Precious Metals Market Commentary for Wednesday, July 26, 2017 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc ……
Gold closed down $2.70 today at $1,249.40 – this before the FOMC released its latest thoughts concerning interest rates. Gold opened a bit lower today reaching $1,245.00 before turning higher – so we continue to settle with a negative bias because of Federal Reserve uncertainty. The Precious Metals Market was however higher in the aftermarket by $13.00, indicating that traders believe this FOMC release was soft on interest rates and even softer on the Fed’s massive balance sheet.
The Fed did keep interest rates steady – they said they would unwind their already oversized balance sheet “relatively soon” – whatever that means. No one really expected them to raise rates this time around because this meeting was one not associated with the Summary of Economic Projections in which a press conference is held by the Chair. Those “more important” meeting for lack of a better word are scheduled for September 19 and 20 and December 12 and 13.
Granted this meeting was a bit on the dovish side but make no mistake about it – the Federal Reserve will raise interest rates and begin reducing its balance sheet in September or December. These moves will most likely cap the price of gold but like I have been saying – the downside here is not going to be drastic – physical demand is already picking up in China and India.
Besides, the real test of this latest FOMC information is the dollar – The Dollar Index moved from 94.00 to 93.50 after the release so traders will look at this latest turn in this very long story as favoring gold at least in the shorter term.
I’m not sure they know how to define the “longer” term at this point and until there is more certainty as to exactly what they have in mind this roller coaster ride will continue. But I think the smart money in this crowd will short the dollar – that only makes sense and that makes for a brighter gold future – patience remains a key word.
This from Sarah Benali (Kitco) – Reasons Why Gold Will Break Out Of Its Range – Precious Metals Market Focus – Gold continues to see range-bound trading and this lack of direction is likely to stick at least until the end of the year, this according to one gold-focused research team based in the U.K.
“We expect gold prices to remain in a period of consolidation,” analysts from Metals Focus said in the Precious Metals Weekly report released Tuesday.
“In our view, it will be difficult for prices to ‘escape’ such range bound conditions before the market benefits from some clarity on details of U.S. fiscal stimulus, probably sometime later this year.”
Despite rallying to four-week highs earlier in the week, gold prices have cooled off Tuesday on profit-taking and the U.S. dollar index lifting on more upbeat U.S. economic data. August Comex gold futures last traded at $1,250.10 an ounce, down 033% on the day.
However, the analysts remain bullish beyond 2017, with several factors working on resuming gold’s “recovery.”
“Crucial to this view is that we are skeptical towards the thesis that fiscal accommodation in the U.S. will see the country’s growth accelerate materially,” they noted, adding that any uncertainty from the Trump administration would also boost safe-haven gold.
What’s more, they pointed out that monetary policies are likely remain “(broadly) highly accommodative,” while nominal and real interest rates would remain “very low,” which would also bode well for the metal.
“The above factors should offer gold a boost later this year, especially given that institutional investment in gold has so far remained light in absolute terms and even more so when it comes to its share of overall investable assets,” they said.
“With equity prices looking increasingly expensive, particularly when compared against gold, the risk-reward arguments should lead to at least a partial rotation back in favor of the yellow metal.”
If you are tired of the US dollar versus gold metric I can’t blame you – so how about something outside of the box? The price of copper has been trending higher lately thanks to strong Chinese interest – as a building material of course. The price of copper is a great indicator of what is happening in world-wide commerce – moving higher things are upbeat as nations spend money on infrastructure – this is now the case in China. And the price of gold relative to the price of copper has a lengthy history of strong correlation – which means they usually travel in the same price direction. As China continues to push the price of copper higher some believe that the price of gold may soon follow.
Silver closed down $0.08 at $16.46.
Platinum closed down $9.10 at $922.70 and palladium closed up $5.95 at $862.90.
The GoldDealer.com Unscientific Activity Scale is a “3” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 3) (last Friday – 4) (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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