Commentary for Monday, August 5, 2019 (www.golddealer.com)

Gold Market Newsletter with Richard Schwary

By  Richard Schwary of California Numismatic Investments Inc ……
 

Gold Powers to Six-Year High – Gold closed up $19.00 today at $1,464.60! Wow! Exactly what you might expect when one seems happy – gold moves to 6 year highs. At the center of what should have been just another food fight is the Chinese yuan – it would appear that China, at least for now will let their currency weaken – reacting to Trump’s continued attempt at punishing them for not playing the trade game properly, or at least not playing it the way we would had hoped.

The usual finger-pointing began early and in my opinion is just beginning to heat up. This behavior is foolish actually on both sides – each believing that their political position is the gospel. At any rate, the bad news was out early – the overnight gold market in both Hong Kong and London moved higher and the domestic followed as safe-haven demand pushed the price dynamic.

The US market moved from $1,458.00 through $1,470.00 – then profit-taking set in as the market moved back to unchanged. Traders then bought the dip moving prices back into the $1,465.00 range. And gold for the second time this month moved above $1,440.00 breaking above the $1,420.00 / $1430.00 short-term consolidation range. At that point, many traders were optimistic that a test of $1,500.00 was in the making. As usual, there is nothing better than a good old “scare” to wake everyone up and look to gold for some safe-haven protection.

And what about the dollar? The Dollar Index – reached a weekly high of 99.00 last Thursday but decided today that 97.5 was a more comfortable number. Still, that much of a drop in a short time is a warning that things are just not right in River City.

And consider crude oil – another market which might make your head spin. This past week we have moved from $58.00 through $55.00 as Trump imposes further sanctions on Iran and our good friends in China suggest that doing oil business with Iran might be a great idea!

What a mess but for now gold holds all the technical cards. This latest scare has redefined the shorter-term picture, but believe it or not gold still has work to do. We have definitely broken above $1,400.00 and more importantly have developed a significant trading buzz in the bargain.

But there is a lot of blue sky up here and the next really big price test looks like $1,600.00 – a level we have not seen since mid-year 2012. Expect perhaps significant backing and filling – this would be constructive and might continue through year end but once the genie is out of the bottle it’s difficult to figure because shorter term profit taking makes everyone fidgety and nervous.

I can’t say the US gold market is hot – yet. But one thing is sure – if world and US stocks continue to move lower it will attract a lot of attention – more fresh speculative money and perhaps turn this latest flash in the pan into a classic momentum play.

This from Zaner (Chicago) – “Not surprisingly a massive washout in global equities overnight from last week’s trade actions resulted in a sharp range up move in gold to start the trading week. In fact gold reached a six year high and is being boosted further by additional weakness in the US dollar anxiety and speculation is rampant on the probable next moves from the US and or China with some press outlets now predicting a currency war. In our opinion the currency war would likely result in a severe washout in the dollar and that could leave a large amount of global capital with some hesitancy in flowing toward US treasuries. Therefore the gold market might win out with very little competition throughout the marketplace. Psychologically the gold market should see added lift from news that Gold ETF funds have now added holdings for 5 straight days with net purchases this year at 4.87 million ounces gold ETF holdings are now at the highest level in over a year. Unfortunately for silver bulls Silver ETF’s reduced their holdings in the last trading session but purchases for the year still total 74.7 million ounces. Clearly the gold market is unfazed by news overnight from India where July imports were said to have dropped by 69% versus year ago levels. The path of least resistance is pointing up with the next resistance point derived from the monthly charts up at $1,500. While the news of a bullish gold survey on Wall Street could indicate the market is closing in on overdone status, gold has seen the “list” of bullish fundamental themes present early last month return and therefore the prospects of another leg up appear to be strong. The latest positioning report in gold did show gold to have the largest net long since September 2016, but the market also showed a significantly larger net spec and fund long reading for weeks ahead of that peak and that might indicate the potential for additional buying fuel on the sidelines now. The July 30th Commitments of Traders report showed Gold Managed Money traders added 13,848 contracts to their already long position and are now net long 231,365. Non-Commercial & Non-Reportable traders added 9,002 contracts to their already long position and are now net long 327,423. While the silver market has recovered from significant declines last week, its charts are much less bullish and silver appears to be diverging somewhat with gold and we think that is because of its physical commodity status and the threat of renewed global economic headwinds. Furthermore, the silver market has the largest net spec and fund long position since April 2017 and the market also has significant overhead consolidation resistance from the past two weeks around the $16.50 level. While silver could benefit from safe haven lift, we suggest gold is a better play for economic anxiety. Silver positioning in the Commitments of Traders for the week ending July 30th showed Managed Money traders were net long 65,327 contracts after increasing their already long position by 11,166 contracts. Non-Commercial & Non-Reportable traders were net long 88,744 contracts after increasing their already long position by 7,197 contracts.

Like other industrial commodities, the PGM markets were smashed last week as a result of the sudden deterioration in global economic prospects arising from the latest US tariff threat. Fortunately for the bull camp in palladium, the market has returned to what has been a key pivot point/support level at the psychological $1,400 level. Furthermore, the net spec and fund long positioning (prior to the large washout last week) was already within the range of the last 18 months and has probably drifted down to the lowest levels since September of last year if adjusted for recent declines. Palladium positioning in the Commitments of Traders for the week ending July 30 showed Managed Money traders added 242 contracts to their already long position and are now net long 14,329. Non-Commercial & Non-Reportable traders added 516 contracts to their already long position and are now net long 12,811.

Like the palladium market, the platinum market has also returned to a level that has been critical pivot/support for nearly 10 months and its net spec and fund long positioning has fallen to very modest levels. It is also possible that the liquidation last week below $850 (which was rejected) balanced the market as the major range down day was forged on significant trading volume. Platinum positioning in the Commitments of Traders for the week ending July 30 showed Managed Money traders were net long 10,441 contracts after increasing their already long position by 9,526 contracts. Non-Commercial & Non-Reportable traders net bought 6,027 contracts and are now net long 34,174 contracts.

The path of least resistance is pointing upward in gold to start the trading week, but we are a little skeptical of the bull case in silver. While we acknowledge the shift toward economic anxiety at the end of last week, that line of thinking has been stoked by noted declines in global equities to start the trading week. With some media outlets this morning even touting the prospect of a currency war an additive measure of anxiety buying is added to the equation. Some will suggest the upside breakout from a 40-day sideways consolidation projects gold prices to the $1,500 level as that uses the 40-day range measurement of $50 above the markets recent consolidation highs which were situated around $1,450. Unfortunately, significant volatility at the end of last week leaves uptrend channel support fairly far down at $1,417.60 but we would peg closer in and more critical support at $1,446.50. As indicated silver might have some upside capacity but thick resistance on the charts is seen at $16.55 and the fundamental case might be limiting.”

Silver closed up $0.13 at $16.35 – still plenty of upside here especially if gold runs. Keep in mind this market is still trading at a huge discount to old highs.

Platinum closed up $5.00 at $855.20 and palladium closed up $12.10 at $1,411.10. 

 

 

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