Gold Markets Commentary for Friday, January 25, 2018 (www.golddealer.com)

Gold Market Newsletter with Richard Schwary

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

Gold Markets closed up $6.50 today at $1,362.40 which makes for a new yearly high. After yesterday’s large pop to the upside ($20.20) the gain today is a nice follow through – momentum always counts in this market.

But from talking with other dealers I find the gold trade divided – some feel gold will continue stronger through 2018 and frankly some think gold is just moving to the high end of a price channel which has been in place for five years.

Professional trader Jim Wyckoff (Kitco) – “Price actions in many gold markets to start 2018 strongly suggest the raw commodity sector is now starting a cyclical upturn. It appears much better times are ahead for raw commodity market bulls, including the precious metals.”

gold marketsOf course Mnuchin’s recent dollar comments helped bring the pot to a boil – they pushed the Dollar Index down more than a point (88.65) enforcing the already large weakness in the index which has been in place for a month.

So with the dollar at three year lows and gold at a two year high there is no arguing with relative direction. Gold has been on a tear – up now $80 this past month. So the technical picture remains bullish for now as gold moves above recent highs seen in September ($1,340).

Whether it can keep climbing remains to be seen but if the dollar remains weak gold will push above the important $1,400 level – something we have not seen since the summer of 2013.

Still considering the impressive run in prices there does not seem to be much buzz across our counter. People are interested in talking about the DOW at all-time highs or the swing in bitcoin pricing and either of these formats offers an unusual adrenaline rush not seen in gold for the present. I’m not saying gold is poky – there is certainly world-wide interest, but not an American focus.

This can be verified by lower US Mint production runs and continued cheap premiums on the popular bullion coins. This premium drop however is temporary in my view and may be the result of a large unwinding of a paper versus physical spread or so the rumor claims.

We are seeing some bigger players get back into the game but this is still “early days” if you are wondering about a big gold revival. Remember that pesky FOMC promise of rising interest rates – perhaps as early as March 20 and 21.

For now however we are seeing more consumer selling than buying. This is normal for a market which has generally moved sideways for years.

For gold to break above $1400.00 the dollar will have to remain weak.

This from Zaner (Chicago) – “Treasury Secretary Mnuchin’s clarification of his statement on the dollar helped lift the dollar off its lows overnight and pull gold and silver off their highs, but one could also argue that these markets had reached extreme levels and are vulnerable to some sort correction or at least leveling. Mnuchin stated that the US Administration is not concerned about the level of the dollar in the short term, which is a function of the free market, but over the long term it believes a strong dollar is best. Still, there is talk that the Administration may impose tariffs on aluminum in addition to the recently announced tariffs on solar panels and washing machines, and this may have traders nervous about a more aggressive trade policy and spark more safe-haven buying in the metals. Comments from Commerce Secretary Ross defended the more aggressive US trade policy by pointing out that the Chinese have been “superb” at free trade rhetoric but “even more superb” at highly protectionist behavior. ETF interest in gold remains strong, with another 27,246 troy ounces of gold being added to their holdings yesterday, the seventh straight day of increases. If the Administration continues to talk and act tough on trade, we would expect gold and silver to continue to make gains. Silver made a major technical breakthrough yesterday that puts it in a much more bullish posture, similar to gold. On a long term basis silver is undervalued relative to gold.

PLATINUM – The PGM metals have fallen back into divergent price action again, as platinum has regained the upper hand on palladium. The PGM sector was a beneficiary of the dollar’s downdraft yesterday, as both metals ended up with decent gains. However, the weaker dollar encouraged some traders to re-enter palladium/platinum spread positions. With today’s new high for the move, April platinum also climbed above its early September high. Tensions in South African platinum mining regions continue to shadow the market, as the potential for fresh supply bottlenecks has been providing underlying support to the market.

TODAY’S MARKET IDEAS: The gold market may be getting overbought, but there is no sign of a top. However, after the huge rally this week, the market may need to at least consolidate its gains. Look for resistance in February gold at the September high at $1,357.90 and then the July 2016 high at $1,377.50 basis the nearby chart. Uptrend channel support comes in at $1,341. March silver has moved outside of the consolidation zone it has held since September 18th, leaving the next target area the gap from $17.755 to $17.803. Near-term support for April platinum is at $1,006.00, while near-term support for March palladium is at $1,089.00.”

I will be in and out of the office for the next 5 weeks – so publishing the newsletter will likely be 3 days instead of the usual 5 days.

Silver closed up $0.12 at $17.55.

Platinum closed up $16.00 at $1,029.30 and palladium closed down $8.95 at $1,100.05.

This is our usual Thursday Chicago Mercantile Exchange report covering the last 5 trading days – so we are looking at the trading volume numbers for the “January” Gold contract: Thursday 1/18 (310089) – Friday 1/19 (290547) – Monday 1/22 (226529)- Tuesday 1/23 (201744) – Wednesday 1/24 (157533) and the trading volume numbers for the “January” Silver contract: Thursday 1/18 (137377) – Friday 1/19 (138255) – Monday 1/22 (139819)- Tuesday 1/23 (138719) – Wednesday 1/24 (142036).

This is our usual ETF information – All Gold Exchange Traded Funds: Total as of (1/16/18) was 68,284,355.  That number this week (1/23/18) was 69,062,058 ounces so over the last week we gained 777,703 ounces of gold.

The all-time record high for all gold ETF’s was 85,112,855 ounces in 2013. The record high for Gold ETF’s in 2017 was 69,062,058 and the record low for 2017 was 62,348,156.

All Silver Exchange Traded Funds: Total as of (1/16/18) was 645,876,913.  That number this week (1/23/18) was 639,477,122 ounces so over the last week we dropped 6,399,791 ounces of silver.

All Platinum Exchange Traded Funds: Total as of (1/16/18) was 2,433,677.  That number this week (1/23/18) was 2,457,986 ounces so over the last week we gained 24,309 ounces of platinum.

All Palladium Exchange Traded Funds: Total as of (1/16/18) was 1,312,175.  That number this week (1/23/18) was 1,273,181 ounces so over the last week we dropped 38,994 ounces of palladium.

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 – 5) (Tuesday – 5) (Wednesday – 5). 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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