Commentary for Friday, July 29, 2016 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc …..
Gold closed up $16.50 today on the Comex at US$1,350.30. This is the highest level gold has seen this week – the lowest close being $1,319.30 – the spread being $31.00. The gold markets got a surprising boost today courtesy of the Bank of Japan. The news from the BOJ is that they will stand pat on current policy – most thought this last meeting would produce something more dramatic like a further push into negative interest rate territory. Well it did not happen and the dollar weakened considerably. This could be the first hint that government monetary intervention has limits and further QE might not be effective or could be dangerous – at any rate the BOJ will take time to reassess alternatives.
The Dollar Index closed yesterday at 96.66 and today is trading around 95.57. This move to the downside was also helped as preliminary numbers on second-quarter US Gross Domestic Product were not exciting (1.2% growth rate). This suggests that the Federal Reserve will not be in hurry to raise rates even though Yellen left the door open for a rate increase in September. So dollar news was negative and the buck moved lower as gold moved higher.
So most readers already know I am not a big fan of playing the “up’s” and “down’s” of the gold market. Real gold bullion is real wealth regardless of price and represents an extreme defensive financial position. I don’t think it makes any sense to have all your wealth in gold bullion but not to create that financial balance that only gold bullion can provide is troublesome in a society which worships spending and fiat currency creation.
But our shinny friend still has plenty of work ahead. Today’s close ($1,350.30) pushes above old short-term overhead resistance ($1,340.00) – in place for two weeks. This sets up a challenge to the more important $1,360.00 overhead resistance. A move above $1,360.00 may portend the resumption of the bullish technical picture created when gold moved above $1,200.00 in May.
So all of this sounds encouraging but new highs in the stock market fueled by all this cheap money may be a gold price “cooler” on the short term – and blunt continued higher price momentum even if the Federal Open Market Committee (FOMC) decides not to raise interest rates.
Silver closed up $0.16 today at $20.36. Silver’s low this week was $19.62 so we again seem to be marking time but holding the $20.00 range.
Platinum closed up $10.00 at $1147.00 and palladium closed up $12.00 at $709.00. Platinum is trading for $203.00 less than gold but is now getting some good publicity since the US Mint sold out of its current production of 2016 US Platinum Eagles.
This from Jonathan Soble (New York Times/Reuters) – Bank of Japan Resists Strong Medicine for Stimulus – TOKYO – As Japan’s economy limped into the second half of the year, some analysts hoped that the central bank would take new, radical steps. It could move its benchmark interest rate further below zero. It could drop cash directly into the arms of Japanese consumers — so-called helicopter money.
Instead, the Bank of Japan chose to keep things at a decidedly lower altitude, at least for now.
The central bank said after its policy meeting on Friday that it would only slightly expand deflation-fighting stimulus, with changes that ranked at the cautious end of what analysts and investors had been expecting.
But it also said it would carry out a “comprehensive assessment” of its approach, a tacit admission that it had so far been unable to defeat the debilitating wage and price stagnation afflicting the Japanese economy.
That review, which will be delivered at its next meeting, in September, is likely to stir speculation about whether the bank will try more drastic maneuvers to get the economy rolling.
The more extreme options include helicopter money, a catchall term for dumping funds straight into the economy by giving it to consumers or printing new money to finance more government spending. Central bankers generally see this as dangerous, but some specialists say Japan may be running out of options.
The central bank “clearly disappointed the market today,” said Michael Moen, a bond manager at Aberdeen Asset Management.
“Reading between the lines, the bank appears to be acknowledging the limits of its policy tools, and the focus going forward will need to be on a combination of fiscal and monetary stimulus,” he said.
There are few weapons in the normal central banking arsenal that the bank has not tried. Its benchmark interest rate is already set below zero, a move intended to try to force companies to invest money rather than hoard it. It is buying government bonds at a rate of 80 trillion yen, or $770 billion, a year to keep banks flush with cash to lend.
Even so, consumer prices were down 0.5 percent in June from a year earlier, and the economy has bounced between periods of growth and contraction.
Since Prime Minister Shinzo Abe came to power at the end of 2012 on a promise to rekindle economic growth, his government has often seemed to leave much of the work to the central bank. Japan has the heaviest public debt load in the world, and Mr. Abe’s administration is officially committed to reducing the deficit, so letting the central bank spend instead of the government is less contentious.
Our Patented Employee Survey – Gold’s Direction Next Week?
Of course it’s not really patented but we do have some fun along the way. This is what the GoldDealer.com employees think: 9 believe gold will be higher next week – 2 think gold will be lower and 1 thinks it will be unchanged.
Our Patented Customer Survey – Gold’s Direction Next Week?
Like the employees our customers were given three choices – up – down – unchanged. We limited the survey to a random sampling of 100 transactions – unscientific but worth considering because these people took action: 49 people thought the price of gold would increase next week – 43 believe the price of gold will decrease next week and 8 think gold prices will remain the same.
Precious Metal Closes & Dollar Strength – July 25– July 29
The walk-in cash business and phones were again on the quiet side but the Activity Scale number remains high because there are some very heavy hitters still selling to us.
The GoldDealer.com Unscientific Activity Scale is a “7” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 4) (Tuesday – 7) (Wednesday – 5) (Thursday – 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.