of the dollar is pointing higher, the lack of dollar strength this December has supported gold primarily through the covering of short positions.”
Interest in gold was muted in the major bullion-buying centers in Asia overnight, dealers said. Data on Monday showed China’s net gold imports from main conduit Hong Kong rose in November from a month before as demand for the metal increased with a drop in prices to multi-year lows.
The walk-in cash business was busy today and like I have been saying the usual platinum bullion products are very popular. Most are in stock but we are sold out of platinum Maple Leafs. The phones were steady but typical for the holiday season.
The GoldDealer.com Unscientific Activity Scale is a “5” for Monday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Tuesday – 4) (last Wednesday – 5) (Closed Thursday and Friday). 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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