Gold Commentary for Friday, August 16, 2019 (www.golddealer.com)

Gold Market Newsletter with Richard Schwary

By Richard Schwary of California Numismatic Investments Inc ……
 

Gold closed down $7.10 today at $1,512.50 and was up a few dollars in a quiet aftermarket. It was choppy in the overnight Hong Kong market and sold off in early London trading – the price spread being $1,503.00 – $1,515.00 – this is typical in that we are still trying to find new footing but the important part of this pattern is gold’s recovery after the London dip. Domestic New York traders once again bought weakness. Gold closed this past Monday at $1505.30 so on the week we are higher by $7.20. I would “read” that as oddly quiet in a market with many cross-currents.

A more-sure Wall Street stock trade this morning did not help gold going into the weekend and the weekly Dollar Index is solidly higher – moving from 97.30 through 98.20 so further settling of gold prices might be in the cards shorter term.

But I don’t see enough bearish news to rain on this current up-trend. The 30-day gold price chart remains bullish as gold has moved from $1,420.00 through $1520.00 over a number of fundamental changes in trade and interest rate options. And the 60-day pricing chart reinforces this uptrend – we have moved from $1350.00 through $1520.00. So even the pessimist should concede that something new is afoot and driving these prices higher.

Still, gold’s push toward $1,600.00 is testing unchartered waters – the last time traders had to deal with such prices was the middle of 2013. So I suspect the bulls are in for a “testing” period.

The bears have been content with a sideways trading range which remained in place through early 2019. And there are traders who believe that without inflation gold’s recent strong move into new higher ground will fade – eventually drifting back into that old sideways channel.

As usual, our old friend “optimism” comes and goes. Stocks drop 400 points – gold is “hot” – the DOW recovers the following day and bullish traders are “disappointed”.

I love this kind of pricing because it creates “buzz”. We are seeing fresh liquidation from long term players – but not much. This suggests the physical market has plenty of “strong hands”.

And what’s better – our phones are busy with questions about gold bullion – the American public is not overactive but they are looking for the “right” price to join the party. This is a fundamental change from our typical slow and boring summer action.

The Hong Kong problem continues to create tension as the world wonders just how long China will put up with what they see as rebellion. It may be that their leaders are not worried about Hong Kong but rather do not want the rest of the country to think that totalitarian rule is going soft as China reinvents itself into a manufacturing giant and world leader. At any rate, a flare-up is possible any time with that many people waving flags and the police in riot gear so until this is settled the possibility of something going wrong will underpin the price of gold.

This from Zaner (Chicago) – “Global equities overnight were higher with gains ranging from 0.5% to as high as 1%. Following the US session on Thursday, the US Treasury released international capital flows data which showed foreign interest adding the most US treasuries since last August. While Japan overtook China as the largest holder of US debt, both countries increase their holdings with the Chinese inflow the first since February. As of June the Chinese held $1.1 trillion of US treasuries! From New Zealand a business PMI index came in much weaker than expected and three points below the prior month. In Japan foreign investment in Japanese stocks declined while foreign investment in Japanese bonds increased. From Europe, the European trade balance matched expectations but narrowed. From the US, housing starts for July are expected to gain slightly, and building permits are expected to jump moderately. The markets will also see Canadian portfolio investments in foreign securities and foreign portfolio investments in Canadian securities. Other information from the US includes Michigan consumer sentiment for August, which is expected to show a decline. Key corporate earnings will include Nordic American tanker, Deere and Company and a Chinese real estate company before the US opening.

The gold market disappointed some bulls with its lack of a significant upward thrust yesterday following the latest anxiety wave from another lower low for the move in US equities yesterday afternoon. Furthermore seeing the market reversed chart direction this morning and seeing the prospect of a risk-on day in equities gives the bear camp the edge to start today. It is also clear that reduced trade anxiety is set to prompt profit classic taking in gold and silver as the media is suggesting the two leaders are actually talking directly. While the gold market hasn’t been limited by the recent uptrend in the dollar index a move above 98.00 this morning in the Index should thicken currency-related resistance for gold and silver prices. We also think macro-economic uncertainty was deflated slightly yesterday by a sprinkling of positive US data points as that questions the all-out recession expectation in the marketplace. Cushioning the gold and silver markets this morning is the news that inflows to ETF holdings continued with gold yesterday adding 103,571 ounces and silver ETF’s adding 4.9 million ounces to their holdings. Year to date inflows to gold ETF’s are now 6.43 million ounces and 98.8 million ounces in silver with the fifth straight day of inflows. Therefore investors continue to show interest in gold despite two-sided volatility. While the initial path in gold prices today is pointing downward and some chart points have been violated already the market should be supported by bullish news from Goldman Sachs which indicated increased central bank gold buying will continue from “De-dollarization”. In conclusion, the bullish forces remain in place in gold but a short-term corrective track is underway because of the tempering of trade fears and from initial gains in US equities. Technical traders will point to the fact that gold did find bargain-hunting buyers around $1520 but the initial failure of that level early this morning opens up the potential for a week ending setback to $1,500 if early equity gains and news that Trump is speaking to Xi extend into the close. However given the spec and fund net long, traders should consider buying protective puts against futures, as the market could easily see another $62 range, as it did on Tuesday.

While the palladium market showed some recovery action on Thursday, the ever-present threat of physical commodity demand destruction remains. September palladium has been able to stand up to negative outside market forces this week with a pattern of higher lows, and that suggests it is less enamored with the prospects of lost physical demand. Unfortunately, the market has not seen the type of inflows into ETFs as in gold and silver, with holdings sitting near their lowest levels since their inception back in 2009. The platinum market, on the other hand, has failed on its charts again and continues to trade below the 200-day moving average in a fashion that projects a slide down $830 and perhaps $820 if it were to appear that the week will end with a big picture, macro economically-driven washout in equities. Apparently the platinum market is not garnering any support from news that platinum ETF holdings saw an inflow yesterday of 16,878 ounces.

With the latest iteration of US/Chinese trade headlines soothing tensions, with US reports of conversations between the leaders, and equities showing a noted relief rally to start today, the initial corrective action in gold and silver is fully deserved. Furthermore both silver and gold were holding significant long spec and fund positions at the beginning of last week and should have built those positions even further into the overnight high. Therefore both markets are vulnerable to long profit-taking but we think fresh selling will be limited to a small group of well-capitalized/aggressive traders. As indicated already we see the $1520 level in December gold as an initial pivot point with the next lower support point seen at $1514 and again down at $1504. The big question is will equity market gains hold/extend throughout the session and will bargain-hunting buyers step back into gold again? Initial pivot point pricing in September silver is seen at $17.49 and then again down at $16.93.”

Silver closed down $0.09 at $17.10. This trade also remains steady and I think the public is looking for $20.00 silver sooner than later.

Platinum closed up $9.50 at $848.80 and palladium closed up $0.30 at $1,439.30. 

 

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