Commentary for Wednesday, September 27, 2017 (www.golddealer.com)

Gold Market Newsletter with Richard Schwary

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

Gold closed down $12.90 today at $1,284.10. I think Yellen’s speech Tuesday caught most by surprise – the markets expected more accommodation even though she has been hawkish this past month. At any rate just the hint of higher interest rates is a gold price “cooler” – even though this “sometimes” conviction is not very logical. Moving interest rates higher by the Federal Open Market Committee (FOMC) is supposed to be the first step in taming either inflation or an unruly business cycle – we have neither.

In fact according to Yellen yesterday the method used by the FOMC to measure inflation might need to be reworked. So why are they talking up higher interest rates?

Rising rates guarantee a more difficult road in paying down the massive $4 plus trillion dollar balance sheet, which should be a priority given there seems to be little inflation pressure. It is kind of a sound financial rule – pay back the money you have borrowed – if you can and especially if you are leveraged.

As far as the current price of gold is concerned price momentum has taken a lunch break. And considering the past few days of price whipsawing and today’s loss it may also skip dinner. Back and forth price action is famous for taking the bubbles out of the trading champagne. And with the euro moving lower over uncertainty and the dollar moving higher as a safe-haven asset the price of gold will do well to simply fight off this latest attack on equity.

Recent Fed Moves may have investors grabbing for gold

Gold’s shorter term woes have been reinforced since early September as the Dollar Index bottomed (91.35) – since that time prompted by a hawkish FOMC the index has trended higher extending itself yesterday to over 93.00 after Yellen’s speech.

A year ago the Dollar Index was looking at 103.00 but has since dropped more than 10% – a trend which has consistently supported the price of gold.

A trend, unfortunately that may be reversing itself as the Federal Government continues to talk up higher interest rates. The deep thinkers these days now suggest an 80% chance of an interest rate hike in December.

I’m not sure who is running this outfit – but it would be nice if they would make up their mind.

This from Zaner (Chicago) – “The dollar traded to its highest levels since August 23rd overnight and December gold traded to its lowest level since August 25th. Gold bears appear to be on the ascendant, as the trade leans more confidently towards a rate hike this year in the wake of several Fed member speeches Tuesday that appeared to discount the threat of low inflation. Significant upside gains in the US dollar yesterday and overnight (possibly settling into a trend) should add to the outside market pressure on both gold and silver prices. Potential strife developing between Poland and the EU authorities could produce additional weakness in the euro ahead, support the dollar, and put further pressure on the metals. One could argue that silver might hold up better than gold in a liquidation wave in the wake of news that Chinese August imports of silver jumped by nearly 10%. Even small specs and investors are showing signs of temporarily vacating gold, as the spot gold XAU dropped sharply in the Monday trade. Another issue that puts our short term view toward gold in bearish ground is the fact that the last COT spec and fund long positioning put the gold long at 270,000 contracts, and that is at least moderately overbought. The potential for a more long liquidation looms ahead.”

Silver closed down $0.05 at $16.75.

Platinum closed down $3.00 at $921.50 and palladium closed up $11.90 at $926.60.

The price of palladium has been moving steadily closer to the price of platinum. Platinum has been bothered by a lower percentage of diesel cars in Europe. Palladium which is off its highs has benefited from worries about a supply interruption with Russia. The first-ever palladium coin from the US Mint is flying toward us.

The US Palladium Eagle (1 oz) will look like the old mercury dime – a curious design choice. Only 15,000 coins will be minted – most expect a quick sell-out.

This is our usual ETF information – Gold Exchange Traded Funds: Total as of (9-19-17) was 67,771,495. That number this week (9-26-17) was 63,380,523 ounces so over the last week we gained 609,028 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 68,380,523 and the record low for 2017 was 62,348,156.

All Silver Exchange Traded Funds: Total as of (9-19-17) was 646,247,165. That number this week (9-26-17) was 648,069,130 ounces so over the last week we gained 1,821,965 ounces of silver.

All Platinum Exchange Traded Funds: Total as of (9-19-17) was 2,377,254. That number this week (9-26-17) was 2,379,234 ounces so over the last week we gained 1,980 ounces of platinum.

All Palladium Exchange Traded Funds: Total as of (9-19-17) was 1,567,567. That number this week (9-26-17) was 1,572,356 ounces so over the last week we gained 4,789 ounces of palladium.

The GoldDealer.com Unscientific Activity Scale is a “2” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 3) (last Friday – 3) (Monday – 4) (Tuesday – 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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