Commentary for Saturday, July 25, 2019 (www.golddealer.com)

Gold Market Newsletter with Richard Schwary

By  Richard Schwary of California Numismatic Investments Inc ……
 

Gold closed up $8.20 at $1,897.30. It would seem all the stars are aligned for even higher prices in both gold and silver.

Which always makes me a bit nervous, but we are seeing a great deal of fresh money coming into these physical markets from a wide variety of sources. Folks we have been doing business with for decades and new accounts from all over the US. There are plenty of reasons driving this market but mostly this kind of commentary is watched closely by veteran buyers. These new folks just seem to be fascinated with the idea of holding real gold or silver, sometimes for the first time in their lives.

In the old days, big buyers were older men. Today, this mix has been thrown out the window. We are seeing young professionals, business owners and a much larger number of women. I would not say mainstream America is on board yet, but there are more of them now than ever before. Most likely drawn not so much to the safe-haven aspect of owning metals but they seem to just like the action and have come to play.

   

This last Monday, gold once again pushed higher closing the day up $7.60 at $1,815.90. Pricing seems comfortable at the higher end of its current trading range but keep in mind that this is where gold made all-time highs in the summer of 2011 so tough overhead resistance has been in place for a long time. And there is a question among traders as to whether this “higher” back and forth pricing chop we are seeing today is a consolidation getting ready to turn into the next leg of this bull market, or this latest move to higher ground is lacking fresh players and so will be worn down over short-term profit taking.

Today’s headline in Barron’s may soon decide this price conundrum – The US Dollar Index is Posed to Plunge. Sensational and an attention grabber but an idea that has been around for some time now. A lot of people were saying the dollar was overvalued by 20% before the virus problem.

But its saving grace has always been its unquestioned status as a safe-haven asset especially in times of trouble. I doubt this will change anytime soon but its value is more vulnerable today than ever before. The two biggies for substantially higher gold pricing would be a much lower dollar or returning inflation – both now on the table – both still speculation as rhetoric heats up – CitiBank saying that “it is only a matter of time” before gold makes a new record high and silver hits $25.00.

Both gold and silver surged higher Tuesday as gold closed up $26.50 at $1,842.40 and silver closed up a whopping $1.38 at $21.50. These are momentum plays in part but both metals were helped because the EU agreed upon a spending package of 2 trillion euros to help with continued economic damage caused by the virus. This was not unexpected, but their delay created the requisite tension. At the same time, the Dollar Index continues weak with some believing it may eventually break lower and the US should have similar financial relief in place this week.

The much talked about silver market once again surprised moving higher by more than a dollar yet silver rounds and bars are still in short supply. From the beginning of the recent gold bull market analysts pointed out that silver became more and more undervalued. A good call to those who paid attention, but I think today’s silver prices are not the result of safe haven demand. Rather they are the result of the anticipated surge in industrial demand over a virus cure. Couple this with the notion that silver is still trading well below longer term highs and you can appreciate further excitement. Curiously, we do not see much selling at these higher prices.

Pricing for Wednesday of this week once again pushed higher – gold closing up $21.70 at $1864.10 and another $10.00 in the aftermarket. Silver closed up an amazing $1.58 at $23.08. The metals are surging higher because of the usual reasons – a combination of safe-haven buying (maybe China and India are back), the Dollar Index making recent lows (94.92), escalating tension between China and the US and the momentum play which always plays a big part when pricing gets crazy.

It is disappointing to see the political establishment squabble over another US relief package, but McConnell said the checks are in the mail. Obviously, gold is taking a run at all-time highs and silver pundits now claim $30.00 is just the beginning.

But I would be a bit cautious here – it figures that we should see profit taking in both silver and gold, but these are unprecedented times, so it is anyone’s guess as to what is around the next corner. Why? Because central to this bull market is a kind of nervous feeling that some are developing over the still required massive central bank spending.

Gold prices Thursday were again higher – silver saw light profit taking but there are few who would consider shorting either metal. The slightly weaker dollar helped gold, but some believe it will take a much weaker dollar to fuel the kind of prices some are suggesting. The public is buying both gold and silver bullion with both hands, but we are now seeing selling among longer term physical owners. So where do you see the most dollar risk with the approaching presidential election – metals or stocks? The technicians are watching $1920.00 gold closely, but this market has so much buzz that it might just blow past this level and consolidate over longer term between $1900.00 and $2000.00. Gold closed up $25.00 at $1889.10 and silver down $0.13 at $22.95. Surprisingly, specific bullion products are still not easy to find.

I’m not surprised gold was again stronger on Friday, the short term technical picture is right, safe have demand continues strong (nothing stays in stock long these days), the election draws closer increasing uncertainty, and many buyers who were waiting for cheaper prices decided to dance.

Now consider the hot rhetoric between the US and China. Secretary of State Pompeo declaring US engagement with China a dismal failure after Trump ordered the Chinese to close the Houston consulate for stealing trade secrets. On the day gold closed up $8.20 at $1,897.30 and silver closed down $0.14 at $22.81 with not near enough physical product on our shelves!

Silver closed down $0.14 at $22.81. Some mild selling with lots of fresh buyers, big and small.    

Platinum closed down $7.20 at $947.90 and palladium closed up $54.30 at $2,272.60.  

This from Zaner (Chicago) – Global equity markets overnight were all weaker with the declines 1.5% or larger. The markets were undermined as-a-result of the Chinese decision to close the US consulate in Chengdu. Economic news of importance overnight included UK GfK consumer confidence readings for July which contracted further than the decline seen in June, a much better than expected UK retail sales reading and very strong euro zone services PMI readings from France and Germany. It should also be noted that overall Euro zone manufacturing and services PMI readings were much better than expected and have entrenched well above the growth/no growth line of 50.0. The North American session will start out with the July Markit US “flash” manufacturing PMI which is forecast to have a moderate uptick from the previous 49.8 reading. June new home sales are expected to have a modest uptick from May’s 676,000 annualized rate. Earnings announcements will include Verizon, NextEra Energy, Honeywell, American Express and Schlumberger before the Wall Street opening.

While gold and silver divergence continued in the early Friday trade, the gold market appears to be poised to launch above the $1900 level with a large portion of the trade expecting new all-time-record highs. The latest bull theme operating in the gold market is related to the old-adage that it does not pay to “fight the Fed” and that impact is given added credence by mechanical market signals of more impending central bank support for the global economy. With the US dollar making yet another lower low for the move this morning and reaching down to the lowest level since October 2018, the currency impact on gold and silver today should remain positive. Not surprisingly gold ETF’s added to their holdings for 20th straight session yesterday, with the addition of 338,559 ounces, which brings net purchases up to 23.6 million ounces this year. According to the Bank of America precious metals funds saw the 2nd largest ever weekly inflow of $3.8 billion in the week ending July 22nd while equity funds saw an outflow of $3.2 billion. It should also be noted that silver ETF holdings jumped by nearly 10 million ounces yesterday with the I-Shares Silver trust alone seeing 9.5 million ounces flow in. With gold taking out the 2011 record “close” yesterday predictions of a new “all-time high” are widespread again this morning. Obviously, seeing the dollar index lower to start this morning extends currency-related buying but seeing US treasury yields back down to the lowest levels since the height of the virus anxiety in March, gives credence to the argument that a safe haven environment is entrenched into the end of this week. It should also be noted that interest in metals is broad-based as Futures, ETF’s, ETP’s and mining shares have all shown strength and volume this week. It should also be noted that stellar gains in gold over the prior 2 sessions were accomplished on large volume and generally rising open interest. At this point, traders should expect new all-time highs with the key question whether-or-not gold can hold in new high ground through the US close later today. As indicated, the silver market is forging a bit of a corrective setback but the trading range on Thursday was not nearly as wide as in the Tuesday and Wednesday trade and therefore, we are hesitant to predict a “top” in silver especially if gold surges above the old all-time high today. In fact, this week’s strong rally in silver was accomplished on the heaviest volume since the February washout began and we suspect ongoing inflows into silver ETF’s will soon right the ship in favor of the bull camp.

Despite the fact that palladium prices seem to have lost some momentum after climbing above the $2,200 level earlier this week, prices remain pinned to the vicinity of this week’s highs and $2,200 has probably become solid support from which prices can continue to claw higher. While not a significant impact on palladium prices yet, palladium ETF inflows continue in the background with the addition yesterday of 4,710 ounces. While 4,710 ounces might not seem significant, that is a 1% increase in a single session. While it could take a number of days of ongoing inflows into platinum group metals ETF’s to point to an emerging investment pattern, we suggest traders anticipate that potential. Unfortunately for the bull camp, this week’s significant gains have not been accompanied by dramatic increases in palladium trading activity but the gains did see a slight uptick in open interest. Technical action in the platinum market to start this morning is discouraging to the bull camp as the market forged a range down extension below yesterday’s lows and prices do not appear to be benefiting from the higher action in gold. However, it should be noted that platinum ETF holdings yesterday increased by 49,272 ounces and that is a daily gain of 1.5%. Overnight platinum did see UBS raise its platinum price forecast with that increase $125 from a previous forecast and apparently predicated on further strong gains in gold prices. Clearly platinum needs very strong leadership from gold to end the trading week above a critical pivot point of $950.

In our view, the trends in gold and silver remain up, with the list of bullish themes numerous and seemingly solid. However, as we warned early in the week expanded two-sided volatility is likely to emerge after the large gains posted this week with gold in particular vulnerable in the event the trade is presented with favorable vaccine news or large gains in international equity markets. Uptrend channel support today in the August gold contract is seen at $1,863.10 and using the July consolidation range as a measuring tool, we project the next target in gold at $2,015. In the silver market, we see a near term target of $25.00 and will remain bullish toward the market as-long-as it manages to hold above pivot point support today at $22.45.”

 

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