Commentary for Wednesday, March 15, 2016 (www.golddealer.com)

Gold Market Newsletter with Richard Schwary

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

Gold closed down $1.90 at $1,200.70 – the gold market being closed by the time Janet Yellen talked about the FOMC expected 0.25 point rate hike.

The interesting part of this story and the real surprise happened in the aftermarket – gold was up $19.50 – which supports my contention yesterday that we might see rising prices after the FOMC raises rates.

So how can this be? Easy for now, but not conclusive – the Gold and Silver market had been in steady decline for two weeks prior to the Yellen announcement and has already priced in this rate hike. Being that traders already expected the hike their attention was re-focused on the so-called dot-plot – the plan by which the Fed might further raise rate as we move through 2017.

Like many times before the gold market bought the rumor and sold the fact – you will see that aftermarket pop in the price of gold on the domestic open tomorrow – but can this market sustain higher prices?

Federal Reserve - Gold and Silver marketThe common wisdom is that if the Federal Reserve continues to raise rates – perhaps three more times according to them – the price of gold will melt. But I wonder – there is a lot going on.  Inflation is stirring. The European elections present a few wild cards which will create social unrest and there is that Trump Rally – record DOW numbers are based on changes the president can get through Congress – suppose there is gridlock? 

This from CNBC (Jeff Cox) – Fed raises rates at March meeting – for the second time in three months, the Federal Reserve increased its benchmark interest rate a quarter point amid rising confidence that the economy is poised for more robust growth.

The move, widely anticipated by financial markets, takes the overnight funds rate to a target range of 0.75 percent to 1 percent and sets the Fed on a likely path of regular hikes ahead.

Despite a well-telegraphed move, news of the rate hike pushed government bond yields lower while major averages in the stock market moved higher.

“The market was bracing for a much more hawkish tone from the Fed. The early reaction looks to be one of relief, that the market’s worst fears were averted,” said Michael Arone, chief investment strategist at State Street Global Advisors.

Some Gold and Silver Market participants had feared that the statement and accompanying economic projections Wednesday would point to a more hawkish Fed, with a faster pace of rate hikes ahead. However, the closely watched “dot plot” that shows each member’s expectations for where rates will be in coming years changed little from the last meeting.

Silver closed unchanged at $16.92 and the aftermarket was up $0.41.

Platinum closed down $2.10 at $936.80 and moved higher by $19.20 in the aftermarket. 

So while everyone is pondering gold’s future – it’s immediate past might be a better place to look. We are up from around $1,150.00 in late December to $1,250.00 by mid-February before settling lower into the $1,200.00 handle as this rate increase approached. Now consider that year over year gold is very close to unchanged. Viewed from this angle are you not surprised that with such a hawkish recent turn from FOMC that we have not seen a complete exit from established long paper – booking profits and moving to the sidelines?

Americans are not too interested in European politics but there are a number of elections that are important to the price of gold. We have talked about France’s Marine Le Pen, a far-right candidate riding the populist movement who wants France out of the European Union.

Geert WildersNow consider this from Sara Sjolin (MarketWatch) – “Known as the “Dutch Trump,” Geert Wilders is riding the populist sentiment sweeping across Europe and the U.S., sharpening fears of a shake-up of the eurozone if his party makes a strong election showing.

The 53-year-old is leader of the far-right Party for Freedom (PVV), which is vying to take the largest number of seats when The Netherlands holds its general election March 15.

Since founding the party in 2006, Wilders has quickly made a big splash in politics with his anti-immigration and anti-European Union stance. Convicted in December of inciting discrimination against Dutch Moroccans, the PVV leader has promised a total “de-Islamification” of The Netherlands, with a message of “your own country first”. That catchphrase, plus his untamed blond hair, liking for social media and free-spoken ways, have helped earn him the nickname the “Dutch Trump” in the press.

One of Wilders’s key pledges is to lead The Netherlands out of the euro, which some analysts say could send shudders through financial markets. It’s reviving memories of the recent sovereign debt crisis in Europe, when fears of a Greek exit from the currency bloc—dubbed “Grexit”—sparked panic, particularly in debt markets.

I bring up these two political possibilities because a win in either case would reinforce physical gold demand and may to some degree be the reason we have not seen a big decline in recent prices. Anything which threatens the status quo will increase physical gold demand as a protection against abusive fiat paper production.

This is our usual ETF informationGold Exchange Traded Funds: Total as of (3-8-17) was 65,610,976. That number this week (3-15-17) was 65,430,451 ounces so over the last week we dropped 180,525 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 65,906,804 and the record low for 2017 was 62,348,156.

All Silver Exchange Traded Funds: Total as of (3-8-2017) was 644,747,650. That number this week (3-15-2017) was 642,713,291 ounces so over the last week we dropped 2,034,359 ounces of silver.

All Platinum Exchange Traded Funds: Total as of (3-8-2017) was 2,382,285. That number this week (3-15-2017) was 2,387,844 ounces so over the last week we gained 5,559 ounces of platinum.

All Palladium Exchange Traded Funds: Total as of (3-8-2017) was 1,549,529. That number this week (3-15-2017) was 1,540,922 ounces so over the last week we dropped 8,607 ounces of palladium.

The walk-in cash trade was a bit on the slow side which is weird considering that the aftermarket in gold was up $19.90. The phones were also on the quite side.  

The GoldDealer.com Unscientific Activity Scale is a “4” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 3) (last Friday – 5) (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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