Commentary for Thursday, June 25, 2015 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc….
Gold closed down $1.10 today on the Comex at $1171.50 in very quiet trading.
Considering the technical picture for gold is negative it’s interesting to me that this market does not feel “heavy”. Traders for sure are undecided and gold for now is ignoring the Greek default situation – probably because they feel some short-term solution will be cobbled together and Greece will not exit the European Union.
Crude oil has been flat around $60.00 a barrel since late April – supporting the price of gold and the Dollar Index is also flat – yesterday’s close was 95.28 and the range today has been 95.09 through 95.51 – we are now trading at 95.25.
Gold’s Moving Averages would add to the negative technical picture – 50 DMA ($1192.00) – 100 DMA ($1195.00) and 200 DMA ($1205.00. The close today ($1171.50) is below all three technical indicators so the price of gold should feel more defensive – but there are many counter trends worldwide and gold bullion remains a reliable option.
Even gold pessimists consider the $1140.00 number formidable but the reasoning that we are trading at the lower end of the range does not excite even the choir. In other words “no excitement” is equal to “no buzz”. And if the gold market can’t get excited over Greece or renewed quantitative easing within the European Union or US debt that exceeds $17 trillion dollars it will remain at least range-bound.
It’s not that gold’s decline has not been great enough – moving from $1888.00 in August of 2011 to $1171.00 in June of 2015. China and India buy this range with no problem – they may pull back trying to exact a better price but when support shows they are back with both hands.
Our across the counter experience has been that they decrease or stop buying when gold moves above $1200.00 an ounce – and when this happens they are willing to wait for better prices.
The problem with this lower end of the trading range is that it presents a “slow-grind” to dealers who supply real gold bullion to real people who really want to own the metals. It’s not that price makes no difference in this range – everyone wants a better deal. But as dips become less frequent and the $1140.00 bottom holds, the action simply slows down.
Silver closed down $0.04 at $15.80. There is some technical analysis which suggests the price of silver may break down into $13.00 range – it was trading around $13.98 in May of 2009. I find this extreme – technically silver looks worse than gold but the physical market seems much tougher in $14.00/$15.00 range. Our physical walk-in cash trade explodes when we approach $14.00 and there has always been talk of silver price manipulation and naked short positions held by the large commodity houses. The theory being that there simply is not enough real silver available to cover all the paper action.
Platinum closed up $10.00 at $1084.00 and palladium was down $16.00 at $679.00. The difference between the price of platinum and the price of gold is narrowing – platinum now trades at $87.00 less than the price of gold.
This is our usual Thursday Chicago Mercantile Exchange report covering the last 5 trading days – so we are looking at the trading volume numbers for the “August” Gold contract: Thursday 6/18 (273,941) – Friday 6/19 (274,752) – Monday 6/22 (271,465) – Tuesday 6/23 (278,660) – Wednesday 6/24 (282,525). These numbers remain in the higher end of the range.
This from Jan Harvey (Reuters) – LONDON, June 25 (Reuters) – Gold steadies after four-day drop, awaits news on Greece – Gold steadied on Thursday after four days of losses as traders took to the sidelines to await further news on Greece’s negotiations with its creditors, with caution over the metal’s longer-term outlook weighing on interest.
Expectations that the Federal Reserve is set to carry out the first U.S. interest rate increase in nearly a decade, boosting the opportunity cost of holding non-yielding bullion, has pressured gold this year, keeping it in a narrow range.
Spot gold was at $1,174.00 an ounce at 1339 GMT, little changed from the previous session, while U.S. gold futures for August delivery were up 30 cents at $1,173.20. Spot prices earlier hit a two-week low of $1,171.02.
Gold has held largely between $1,160 and $1,230 since mid-March, struggling to break higher despite an ostensibly bullish rise in tensions over Greece.
“We would have expected gold to trade much higher, given all the issues in Greece,” Commerzbank analyst Daniel Briesemann said. “It’s being kept in check by an ongoing withdrawal by speculative financial investors. If this doesn’t stop, the gold price won’t be able to recover.”
Gold has faced additional pressure from a stronger dollar, which hit a two-week high against the euro earlier this week before steadying on Thursday. European shares trimmed early losses in afternoon trading as talks began in Brussels on a financing-for-reforms deal with Greece to avert a possible debt default.
Greece’s international creditors put a final cash-for-reform proposal to euro zone finance ministers on Thursday in a showdown with Athens after lengthy negotiations failed to yield an agreed plan to avert an imminent default.
“We’ve been hearing about the Greek story for so long that it’s no longer big news. People are frustrated with the lack of performance on the part of gold,” said Afshin Nabavi, head of trading at MKS.
“We attempted this week to break $1,200 and failed, and that doesn’t look so good. With gold, either people wait for it to go much lower so it’s a bargain, or for it to get more expensive (so it has investment value). Now, people are waiting for lower numbers to buy.”
Silver was down 0.6 percent at $15.83 an ounce, spot platinum was up 0.2 percent at $1,073.24 an ounce, and spot palladium was down 2.4 percent at $679.63 an ounce.
Palladium fell to its lowest since July 2013 at $673.47 an ounce earlier, having broken through key chart support last week. Prices have slid 14 percent so far this year, hurt by perceptions that supply of the white metal is plentiful.”
So is everyone tired of hearing about when the Federal Reserve will raise interest rates and also when the Greeks will clear up that pesky problem of paying back all the money?
I know it’s easy to get cynical in this business but with little movement on either of these important questions and it being the summer-time too – what other considerations should we consider.
Of course – the Dollar Index matters the most but that too requires patience. That’s why when another commentator decides to be funny it’s appreciated by everyone. Gary Wagner knows plenty about trading these markets and I never miss reading his work – this latest post relates to zombies and should be emailed to any friends who wonder about gold’s price direction.
This from Gary Wagner (Kitco/thegoldforcast.com) was on target. Zombies Of The Fed Part 543 At Your Local Financial Theater Now – “It’s already time to focus again on the possibilities surrounding a Fed interest-rate hike. Yes, it’s like a zombie. Cut it, burn it, run away from it, bury it… it keeps showing up. (Maybe that’s more like your aunt and uncle from Toledo, but you get the idea.)
The reason we say focus again is that first-quarter GDP data has been revised to reflect growth that was not as slow as previously recorded.
GDP fell at a 0.2% annualized rate in the quarter instead of the 0.7% contraction data reported last month. Consumer spending was revised up to 2.1 percent from the initial 1.8 percent.
This “will bode well for the 2015 [GDP] average and suggests Q2 was entered with better momentum than originally assumed,” said Omer Esiner, chief market analyst of Commonwealth Foreign Exchange in Washington. Of course, the Fed will look closely at this, number, and will be strongly influenced by what goes on in the second quarter that is now coming to a close. If it looks like there is a significant uptick in GDP growth, September as a lift off target date will again come onto our radar.
In spite of that, the euro gained ground on the dollar today, helping to mitigate a downside atmosphere loose in regular trading.
Concerns yet once more about Greece worked against American equities and the two mainland stock exchanges in Europe. Only Britain’s FTSE managed a bit of an up move.
Greece presented a new revenue-raising (tax) plan that is meant to reassure other euro zone countries of the country’s ability to meet its obligations. As of this afternoon in Europe, the plan had not been fully approved, or fully rejected. The sparring goes on unabated.
The Greeks simply won’t reform their pension programs, which are considered overly generous and beyond the means of the economically weak nation.
IMF chief Christine Lagarde spelled out her objections to French magazine Challenge today: “You can’t build a program just on the promise of improved tax collection, as we have heard for the past five years with very little result.”
Talks have not broken down but the danger signs are mounting. The twin scourges of the threat of a Fed rate hike and the unsettled Greek debt situation pushed bond yields lower today.
Crude oil slipped today. West Texas Intermediate and Brent North Sea were down 1.4% and 1.7%, respectively. U.S. stocks were drawn down but stocks of gasoline and other oil-derived products were up, creating a push-pull scenario that may be present in the market till summer driving season in the northern hemisphere comes to close.
We’ve been touching on the S&P 500 recently and continue to do so. We’re awaiting a bigger move up from it. Perhaps a very big move. Right now, many traders and investors are standing by as they watch the Fed and Greek dramas unfold a little more. The S&P couldn’t seem to break through its recent record high because of the absence of that little bit of extra demand on the trading floor.
When that temporal resistance to the up move is cleared away, we’ll see the S&P jump higher. For those that enjoy our Hawaii 6.0 Articles and would like a deeper analysis focusing on the technical aspects of the market, I invite you to try our daily video newsletter. Simply use the link at the bottom of this report to sign up for a free trial. Wishing you, as always, good trading. “
The walk in trade was just average today. By the way – the reason we do a great deal of walk-in business is because product and cash are always available. The phones were on the slow side. Keep in mind that 4 th of July falls on a Saturday – so the CNI Building will be closed Friday July 3 rd for our Independence Day.
Also note that the trading markets, banks and post office will also be closed Friday – July 3 rd . Wishing you all a happy and safe 4 th of July.
The GoldDealer.com Unscientific Activity Scale is a “ 4” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Friday – 4) (Monday – 5) (Tuesday – 6) (Wednesday – 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.
Disclaimer – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisers. The precious metals and rare coin market is random and highly volatile so it may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.