Commentary for Thursday, February 16, 2017 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc ……
Gold closed up $8.50 at $1,241.60 today. This looks like one of those typical days when the dollar moves lower and gold moves higher. The Dollar Index closed yesterday at 101.09 and today is trading around 100.54 with traders citing political uncertainty. The usual answer to what is happening revolves around some tension created by the Trump administration which generates renewed physical interest in safe-haven buying. With the price of gold approaching a three month high and gold trading above its 50 Day Moving Average ($1,184.00) and its 100 Day Moving Average ($1,213.00) the next big test is the 200 Day Moving Average ($1,261.00). This is now within reach which makes the bulls happy as the shorter term technical picture improves.
But the story is not all rosy – even if this technical overhead resistance is breached the region between $1,250.00 and $1,350.00 for gold is formidable. Remember it was the summer of last year that gold failed to move above $1,350.00 and we have been struggling ever since.
And the bullish talk is off-set by an increasingly hawkish Janet Yellen as the FOMC gears up for its important March meeting. Whether the Fed will raise the interest rate at that time is again a question which might make your head spin. They certainly could – a small bump would not create much distraction – if they dampen down the talk of further rate hikes this year.
Recently surfaced US inflation talk might also be creating action. This is another one of those goofy questions which splits opinion nicely and makes the skies cloudy. Is the US in front or behind the inflation curve? It’s not so easy to tell and even the fed governors differ on their opinions. One thing is clear – they don’t want to get behind the inflation curve but with the fiat currency flood gates wide open in Europe what are they to do? And consider what President Trump calls a “massive tax restructuring plan” – just exactly what this means remains to be seen but it’s a pretty safe bet that it will encourage further inflation fears.
The US debt is now larger than the entire market capitalization of the S & P 500 and is about twice the value of all of the DOW stocks. And the dollar is just another of the 3,700 fiat currencies that exist or have existed in the history of mankind.
This from Reuters – The main takeaway from the ECB minutes was that there appears to be little appetite to curb their monetary stimulus while Europe gears up for high-stakes elections. This contrasts with the United States where policymakers seem set on tightening policy in the coming months and data showed U.S. inflation recording its biggest gain in nearly four years. Illustrating this divergence, the spread between U.S. and German benchmark government bond yields was close to a three-week high on Thursday at 211 bps. “The consolidation in the transatlantic spread has ended with the hawkish talks from the U.S.,” said DZ Bank strategist Daniel Lenz. “Meanwhile tapering talk in Europe has faded with the ECB stating that it is not on the agenda and political risks keeping it from rising too much.”
By the way – do you know where the term “fiat” currency comes from? Fiat is a Latin term meaning “let it be done”. In other words fiat paper money is created out of thin air through a kind of kingly or royal proclamation – no backing required, but then you knew that already.
Silver closed up $0.11 at $18.07.
Platinum closed up $5.80 at $1,015.70 and palladium closed up $7.10 at $793.30.
The walk in cash trade was quiet today and so were the phones – curious considering the upward pressure on the price of gold.
The GoldDealer.com Unscientific Activity Scale is a “3” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Friday – 4) (Monday – 4) (Tuesday – 4) (Wednesday – 3).
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 increasing – it would indicate things are busier – decreasing numbers over a longer period would indicate volume is moving lower.
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