Commentary for Monday, November 7, 2016 (www.golddealer.com)

Gold Market Newsletter with Richard Schwary

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

Gold price closed down $23.90 today at $1278.30 in a surprise move to the downside – giving up most of last week’s $30.00 advance.

It’s true that gold price is softer and stocks rallied because of the latest FBI comments in favor of presidential candidate Hillary Clinton but I think the relationship between the price of gold and the winner of the election is overcooked. If Trump wins the price of gold will move higher and settle lower – if Clinton scores the price of gold will move lower and settle higher. The variable between these two apparently opposing positions is time and within a few months of either event the “presidential outcome” will have created little real change in the price of gold. Still today’s close ($1,278.30) is below gold’s 50 DMA ($1,297.00) – below its 100 DMA ($1,315.00) but continues to hold its 200 DMA ($1,278.00) – so the short-term momentum gold possessed before the FBI announcement has been lost.

After Tuesday the gold price conversation will center on whether the Federal Reserve will raise interest rates in December or once again adopt a “wait and see” position. Their action or inaction will depend on the jobs, inflation and the usual parameters that the FOMC uses to decide our interest rate fate.

A more interesting question might be whether gold will retain 2016 gains after the election? In the shorter term everyone expects volatility – the last chance the FOMC will have to raise rates this year will be on December 13 and 14 – Yellen will speak and everyone will be listening.

This is only about a month after the presidential race – so my bet is that they will once again stand pat – there is this kind of grace period for any new president – so why rock the boat? Their next meeting will be in late January – look for that small rate hike at that time.

gold price vs dollar

Between now and then the price of gold will drift – momentum today is to the downside but this too will fade as election jitters move to the background. The paper players will try to take advantage of current downward momentum but this will be met with bargain hunting – the $1,200.00 / $1,250.00 corridor represents gold’s most powerful defense line.

Finally among all this chatter keep the dollar in mind – this will be the final arbiter in pricing gold. And while you are pondering the good old buck keep in mind that in 2012, 2013 and 2014 the Dollar Index was happy around 80.00 – by 2015 it was trending between 90.00 and 100.00. Today we are at 97.79 – this has been the true reason the price of gold has struggled – yet with this headwind we are still trading at the higher end of its current price range.

No one that I know of thinks the dollar will maintain this strength with most world currencies moving in the other direction – if it did this would be ruinous to Wall Street’s overseas business. Sooner or later the dollar will move back to a more traditional and lower trading range and gold will benefit. If gold is fairly valued today that would mean a 20% upward movement which would set up a test of all-time highs.

Silver closed down $0.22 at $18.12.

Platinum closed down $3.00 at $998.00 and palladium closed up $31.00 at $655.00. Platinum is trading for $280.00 less than gold but even with this discount trades of gold bullion for platinum have again slowed. Palladium saw sharply higher levels today possibly because a deal struck last week among labor unions and mine owners has been brought into question and palladium is also benefiting from evidence of strong car sales.

This from Pratima Desai (Reuters) – Gold slides as dollar and equities jump on Clinton boost – LONDON, Nov 7 Gold prices fell on Monday as the dollar and stocks rallied on news Hillary Clinton would not face criminal charges over her use of a private email server, boosting her chances of winning the U.S. presidential election.

The spot gold price was down 1.5 percent at $1,283.81 an ounce by 1450 GMT, close to an earlier session low of $1,283.12. U.S. gold futures also fell 1.5 percent to trade at $1,284.8.

“It’s risk on after the FBI said it won’t be taking the email saga any further,” said Warren Patterson, commodity strategist at ING. “Polls are showing Clinton in the lead.”

The FBI said on Sunday it stood by its earlier finding that no criminal charges were warranted against Democratic presidential candidate Clinton.

Gold gained more than two percent last week on uncertainty related partly to the FBI saying on Oct. 28 that it was looking into new emails that may be connected to Clinton.

The election is on Tuesday and the final result will be known on Wednesday.

“If Clinton wins there’s going to be a further correction in prices and gold may even go down to $1,250,” said Joshua Rotbart, managing partner at Hong Kong-based bullion services provider J. Rotbart & Co.

The latest Washington Post-ABC and final NBC-Wall Street Journal polls published on Sunday showed Clinton ahead of Republican rival Donald Trump.

“There is a general perception in the market that if Trump wins gold will go through the roof based on the uncertainty his presidency will usher in, and his protectionist stance,” said Amanda van Dyke, fund manager at Peterhouse Asset Management.

Equity markets recorded their biggest gains in weeks on Monday while the VIX index, dubbed the “fear index” of U.S. stocks, posted its biggest one-day fall in more than four months.

A higher U.S. currency makes dollar-denominated gold cheaper for holders of other currencies; a relationship used by funds and short-term traders to generate buy and sell signals. Also helping the dollar were expectations that the U.S. Federal Reserve will raise rates in December, a view reinforced by strong jobs growth in the United States.

“The rate rise in December is largely already priced in. I wouldn’t be surprised to see a knee-jerk move following a rate rise announcement but it will be brief,” said Cameron Alexander, an analyst with Thomson Reuters-owned metals consultancy GFMS.

On the technical front, support for gold was seen around the 200-day moving average of $1,278 an ounce and $1,271, the 21-day moving average.

The walk-in cash trade was active and so were the phones – there was again a surge in IRA activity so folks are thinking long term. There is no question that people who already have an interest in gold continue to buy weakness as much of this business is from repeat customers.                  

The GoldDealer.com Unscientific Activity Scale is a “6” for Monday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Tuesday – 3) (last Wednesday – 5) (last Thursday – 6) (last Friday 4).

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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