Gold Markets Commentary for Friday, October 11, 2018 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc ……
Gold Markets closed up a surprising $34.20 today at $1223.50. It quickly pushed higher on the open reacting to a number of factors. First, the big drop in the DOW (800 points) yesterday and today’s 500 point loss woke everyone up – fear is a big motivating factor within the established gold bullion community.
The Trump comment about why the FOMC needs to lighten up about promised interest rate hikes also helped in that it sets the stage for perhaps a little less hawkish Federal Reserve – but that remains to be seen and the reason why I would not get too carried away with today’s aggressive price action.
Trump put the current FOMC Chair Jerome Powell in place and knew that he was an independent voice, not particularly challenged by the Oval Office.
There are other factors as well – the notion that inflation is still tepid so there is plenty of room for the FOMC to navigate – with current rates they even have room to “lower” if continued weakness in the DOW suggests a recession. This suggests “stability” not “panic”.
My bet is that the DOW settles down in the next few days and recovers somewhat but who knows – this uncertainty will continue to support gold.
I doubt that these past two days of firm gold pricing is the beginning of something “big” – it looks like a combination of safe haven buying and a knee jerk reaction to a trading mentality that was geared up for further “short” profits based on higher interest rates.
And all of this has been helped by a somewhat weaker dollar – the Dollar Index these past 5 trading days has moved from 96.00 through 95.00.
Today’s close ($1223.50) is however impressive in that gold is now trading above the 60 day pricing model ($1210.00). But consider that there is a pricing “mountain” to climb here if you believe this is beginning of something “big” for the precious metals community.
This can be seen in the 6 month pricing chart – gold broke down from $1350.00 and it was pretty much a dive – bottoming around $1175.00 – bouncing higher and finally holding a fairly tight trough on either side of $1200.00.
This recent “bottom” was as late as last week being questioned. I think the paper trade was just waiting for the next FOMC rate hike to once again pile on short paper.
I have been saying “premiums” are firm to rising – the Krugerrand is a good example. I don’t think this new demand is US based – the Europeans are buying – not a stampede but something is going on most likely because of stock instability both here and overseas.
Still even with this small amount of fireworks gold is technically still in a bearish mode. There are however two big pluses relating to this recent “pop” in its price. First, it will remind everyone that gold bullion is still very much in the financial game and second it should help refocus everyone on the notion that this “dance” about interest rate “normalization” is dangerous. It could turn ugly – but for now let’s settle for the notion that gold has regained its footing.
This from Zaner (Chicago) – “While the dollar is lower this morning and it extended its downside breakout action to the lowest level since October 1st that does not appear to be the primary catalyst behind the impressive jump in gold prices this morning. Obviously gold is outdistancing silver as silver has generally favored its physical commodity market standing while gold remains dollar/safe haven orientated. While it took a massive washout in equities and a moderate amount of economic anxiety, the safe haven lift in gold is justified given that the Dow Jones industrial average into the low this morning has posted a 24 hour decline of 1,300 points. At least for the time being the gold market has tossed aside the fear of slackening physical demand and in a somewhat perverse way has embraced the hope for improved investment demand. In other words for the better part of 2018 gold saw negative economic action as a threat to consumption but that focus has shifted in the short run. On the other hand we get the feeling that the bull camp will need a very high level of ongoing anxiety from declines in equity prices to facilitate a consistent flow of speculative buying into gold. The bull camp should be relieved that the Indian government has excluded gold from a second list of items facing tariffs as they continue to battle a current account problem. While the trade hasn’t paid that much attention lately to raw physical monthly demand figures, the fact that Indian September gold imports were reported to have dropped by 14% (due to currency influences) from Gold Fields Mineral Services (GFMS), we suspect that issue won’t be taken in hand but that should capable of thickening overhead resistance in December gold between $1,212 and $1,215. It should be noted that GFMS also indicated that some improvement in investment demand for gold was being seen because of weaker equity market action prior to the current event, and that view is given added credence by the unfolding string of major loses in US equity markets this week.
In a very impressive fashion the palladium market this morning is trading higher against a backdrop of noted weakness in a long list of physical commodities. Clearly palladium is seen as a safe haven instrument and given its recent strength and the ability to continue higher this week with a shift in market sentiment its bullish capacity is enhanced. In fact while the palladium market showed a volatile two-sided trade yesterday it did manage a higher close in a fashion that suggests it was poised to benefit from the shift in conditions and that might result in a quick test of this week’s high up at $1,077.80. Perhaps funds seeking inflation protection from a small supply/growing demand commodity set the trend in motion in August and now funds and investors are set to extend the upward push with reallocation funds. While the platinum market is avoiding the brunt of the physical commodity market knockdown it did range down sharply initially overnight as if it was poised to succumb to the equity market debacle. In fact the equity market action has become a debacle and psychology toward commodities will probably remain bearish ahead and that should thicken overhead resistance in platinum up at the $831.40 level. At this point it would take massive gains in palladium just to drag platinum higher against outside market forces.”
Silver closed up $0.28 at $14.54.
Platinum closed up $18.70 at $842.80 and palladium closed up $8.00 at $1093.20.
This is our Thursday Chicago Mercantile Exchange report covering the last 5 trading days – so we are looking at the trading volume numbers for the “October” Gold contract: Thursday 10/4 (374043) – Friday 10/5 (375977) – Monday 10/8 (376326) – Tuesday 10/9 (369035) – Wednesday 10/10 (369035) and the trading volume numbers for the “October” Silver contract: Thursday 10/4 (167851) – Friday 10/5 (166612) – Monday 10/8 (165427) – Tuesday 10/9 (163663) – Wednesday 10/10 (163663).
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