Gold Market Commentary for Friday, September 25, 2019 (www.golddealer.com)

Gold Market Newsletter with Richard Schwary

By  Richard Schwary of California Numismatic Investments Inc ……

Gold closed down $10.60 at $1857.70 today and was up $8.00 in quiet aftermarket trading. Not spectacular but good enough in a crazy week of trading that caught everyone by surprise and then turned into a panic session as most bought the dollar and hid under the bed. What a complicated mess in which market moves do not make sense and the fear of a virus resurgence creeps back into dialogue. Earlier in the week I got an email update from Gary North, a supporter of free American enterprise, much less government and prominent gold and silver advocate for decades. Gary remembered cowboy philosopher Will Rogers who famously said – “I joked about every prominent man of my time, but I never met a man I didn’t like.” It was so timely because it reminded me of a time long ago when political commentary was informed and civil.

Gold got a wakeup call Monday – and will provide a lesson in patience. The Dollar Index surged from 92.7 to 93.5 as the US joined a global equity sell off related to a rise in European Covid-19  cases. This was the scenario I mentioned last Thursday – if stocks get turbulent be cautious. Gold and silver are the most liquid of investments and easily sold especially at the higher end of their trading range. To most this would seem counterintuitive – higher virus problems, more political infighting over the death of Supreme Court Justice Ginsberg, a totally divided country in what may turn out to be the nastiest presidential election on record, law and order questions still not resolved, world central banks committed to “doing whatever is necessary” in the financial and business fight of the century. And US stocks down more than 700 points on renewed lockdown fears and a stimulus deadlock. Whew! You would think gold and silver would skyrocket. But as has been the case many times in the past when fear and doubt become commonplace the world parks their loot in the US dollar. It is a safe play in the short term when things get too dicey. Reminds me of the old trading adage – “sometimes you sell what you want and sometimes you sell what you can”. The lesson is to get used to volatility and believe in support. Forget about what the Asian market is doing – which is nothing and it is too early to talk about consolidation. The bad news is that gold dipped below that comfortable $1900.00 number, the good news is that it closed above $1900.00 and was up another $10.00 in the aftermarket – which is encouraging. What you are looking for is that anticipated bounce – when and how much. Gold is higher by more than $400.00 year to date so there is plenty of room for everyone to speculate in this serious investment game. A plus this week – Fed Chair Powell talks with Congress encouraging more relief money. Everyone knows that a weaker dollar (and euro) are in everyone’s interest. That is why central banks have already committed themselves to monetary expansion through 2013. Weaker currency will help with the virus and the cost of carrying an impossible debt load. On the day gold closed lower by $50.90 at $1901.20 and silver was down $2.73 at $24.30.

Tuesday of this week this domestic bounce back was not what I had hoped for in early trading, but the number did indicate that traders bought the dip. And yesterday’s gold ETF inflows of 1.1 million ounces was the biggest single day increase in 12 months. I suspect gold trading will remain choppy around $1900.00 but it must show some strength here, hopefully encouraged by Fed Chairman Powell’s comments. But this cuts both ways – if he is overly dour both stocks and the metals will suffer. All of the basics for higher gold remain in place and growing in importance but in the short term the dollar rules. The Dollar Index has moved from less than 93.00 yesterday through 94.00 today – a big jump. More uncertainty in banking or politics will push this index higher and gold lower. But there are still plenty of bargain hunters – it’s only a matter of price and mood. On the day gold closed down $2.60 at $1898.60. Silver closed up $0.14 at $24.44. After yesterday’s silver loss of almost $3.00 enthusiasts will have to gather themselves but as usual, we are not seeing much in the way of silver or gold selling.

Wednesday gold opened choppy but sold off as the dollar gained strength. The Dollar Index made a short-term high ground at 94.26 and gold ETF holdings moved lower.  Powell’s comments about our recovery being “long and arduous” was downbeat which encourages talk of deflation. This kind of reaction is counterintuitive to me in that the Fed has promised to do “whatever is necessary”. And Powell’s thinking has always been that the FOMC cannot carry all the load during this emergency. Congress must get its act together and help – which suggests another stimulus package. It is amazing that politicians are arguing over the numbers so this has turned into the worst kind of election football. Shakespeare comes to mind (Romeo and Juliet) – before he dies Mercutio curses both the Montagues and Capulets “A pox on both your houses”. Both parties should be ashamed of themselves. The 2-month-old $1900.00 support line is in the rear-view mirror. There is technical support at $1800.00 and solid longer-term support going back to April at $1700.00. We are seeing some bargain hunting by the public but there are no lines in the parking lot. Gold finished down $38.70 at $1859.90. Silver was off $1.43 at $23.01. A tough week for everyone and it’s only Wednesday.

Gold opened choppy Thursday but seemed to catch an updraft as the Dollar Index may have softened. At the beginning of this week the index was 92.7 and this morning reached a high of 94.6 before moving lower (94.2). Perhaps suggesting a short-term top. Recent dollar strength is the result of safe haven buying as folks worry about declining stocks, deflation speculation, the Ginsberg fight, and even the possibility of a contested election. Still traders are looking for that “bargain hunting” bounce in the metals. While some are viewing this wash-out as the end of the bull market in gold and silver I disagree completely. For the last 2 years gold has moved consistently higher so being left-footed at $2000.00 should not be a surprise. And it should also not be surprising that finding a longer-term base line support will take some time. But consider that even with a raft of recent negatives our shiny friend is only down about $70.00 this past month and year over year is still in the green by $325.00. This is not a market falling apart. It is a market trying to figure “fair value” in a world turned on its head as central banks flood the world with fiat paper money and suggest that zero interest rates will last for years. The smart money in both stocks and the metals will “wait this out” remembering the Edison quote. “Opportunity is missed by most people because it is dressed in overalls and looks like work”. Today gold closed higher by $8.40 at $1868.30. Silver was up $0.11 at $23.12. We are seeing only mild selling.

Friday the dollar continues to be troublesome for gold. The Dollar Index has moved up another half point since Thursday touching 94.75 before settling a bit lower. This underlines the tension factor in all markets especially as the presidential election nears. And it has precious metal enthusiasts scratching their heads as to why gold and silver remain lukewarm. Considering the unrelenting strength in the dollar I’m happy both gold and silver did not slump further into the weekend. Our more seasoned players have begun to “step buy” as this market moves lower and order size is increasing but we see little in the way of fresh speculative money. It is impossible to say if both gold and silver will trend lower, but this scenario is now popular regardless of the commonsense argument which favors higher prices. So, for the present let us say that the metals are struggling but showing enough mild strength to ward off further price erosion. Whether this is simply technical book squaring after these large drops remains to be seen. Trying to figure “fair value” is still a reach but it is now at least a consideration as premiums move lower and availability increases. Be patient and do not discount the possibility of greater volatility over this coming election. It is impossible to call a bottom here, but you will sense when the wind has changed. When this happens buy all you can. These past two years are just the beginning of gold and silver’s amazing story because central banks believe they can ignore financial gravity. Gold closed down $10.60 today at $1857.10 and silver was lower by $0.10 at $23.02.

This from Anna Golubova (Kitco) – “Both gold and silver are now oversold” – Commerzbank – After a week of losses, gold and silver prices are now oversold, says Commerzbank. “The RSI for gold and silver this morning was 31 and 25 respectively – levels last seen during the sell-off in mid-March. Back then, prices rose sharply a short time after,” writes Commerzbank commodity analyst Carsten Fritsch. Gold lost around $100 since Monday, hitting two-month lows this week and touching $1,850 an ounce Thursday morning. Silver tumbled nearly 20% this week, briefly touching $21.70 an ounce on Thursday morning. A price reversal is looking very likely for precious metals, Fritsch notes. “The fact that the 100-day moving averages have now been reached could form the basis for a countermovement that is certainly due. It is obvious in our opinion that prices are more likely to be significantly higher than lower in the coming weeks,” he says. “After all, the positive environment for gold and silver hasn’t changed since the beginning of the week. It is doubtful to say the least that the U.S. dollar will be able to defend or even extend its latest gains given that the monetary policy of the U.S. Federal Reserve will remain ultra-expansionary for years to come.”

Silver closed today down $0.10 at $23.02. Interesting that with the shellacking silver has recently taken there are a number of prominent commentators who believe the next decade will present the perfect storm for higher silver prices.

Platinum closed up $4.00 at $841.10 and palladium closed down $5.30 at $2207.70.  

As always, we appreciate your friendship and business. If you have unusual circumstances, need cash or are looking for a special store visit – talk to Harry. Let’s be careful out there – stay safe and trust in God’s blessings. Richard Schwary

This from Zaner (Chicago) – “Overnight global equity markets were evenly mixed with higher and lower trade with the Australian market topping the list as the biggest gainer with a rise of 1.3% and the Hang Seng taking the bearish prize with a decline of 1.18%. Overnight economic news of importance saw Italian business confidence readings leapt higher in conjunction with a sharply higher Italian consumer confidence reading. Also out overnight were UK consumer confidence readings which were deep in negative territory but better-than-expected in better than the prior month rounding out the news Australian import and exports were down by 7 and 2% respectively. The North American session will start out with an August reading on durable goods that is expected to have a sizable downtick from July’s 11.2% reading. August durable goods ex-transportation is forecast to have a moderate downtick from July’s 2.4% reading. New York Fed President Williams will speak during morning US trading hours.

If the declines in the gold and silver markets over the past 6 trading sessions were not so severe (which has severely damaged bullish psychology), we would begin to look for a bottom. In fact, we get the sense that the sting of the sharp washouts has died down and the bearish fervor appears to have moderated down. However, with the psychological/chart damage, a building pattern of ETF outflows (-162,803 ounces in gold Thursday) and what appears to be a dollar “uptrend”, the bear camp continues to have the brunt of the forces on its side. Certainly the $115 washout in prices since the last COT report brings down the net spec and fund long position considerably, but being liquidated technically does not mean fresh buyers will return. Furthering that argument is a statement yesterday from Commerzbank that both gold and silver are “now oversold”. However, with the US Federal Reserve Chairman looking to Congress to provide fiscal support for the economy, it would appear as if the Fed is not on the cusp of “doing whatever is necessary” and that leaves further physical demand destruction fears in place. The lack of assistance for the economy and soft US data this week also fosters ongoing negative views toward physical commodities and in turn is probably pulling in some deflation fund selling. While not a confirmation of slowing in the US pace of recovery, the claims data yesterday certainly adds to that line of thinking which in turn adds further to demand destruction and deflation expectations. In our opinion, the dollar index is headed back above 95.00 with the index likely to be propelled even higher next week in-the-event that the Trump administration implements tariffs against China as threatened this week. In the silver market the $1.60 horrific slide this week clearly resulted in margin liquidation in wounded buyers limiting the amount of bargain-hunting buying ahead. Furthermore, silver ETF’s also reduced their holdings by 2.5 million ounces yesterday which extends a pattern of withdrawals which concerns the bull camp. In order to avoid rekindling aggressive selling bias probably requires a trade consistently above $22.90 this morning.

While open interest in palladium has not declined markedly with the palladium market slide, given the $216 slide in prices since the last positioning report into this week’s low we suspect the palladium spec and fund position long positioning of 4,064 contracts is approaching a “mostly liquidated” positioning. However, given the wave of negative sentiment in the precious metals markets, we are not even sure if positive Chinese economic news this week would have been able to cushion palladium prices. We would note that inflows into palladium ETF’s might pick up especially if prices return to the vicinity of 1 1/2-month lows. The palladium market did manage to respect the prior sessions low in the trade yesterday, but the charts continue to look bearish. However, trading volume on the last 6 days decline has fallen off consistently which might suggest declining interest in pressing the short side as prices approach consolidation lows from last month at $2161. Similarly, the platinum market appears to have found some form of a temporary bottom with key support now seen at $829.20, with the market sliding below that level yesterday and soundly rejecting that slide. Unfortunately, platinum ETF holdings yesterday declined, preventing the market from building hope that investors will buy the break.

While both gold and silver are certainly short-term technically oversold, we have not seen a fundamental headline change justifying an end to the selling. On the other hand, the $150 slide in gold prices and the $7.20 cent slide in December silver should begin to reduce selling and set the stage for sideways consolidation. In the near term, the bear camp retains control until there is a significant improvement in macroeconomic sentiment or a significant reversal in the US dollar. As we indicated yesterday, the net spec and fund long in gold is probably close to 13-month lows, while the net spec and fund long in silver might only be at the lowest levels since May 12th.”

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