Gold Bullion Markets Commentary for Wednesday, November 23, 2016 (www.golddealer.com)

Gold Market Newsletter with Richard Schwary

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

Gold closed down $21.90 at $1,189.30. So we have breached the important support at $1,200.00 – not exactly unexpected as we have been saying but time will be needed to see just how this will shake out relative to the new Trump presidency.

US durable goods orders were up 4.8% in October versus an expected 1.5% increase. This economic surprise pushed the dollar higher and gold bullion markets lower – but the dollar’s rise has been exceptional considering the DOW is setting new records at the same time. And all of this magic is happening on the expectation of a Trump business revival. The Dollar Index was steady in early trading at 101.00 and pushed to almost 102.00 on the durable goods release.

Still I’m suspicious when there is either a big “up” or “down” day before a holiday. Tomorrow is Thanksgiving and US traders are worried more about drum sticks than pick up sticks – so this $1,200.00 breakdown might turn into a solid buying opportunity which I pointed out yesterday. Deterioration in the technical picture continues but I would not be surprised to see bargain hunting Friday and Monday.

Gold Bullion MarketsThere is also nothing like the “big seller rumor” to manipulate a thin market. Remember the 3.2 million ounce gold seller in early October during golden week holiday? Or the 8.5 million ounce seller on Veteran’s Day and another 5 million ounces today – right before Thanksgiving? My point being is that why would a legitimate seller choose holiday thin traffic to dump such large numbers?

We will be closed Friday for the Thanksgiving holiday but the commodity markets will be open and I suspect trading thin so it’s difficult to say what might happen, banks and post office will also be open. I would also be suspicious about new DOW highs on the promise of business reform – we really don’t have a clue as to how this will all work out in the longer term.

There are however a lot of moving parts and thinking “out of the box” is fun. If Trump does cut corporate taxes by half it would basically push corporation valuation much higher and they can’t just sit on the money – they too will spend, spend and spend – which equals inflation – sooner or later. Now consider that Trump and the Congress may also follow through on higher military and infrastructure spending – more inflation and wage pressure.

I don’t buy the traditional argument that the money to pay for all this will come from “efficiency of scale” or “improved business revenues”. It will be created through a continued loose monetary policy – and that creates more inflation pressure. The bill for the Reagan revolution was large but it might look like peanuts if Trump and Republicans are serious about converting election “tough talk” into reality.

This discussion touches on a few reasons I believe no matter who is in charge – gold and silver have a place in sound investment strategy. They keep everyone honest just in case all this post-election theory ends badly. For the next several years your most important idiom might be “the devil is in the details”.

Silver closed down $0.24 at $16.39.

Platinum closed down $11.90 at $931.10 and palladium closed down $6.85 at $737.40.

This from Eric Onstad (Reuters) – Gold slides to nine-month low as dollar rallies on U.S. data – Nov 23 Gold slid to a nine-month low on Wednesday as a buoyant dollar extended its rally on the back of strong U.S. data that further cemented a case for increasing interest rates next month.

U.S. durable goods orders rebounded in October and jobless claims, though off a 43-year low, remained below a level consistent with a tightening labour market.

The data sent the dollar index to a fresh 13-1/2 year high. “The dollar rally has been taken to another level on the back of the U.S. durable goods data, which was really stunning,” said Naeem Aslam, chief market analyst at Think Markets UK.

Gold has shed more than 10 percent from a peak hit in the aftermath of the U.S. election two weeks ago.

“It has been a pretty dreadful time for gold. Everything that’s good for growth has been negative for gold,” said Robin Bhar, head of metals research at Societe Generale in London. The metal has been hit by expectations that the policies of U.S. president-elect Donald Trump will boost economic growth as well as strong U.S. data supporting the case for a rate hike.

Gold is highly sensitive to rising interest rates, which lift the opportunity cost of holding non-yielding assets such as bullion while boosting the dollar, in which it is priced.

Traders are pricing in a 100 percent chance of a December rate increase, according to the CME Group’s FedWatch Tool. The U.S. Federal Reserve next meets Dec. 13-14.

Uncertainty surrounding Italy’s constitutional referendum on Dec. 4 and French and German elections next year, however, could support gold through safe-haven buying, Bhar said.

“Seasonally, as we move towards Christmas, New Year and Chinese New Year, that should see some physical support.”  While Trump’s victory has spurred safe-haven buying of physical gold in Europe, traditional bullion holders in the United States are standing pat.

This from Allen Sykora (Kitco) – Nomura Envisions Tighter Jobs Market, More Inflation From ‘Trump Effect’ – Nomura looks for the labor market to tighten further and inflation to pick up from the “Trump effect” of the incoming U.S. administration, but then anticipates growth will slow as the impact from his trade and immigration policies kick in. “At this point, great uncertainty clouds the outlook for policy. Nonetheless, we think it is worth offering a preliminary assessment of how the election is likely to affect the economy and the course of monetary policy,” Nomura says. Nomura says that the economy is already near full employment and the Federal Reserve is expected to tighten monetary policy. “We expect the Republican-led Congress and the Trump administration to support a large fiscal stimulus,” Nomura says. This is likely to include a “sizable tax package” for businesses and individuals, plus slightly higher spending on defense and infrastructure. “By contrast, two sets of less conventional policies — trade reform and stricter immigration policy — being touted by President-elect Trump have the potential to restrict growth,” Nomura says. The firm lists this outlook: “Fiscal policy wins initially, boosting growth in late in 2017 and into 2018, but then the negative effects of trade and immigration start to take over and reduce growth in late 2018 and beyond. Labor markets continue to become tighter, and we’ve increased our forecast for job growth. We forecast the unemployment rate to fall to 4.5% by the end of 2018. Inflation increases throughout the forecast. With steadily increasing pressure induced by fiscal policy, core inflation is higher throughout the forecast horizon than previously assumed, as is the deficit.” The Federal Reserve is likely to respond and “should be able to take its foot off the gas” of monetary accommodation “to some degree,” Nomura says. We can’t stress enough the elevated uncertainty surrounding this forecast,” Nomura adds. “It will take many months for that uncertainty to clear. To what extent is trade restricted, how large will the tax cuts be, and what will happen to immigration? Even as more concrete policy proposals are released and key members of the administration are named, we will not know until well into next year the answers to these, and other, important questions.”

This is our usual ETF informationGold Exchange Traded Funds: Total as of (11-16-16) was 68,142,039. That number this week (11-23-16) was 67,295,985 ounces so over the last week we dropped 846,054 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 2016 was 69,967,028 and the record low for 2016 was 47,568,082.

All Silver Exchange Traded Funds: Total as of (11-16-16) was 666,133,114. That number this week (11-23-16) was 657,675,077 ounces so over the last week we dropped 8,458,037 ounces of silver.

All Platinum Exchange Traded Funds: Total as of (11-16-16) was 2,367,319. That number this week (11-23-16) was 2,358,671 ounces so over the last week we dropped 8,648 ounces of platinum.

All Palladium Exchange Traded Funds: Total as of (11-16-16) was 2,045,463. That number this week (11-23-16) was 1,925,269 ounces so over the last week we dropped 120,194 ounces of palladium.

The walk-in cash trade and phones were solid today as the public once again took advantage of lower prices. The physical gold bar market is now behind the curve as manufactures are now quoting December delivery. Keep in mind that European buyers are still in the “safe-haven” category relative to our new president.

Also important to note that premiums could double on US Silver Eagles Monster boxes between now and the end of the year – this always happens as the US Mint slows production of 2016 dated coins and prepares to strike coins dated 2017.     

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

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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