Commentary for Thursday, April 29, 2016 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc ……
Gold closed up $15.30 on the Comex today $1265.50 – a not unexpected rise after yesterday’s inaction by the FOMC but there are a few more factors to consider.
Gold finished the day on an upbeat note – the Bank of Japan surprises everyone and stands pat – this creates concern so world paper markets swoon – the Nikkei was down 3%. The dollar moved lower because the Federal Reserve does not intend to raise interest rates for now.
A look at the Dollar Index helps – we closed yesterday at 94.39 and today traded between 93.69 and 94.58 – we are currently around 93.72 – so decidedly weaker. This helped push gold higher.
As far as the gold paper action is concerned this market was rather flat on the open moving on both sides of $1256.00 – this pattern was held for about 3 hours so gold’s push to the upside was not entirely an event created in the aftermarket yesterday.
If you want an outside guess the fall-out from “no-action” by the Bank of Japan may have rattled the markets more than I would have guessed.
Also a reminder that this close ($1265.50) places us well above gold’s moving averages – 50 DMA ($1240.00) the 100 DMA ($1246.00) and the 200 DMA ($1240.00). This of course makes computer trading folks happy because that “green” trend light is on and this creates expectation – perhaps (finally) we will see that upside breakout the bulls have anticipated.
To the more cautious however this pricing pattern remains a tempest in a tea pot – granted gold is trading at the higher end of its current range and it could break higher but I think the term “range bound” is more correct.
Gold has traded between $1215.00 and $1270.00 for the past 60 days regardless of what the Federal Open Market Committee (FOMC) or the Bank of Japan does – it’s clearly still “waiting” within this range.
During that same period there have been a number attempts to break above $1270.00 and each has failed. So sit back and relax – until the magic $1270.00 number is the new “bottom” all of this remains interesting but is still background noise.
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 “June” Gold contract: Thursday 4/21 (383,471) – Friday 4/22 (373,396) – Monday 4/25 (366,905) Tuesday 4/26 (367,577) – Wednesday 4/27 (370,666).
We have introduced silver to our CME rundown – so we are looking at the trading volume numbers for the “June” Silver contract: : Thursday 4/21 (56,863) – Friday 4/22 (48,767) – Monday 4/25 (41,611) Tuesday 4/26 (27,030) – Wednesday 4/27 (11,490).
Silver closed up $0.28 at $17.56. This market is showing resilience and acting like it wants to move even higher. Keep in mind however that silver is extremely volatile and we are well above recent lows so the paper trade might want to book some profits. Still I have a feeling a solid bottom is in because the physical market is getting warm again.
Platinum was up $26.00 at $1050.00 and palladium closed up $14.00 at $624.00. Platinum is trading for $215.00 less than gold and there is something else worth noting – the platinum Exchange Trading Fund (ETF) activity today has shown a big increase over yesterday’s numbers. This is unusual and could point to something in the wind.
This from Reuters – “By de-emphasizing global risks but acknowledging slower growth, the FOMC executed an equivocal pirouette that keeps a June/July move open but only just,” said Tai Wong, director of base and precious metals trading for BMO Capital Markets in New York.
“Gold has traded in a choppy $10 range but ultimately the FOMC has not impaired the constructive sentiment in gold and silver.”
Gold was firm ahead of the Fed statement, with data showing orders for long-lasting U.S. manufactured goods rebounded far less than expected in March.
“The Fed cited the moderation in consumption and softness in exports and investment spending, which in our view positions them to wait until September for enough signs that at least consumption is turning firmer,” said Avery Shenfeld, chief economist for CIBC Capital Markets.
“Overall, not really much for markets to chew on in this, with forecasters likely to stick to their guns on whatever they were calling for prior to the statement.”
Gold is highly sensitive to rising interest rates, which lift the opportunity cost of holding non-yielding bullion while boosting the dollar, in which it is priced.
A slump in demand from key Asian consumers is likely to push gold prices lower in the short term, GFMS analysts at Thomson Reuters said in a report on Tuesday.
The above Reuters information is interesting. I read the Yellen release and saw “dovish” all the way – completely supporting the price of gold and yet the markets reacted with a small yawn.
Reuters was even a bit on the hawkish side – going as far as suggesting that the proposed summer hike was still on the table. Amazing how traders interpret so differently – even traders of like mind switch sides overnight – it’s a great testament to just how confused this marketplace has become during this overzealous and extremely long period of quantitative easing.
The walk-in cash business was more than steady today – saw some big sellers in gold bullion and equally big buyers in silver bullion which is unusual. The phones were average considering we are moving into the higher end of the trading ranges. Today’s popular product is the Austrian Gold Philharmonic
The GoldDealer.com Unscientific Activity Scale is a “5” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (Last Friday – Newsletter Day Off) (Monday – 5) (Tuesday – 4) (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 generally increasing – it would indicate things are busier – decreasing numbers over a longer period would indicate volume is moving lower.
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