Commentary for Wednesday, October 28, 2015 (www.golddealer.com)

Gold Market Newsletter with Richard Schwary

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

Gold closed up $11.10 on the Comex today at $1177.10 and then reverses direction in the “aftermarket” in a wild trading session which left everyone confused.

 It’s funny how everyone is fixated on what the Federal Reserve will do with interest rates. Even when they do nothing the results are extraordinary – which is the case today. The fact that the FOMC did not alter their interest rate structure was enough to push gold higher even though we are still at the upper range of the current stronger market. The power of the FOMC is extraordinary – creating an upward spike in the price of gold even though the technical picture is actually deteriorating – but that is only the beginning of the story.

Gold was off to the races in early October moving from around $1110.00 to almost $1190.00 before failing its latest attempt at moving over $1200.00. Since that time gold has drifted lower – the bulls have lost control and bearish sentiment is once again the norm. So today’s push to higher ground is the Goldilocks effect – a relief really with some technical book squaring – somewhat supported by a still mixed bag when it comes to improving US economic metrics.

fomc1In other words gold is still wandering in the woods and in my opinion will do so through the end of this year. Given that the Fed will not do anything with interest rates the remainder of 2015 the only big metrics to watch in gold pricing are the moving averages. The 50 DMA ($1141.00) the 100 DMA ($1140.00) and the 200 DMA ($1172.00) compared against today’s close ($1177.10). It is troubling that even with Fed inaction gold cannot hold the 200 DMA and there is so much attention placed on a rate hike that at best will be a 0.25 of a point. And one which might well be withdrawn by the second quarter of 2016 if our numbers do not get decidedly better – sooner perhaps if Europe continues to stumble.

Back to the higher close today ($1177.10 – remember that was up $11.10 and the bulls are semi-happy). After the FOMC news was released (after the market close) the supposedly dovish FOMC position was turned into a traders’ nightmare – a hawkish “they don’t care what is happening in China or Europe” meaning any consideration for the struggling EU was now off the table. A real interest rate hike was always a possibility and the FOMC hinted that it may come as soon as December!

The Dollar Index moved from 96.50 to 97.61 on the news – strong as lye soap.

The gold “aftermarket” went crazy – we turned a positive gold event and the $11.10 nice move to the upside into an “aftermarket” sell-off which erased the closing gains and moved to the downside as much as $20.00. That amounts to a whopping $31.00 spread on an idea that did not happen as yet, shows how dyslexic this process has become and put the bears back in charge.

Silver closed up $0.43 at $16.28. Silver followed gold up and turned equally negative in the “aftermarket” turning a $0.43 closing gain into a $0.37 “aftermarket” loss for a total range of $0.80 – which also left everyone scratching their heads.

Platinum closed up $22.00 at $1011.00 and palladium was higher by $7.00.

plat_barThis from Allen Sykora (Kitco) – Commerzbank, HSBC: Chinese Gold Imports from Hong Kong Confirm Strong Demand – September gold imports into China from Hong Kong confirm strong demand in the key gold-consuming nation, say HSBC and Commerzbank. According to news reports, China’s net gold imports from Hong Kong climbed to 97.242 tonnes in September from 59.319 tonnes in the prior month. This was the highest monthly level since November 2014. “Since the start of the year, China has now imported 582 tonnes of gold from Hong Kong on a net basis, which is just shy of 3% more than in the same period last year,” Commerzbank says. “In other words, imports have now caught up following a subdued start to the year; gold imports in the first half of the year were nearly 20% down on the previous year.” Increased Swiss gold exports to China and Hong Kong and record-high gold withdrawals on the Shanghai Gold Exchange had already indicated “robust” Chinese gold imports, Commerzbank says. Adds HSBC:  “Brisk demand from China is central to sustaining prices, as after a strong August, Indian demand for imported gold seems to have cooled.”

This is our usual ETF Wednesday information – Gold Exchange Traded Funds: Total as of 10-21-15 was 50,053,818. That number this week (10-28-15) was 49,935,916 ounces so over the last week we dropped 117,902 ounces of gold.

The all-time record high for all gold ETF’s was 85,112,855 ounces in 2013. The record high for Gold ETF’s in 2015 is 53,901,867 and the record low for 2015 is 48,751,079.

All Silver Exchange Traded Funds: Total as of 10-21-15 was 606,613,021. That number this week (10-28-15) was 607,310,525 ounces so over the last week we gained 697,504 ounces of silver.

All Platinum Exchange Traded Funds: Total as of 10-21-15 was 2,553,591 ounces. That number this week (10-28-15) was 2,542,618 ounces so over the last week we dropped 10,973 ounces of platinum.

All Palladium Exchange Traded Funds: Total as of 10-21-15 was 2,881,472 ounces. That number this week (10-28-15) was 2,849,334 ounces so over the last week we dropped 32,138 ounces of palladium.

This from Sarah Benali (Kitco) – More Aggressive Tightening From Fed In 2016 Than Markets Have Priced In – Capital Economics – As markets await Wednesday’s Federal Open Market Committee meeting to conclude, one UK-based research firm says that despite it being a non-event, the central bank may look to make more aggressive policy moves moving forward. “[W]e continue to expect US interest rates to be raised more than the markets anticipate in 2016 and beyond,” says Julian Jessop, chief global economist for Capital Economics, in a research note Wednesday. “Nonetheless, this prospect should not be as alarming as it sounds, both because it depends on global economic and market conditions improving, and because policy elsewhere is still likely to be loosened further,” he adds. According to Jessop, the Fed will hold off on raising rates until March of next year, prompted by weaker employment data and a ‘likely’ slowdown in Q3 GDP data. “Beyond that, however, rising inflation will prompt a more aggressive tightening than markets currently have priced in.” Jessop explains that they expect the Fed funds rate to increase no more than 2% in 2016 and 3 ½ % in 2017. “What’s more, these forecasts depend on the US economy remaining strong enough for wage and price pressures to pick up, and on there not being any major adverse reaction in the markets. If these conditions are not met, the Fed would surely go back on hold (or even reverse course),” he says. Looking at the global picture, Jessop says he expects more easing from the European Central Bank, the Bank of Japan and the People’s Bank of China; adding that emerging markets shouldn’t be too concerned with Fed rate hikes. “We are also relatively relaxed about the impact of Fed tightening on emerging market (EM) equities and on commodity prices,” he said, noting that both might actually benefit after the first rate hike is in place as markets will perceive it as a vote of confidence in the global economy. “In any event, the prospects for most EMs depend far more on developments in China than on whether US interest rates end next year at zero, or (a still-low) 2%.”

 The walk in cash trade was somewhat busy but the surprise “aftermarket” took the buzz out of the downstairs. The phones were also initially busy but turned very quiet when everyone decided the FOMC statement was hawkish. 

The GoldDealer.com Unscientific Activity Scale is a “4” for Tuesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 4) (last Friday – 4) (Monday – 4) (Tuesday – 4). 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 generally increasing – it would indicate things are busier – decreasing numbers over a longer period would indicate volume is moving lower.

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