Commentary for Tuesday, October 23, 2018 (www.golddealer.com)

Gold Market Newsletter with Richard Schwary

By Richard Schwary of California Numismatic Investments Inc ……

Gold closed up $12.20 at $1233.40. Gold’s close today will get more attention than it deserves. But these higher prices are supported by real safe haven buying in view of a world dynamic which is beginning to nag even the bears.

Problems abound for the bulls to embrace – the Saudi issue, Italy, wobbly world stocks, Brexit problems, a shaky DOW, the possibility that the Republican sweep will be replaced with a lame-duck session, follow through higher momentum in the metals after yesterday’s sell-off.

And all of this upbeat news in the wake of a generally stronger dollar – the Dollar Index this past 5 days has moved from 95.00 through 96.00 and holding – underline holding.

So what gives? General nervousness has translated into safe haven buying. But is this new bullish “happiness” warranted? I would say yes if the DOW remains troubling, but that is a qualified answer. There really is no reason for this sudden shyness in what could be called the continuing Trump business Wall Street success. Yes interest rates are a concern but the FOMC does not have to “raise” again in December and even if they do the borrowing rate is still cheap an supportive of business. Yes the dollar is stronger than Trump would like but this could simply be another “transitory” round – up today down tomorrow business as usual.

And gold is moving for sure – Reuters “Now we have risen above the 100-day moving average (around $1,224), which is key, so maybe we can see it rise to $1,250, which could be the next target,” said Commerzbank analyst Carsten Fritsch.”

But I think seasoned traders will remain cautious – the yearly pricing chart will show a lot of open space between $1250.00 and $1300.00 and another technical problem between $1300.00 and $1350.00. So for now let’s enjoy higher prices hoping for further confirmation – like higher inflation numbers or a wavering FOMC in light of the President’s recent comments. Gold is not out of the “interest rate” woods yet but it certainly is out of the woodshed. People are poking around again wondering if its “safe haven” appeal is here to stay.

This from Zaner (Chicago) – “The gold market this morning has broken out to the upside in an impressive fashion and has reached the highest level since July 26th off a sudden revival of safe haven/flight to quality buying interest. The silver market is following gold but is clearly showing less vibrancy. With the US dollar weaker and not being seen as a safe harbor, the metals markets see a conclusively bullish outside market environment. The fact that the latest Chinese stimulus plan has failed miserably to support Chinese equities and economic sentiment throughout Asia, is very important. In fact the trade seems to have seen the Chinese effort as a sign they are concerned about their economy and that has rekindled the idea that stocks have shifted into a “bear market”. Seeing stocks touted to be back in a bear market should give the current gold rally some legs. With the most recent COT positioning report in gold showing a net spec and fund long that was less than 10% of the record spec and fund long, should leave gold with plenty of speculative buying fuel. In other words if the fundamental track continues to contribute anxiety to the news cycle, buyers are likely to pile into gold. It is also possible that the gold market is drafting support from news that Trump is unsatisfied with the Saudi explanation of the death of a dissident journalist. A minor negative for gold from yesterday was news that RandGold Resources LTD expects its Congo mine to beat their 2018 production target, but that news was offset by reports that several sovereign central banks raised their gold holdings in September according to the IMF. In conclusion, noted weakness in equities and deteriorating economic sentiment has become significant enough to shift gold and silver away from physical commodities and into safe haven instruments.

We are now extremely amazed in the action in palladium as it has extended sharply higher in the face of what appears to be an economic meltdown in Asia which in turn would seem to hit right at the heart of Chinese palladium demand prospects. However so far total palladium derivative holdings have not shown a reversal from a downtrend but some might suggest that small investor interest in the PGM markets would be a signal of the beginning of the end of the uptrend as that would mean bullish sentiment has reached an extreme. Obviously the current rally in palladium is about demand as Anglo American PLC overnight pegged their 2018 “platinum production” to be revised upward. In fact Anglo American PLC projected their combined platinum and palladium production in the third quarter to have increased by 4% and 1% respectively. In the end money apparently sees the palladium market as the ultimate safe haven instrument and that is clearly justified if one takes a long view on its supply and demand condition. In fact the palladium world supply and demand balance is likely to post its eighth deficit out of the last nine years this year and therefore it is possible that long-term players, managed money and others are betting on further new all-time highs ahead. As we indicated in coverage yesterday, the net spec and fund long positioning in platinum was only 12,300 contracts as of last Tuesday and that should leave the market with further speculative buying fuel.”

Silver closed up $0.21 at $14.73. 

Platinum closed up $13.40 at $832.40 and palladium closed up $15.10 at $1140.80.  

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