US China trade war tariffs Gold

Gold Commentary for Monday, April 2, 2018  by www.golddealer.com

Gold Market Newsletter with Richard Schwary

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

Gold closed up $19.30 today at $1,342.10 as China decides what is good for the Goose is good for the Gander – she imposed tariffs on 128 US products. This created some angst in the stock market and initially created weakness in the dollar. As the dollar recovered the ISM Index (a sentiment indicator) drooped as inflation talk began to heat up once again.

I actually don’t think any of these factors are a big deal per se but the generally rising level of international tension creates the perfect storm for basic gold buyers. And gold’s ability to hold at or above the $1,320.00 line since December of last year is adding to the tension.

Some traders believe that the big drive in prices which began last December at $1,240 is an accident waiting to happen.

Gold made more than a $100 advance and then lost its mojo. And we have been moving sideways between $1,320 and $1,360 ever since. The most likely theory being that with higher interest rates and the possibility of profit taking gold would settle into a range perhaps between $1,280 and $1,300.

But for now the bears will have to bide their time – Trump’s tariffs and China’s retaliation has upset the apple cart for what I think will be the short term. Let all this settle down somewhat and gold prices should cool off.

Now I had this conversation with a rabid bull across our counter over coffee this morning – and he likes the scenario as long as gold does not break any higher.

A point well taken – if gold does establish itself at $1,400 the technical guys will revive the argument that the higher price trend which began at $1,070 in mid-2015 is still intact – now that’s a big deal in that pricing of gold above $1,400 creates a huge amount of buzz.

How all of this new interest pares with the generally disappointing interest in US Mint bullion products like US Gold Eagles I will leave to the reader but we in the gold community like the idea that the most recent food fight between China and the US has at least woke up the peanut gallery.

This from Zaner (Chicago) – “Obviously the combination of weakness in the dollar and escalating reactions by US and China regarding trade tariffs has ignited gold, silver, platinum and palladium to start the trading week. While China failed to impose tariffs on US soybeans they did levy tariffs against frozen pork in a move that will influence US agribusiness. However the tariffs levied by China are estimated to be only $3 billion in US goods and that pales in comparison to the initial US salvo of $50 billion in goods levied with tariffs. While we are doubtful of a full-blown trade war the promise of another round of tariffs from the Trump administration later this week would seem to suggest some form of a trade war is already underway. While the dollar has started the new trading week on a softer footing it remains within the upper quarter of the last 2 1/2 months trading range and that could dampen its capacity to lift gold and silver. While the Commitments of Traders Futures and Options report as of March 27th for Gold showed Non-Commercial and Non-reportable combined traders held a net long position of 235,156 contracts that positioning is probably overstated given the slide in prices after the report was measured. While the silver market is clearly drafting support from spillover buying from the action in gold and because of weakness in the dollar, it is also possible that the positioning report in silver is giving rise to some short covering by the noncommercial traders as those traders posted a new record net short of 15,246 contracts in this week’s report. In fact with the Commitments of Traders Futures and Options report as of March 27th for Silver showing Non-Commercial and Non-reportable combined traders held a net long position of only 6,546 contracts one could suggest that silver is capable of seeing a moderate influx of technical buying especially if the trade battle between the US and China continues to escalate.

So far the fear of a trade war between the US and China has not adversely impacted platinum and palladium prices but that threat looms in the background. Fortunately for the bull camp the platinum market was significantly short-term oversold from the action at the end of last week and that has probably resulted in a larger than expected reaction to the fundamental news this morning. In fact with the July platinum contract last week posting a high to low setback of $36 some measure of recovery and a bid above $950 is possible. Like the platinum market the palladium market was also oversold technically with the high to low slide last week of $46 probably providing some technical short covering buying this morning. Downtrend channel resistance in June Palladium today is seen at $968 and closer in resistance is seen from the bottom of the March consolidation up at $957. The Commitments of Traders Futures and Options report as of March 27th for Platinum showed Non-Commercial and Non-reportable combined traders held a net long position of 32,464 contracts. The Commitments of Traders Futures and Options report as of March 27th for Palladium showed Non-Commercial and Non-reportable combined traders held a net long position of 12,827 contracts.”

Silver closed up $0.41 at $16.63.

Platinum closed up $3.40 at $930.70 and palladium closed down $16.30 at $928.50.

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