Commentary for Friday, November 9, 2018 (www.golddealer.com)

Gold Market Newsletter with Richard Schwary

By Richard Schwary of California Numismatic Investments Inc ……
 

Gold closed down $16.50 at $1,206.40. Looking for something consistent about the gold trade these days? The public in general and traders in particular change their minds quickly. Now you might say this is obvious and you would be right but this habit does the physical trade a disservice. The current environment is a good example – it does not take a great deal of experience to conclude that recent back and forth action was setting up a gold price break either higher or lower.

With the interest rate fear and safe-haven demand turning mild it was a pretty safe bet that the channel between $1,220.00 and $1,230.00 would continue to drift lower especially with geopolitical rhetoric moving to the back burner and the Democratic win calming Wall Street.

At the same time any buzz in the physical market which developed as prices moved from $1,190.00 through $1,230.00 disappeared like Keyer Soze. Talk of Trump/China trade wars evaporated, EU debt problems and Italian unrest went “poof”. And who cares about crude oil – the Middle East and troubles with Iran?

All anyone can talk about is that gold is breaking down in price – forget the cheaper is better scenario. Today’s close ($1,206.40) is defensive but there is also a long weekend ahead of us and the US markets will be closed Monday. And while this latest dip is not encouraging there is plenty of support between $1,180.00 and $1,200.00 which goes back six months.

I think this market should provide angst around the question of whether gold put in a real bottom at $1,180.00 in August. In other words have we been looking at a particularly long dead cat bounce and do traders actually expect the earlier blow off from $1,320.00 to continue?

This could be possible but that remains to be seen – especially with all the reasons for this last push above $1,200.00 still in place. So I would not get too excited over this latest break to the downside – in my opinion gold is still trying to get its footing. And I suspect we are not too far away from what will be seen as a “value” region in both gold and silver over the next decade.

Just a reminder we will be closed this Monday for Veterans Day.

This from Zaner (Chicago) – “While we think the gold and silver markets generally remain within an intermediate uptrend, moderate corrective setbacks against that trend are still likely, as physical and investment demand are not strong enough to throw prices aggressively higher. However, the gold market should derive longer-term support from yet another decline in South African gold production in September. Production declined by 19%, coming on the heels of a 15.9% decline in August. Unfortunately for the bull camp, the decline in South African gold production has been a given in the marketplace for years, and the idea that many mines are “played out” is not a new theme. On the other hand, total South African mining output has also continued to decline, and that suggests something beyond sagging reserves is serving to reduce supply. Overnight Gold Fields reported that they had lowered their 2018 output forecasts to 2 million ounces from previous estimates of 2.08-2.10 million due to slowdown strike action that began earlier this month. Since we think the dollar will roll over down (despite the Fed), we would be surprised to see December gold fall back toward the November low of $1,216.10. The silver market might show more weakness than gold, and long silver traders probably have to risk those positions to at least $14.23. Countervailing the continuation of the upward march in prices is the fact that gold and silver derivative holdings generally declined this week. Shares in the world’s largest gold ETF held steady yesterday.

PGM prices eased overnight as the dollar gained, but unlike South Africa’s gold production figures for September, PGM mining in South Africa jumped by 7.2%, but that only tempers the bullish environment slightly. Palladium and platinum charts remain definitively positive, with the platinum market showing the most uniform strength thus far in November. With the downshift in global economic sentiment and in expectations for commodity demand not undermining PGM prices over the last three months, a slight improvement in global economic sentiment should allow for an extension to the upside ahead. While we have seen no evidence of the market falling off of the US/Chinese trade dispute, the mere hint of talks or a deal between those nations could vault January platinum prices quickly above the $900 level. Initial pivot point support in January platinum is now seen at $866, but uptrend channel support isn’t seen until all the way down at $844.25. Initial pivot point support in December palladium is seen at $1,087, and a return to the contract highs looks to be ahead. Despite the large gains in palladium since the August lows, open interest has only expanded by 2,500 contracts (to 24,271), and it remains well below the 2018 high of 39,911 contracts, which suggests the market still has more buying fuel.

While we can’t argue against a continuation of the upward track in prices, periodic corrective slides of $25 in gold and $0.45 in silver should not be ruled out. The rally from the last COT report likely puffed up the spec and fund long in gold to above 50,000 contracts, but we would not expect the market to be out of speculative buying fuel until the net long reaches 72,000. But without a major headline development, December gold might see modest corrective action and could fall back toward the November low of $1,216.”

Silver closed down $0.29 at $14.10. Expect this area to get hot very fast at these lower numbers.  

Platinum closed down $14.30 at $852.40 and palladium closed down $18.60 at $1114.10. Trades of palladium bullion for platinum bullion continue and surprisingly there are still US Platinum 1 oz Eagles to be had without paying nosebleed numbers.

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