Commentary for Friday, July 1, 2016 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc ……
Gold closed up $17.40 on the Comex today at $1,335.80 with highs on the day above $1,340.00 before the settle.
Today’s move is again surprising – we are actually showing some footing above $1,300.00 without the “after” Brexit pull-back in prices I had imagined.
I still expect backing and filling in this market so don’t load up the truck yet – but gold has shown respectable gains, the close today being the highest level we have seen in 2016 and we are up 26% on the year. The shock of Brexit is behind us and results won’t be known for some time but there could be a growing feeling that central banks are losing control and there has always been a fear of “unintended consequences”.
Still this rather large “pop” to the upside especially going into a long weekend should get some attention. So let’s look at the usual suspects – the Dollar Index these past five days has been supportive of higher gold prices – trading from above 96.50 to below 95.50. This is still at the higher end of its current range but weaker in a relative sense on the short term.
The Technical Outlook
Crude oil this past week has been generally supportive of gold prices moving from $46.00 to around $49.00 a barrel – this has a settling effect on world markets and this week Europe’s paper markets have managed to trade “green” assuring some that the world may not jump out the window as the British leave the European Union.
Technically the price of gold looks solid if you look at the moving averages – compare today’s close of $1,335.80) to the 50 DMA ($1,323.00) the 100 DMA ($1,320.00) and the 200 DMA ($1,303.00). We are trading above all three which puts all the computer trading programs on alert and we have made new recent highs – another technical plus.
What gold has accomplished today has shown that underlying physical demand probably coming from outside the US has some legs because the paper players are willing to test upside resistance in the congested price range between $1,250.00 and $1,350.00 and momentum players are pushing the newly created envelope.
What still bothers me about this most recent strength is that it is attributed to continued physical demand but I have not seen it across our counter and it has not been confirmed from other larger dealers we talk to every day both here and in Europe.
Why not? I don’t have a good answer here – gold could be climbing over the proverbial Wall of Worry – this would be good and set the stage for the particularly difficult price range between $1,300.00 and $1,400.00.
For now gold still remains cheap by most standards and is seeing a revival being up $170.00 these past 12 months – but keep in mind most of this increase in value has happened over the past 30 days ($125.00) so we could be looking at a bear trap. Most traders however are becoming more positive about higher prices – this is refreshing.
In the end safe-haven demand is at least in the conversation – directly below this trading psychology is the notion that the Federal Reserve may not raise rates this year. Finally as the entire world continues quantitative easing the US fails to focus on ISIS. This threat is much more dangerous than the average American can even imagine so look for tension levels to increase through the remainder of 2016.
Silver closed up a whopping $0.93 today at $19.54.
Silver’s ability to move price higher very fast is often overlooked by everyone because it also offers extended periods when price activity is flat and watching for some signs of activity is like watching the grass grow.
Being up almost a dollar today makes for a 10% rise this week. We have known for a long time that silver production numbers are in the red meaning we are consuming more than we are digging out of the ground. But because there is plenty of silver from secondary sources it takes time for imbalances to appear in daily price numbers. And the American public is not long term minded – they want to see profits or they are on to the next idea.
But even with this week’s price performance keep this perspective – we are still plenty cheap.
Think about this price metric – silver was up 42% this year – pretty impressive. But its scalability is what makes silver bullion shine – another 42% increase would take us to $27.75 and another 42% after that would take us to $39.40 and even that number is still less than the 2011 high of $49.00. This is why silver bullion offers something explosive to those with solid patience. Also consider that we are not in an inflationary environment. Throw inflation into this formula and might imagine the sparkling results.
Platinum closed up $32.00 at $1,055.00 and palladium closed up $9.00 at $606.00.
Our Patented Employee Survey – Gold’s Direction Next Week?
Of course it’s not really patented but we do have some fun along the way. This is what the GoldDealer.com employees think: 9 believe gold will be higher next week – 3 think gold will be lower and none think it will be unchanged.
Like the employees our customers were given three choices – up – down – unchanged. We limited the survey to a random sampling of 100 transactions – unscientific but worth considering because these people took action: 61 people thought the price of gold would increase next week – 32 believe the price of gold will decrease next week and 7 think gold prices will remain the same.
Precious Metal Closes & Dollar Strength – June 27 – July 1
The walk-in cash business was again average and so were the phones. I can’t say the American public is kicking in the back-door over recent strength in gold or silver but there is steady interest in both buying and selling.
GoldDealer.com will be closed this Monday July 4th for Independence Day!
The GoldDealer.com Unscientific Activity Scale is a “5” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 6) (Tuesday – 5) (Wednesday – 6) (Thursday – 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 generally increasing – it would indicate things are busier – decreasing numbers over a longer period would indicate volume is moving lower.
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