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Gold Market Newsletter – Gold Closes Firm – A Short-Covering or Relief Rally?

Commentary for Monday, September 14, 2015 (www.golddealer.com)

Gold Market Newsletter with Richard Schwary

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

Gold closed up $4.20 on the Comex today at $1107.20 which is a bit of a surprise considering the FOMC meeting this week. The meeting itself apparently will be on Wednesday and Thursday and action, if any will be released after the markets close on Thursday.

I would not be too concerned (although there are plenty of people who are now fixated on the Fed’s next move) – let’s just wait and see, this zero interest rate environment is not going anywhere on the short-term or perhaps even longer.

The trade is talking about increased CFTC short positions in gold contracts which is true but I would not get too carried away. If going short in the gold market was just a matter of watching the paper market everyone would not have to work for a living. Sure the trade expects a rate increase and that increase regardless of size may depress prices but the ultimate outcome is still murky.

Goldman today actually called for more Quantitative Easing citing the China problem – a minority position to be sure but there you have it – a voice in the wilderness.

gold_silverThe same kind of thinking presents itself in the so-called relief rally. If nothing happens this week or even if traders believe the Federal Reserve will not raise interest rates because the rest of the world may be in big transition there will be a “relief rally”.

Actually this may have happened judging by today’s higher numbers. The price of gold moves higher because of something which did not happen – a dicey proposition in my mind.

You can’t really cite the dollar – the Dollar Index has been fairly steady this past week moving from 96.00 to 95.00 although on a day to day basis you could develop a talking point. And crude oil has flattened out between $44.00 and $46.00 a barrel since late August.

Silver closed down $0.13 at $14.36. Some product shortages persist – an email from a reader claims higher silver production from mines like Hecla does not square with shortages like in the American Silver Eagle Monster Box production. Again this shortage at the US Mint is not really a shortage at all – the lower prices in silver simply caught them off-guard and put them behind the production curve for now. Also note that the Perth Mint has reallocated production to keep up with their new mini-monster boxes of the 1 oz silver bullion Kangaroo.

Platinum closed down $10.00 at $955.00 and palladium was off $3.00 at $587.00.

This from Peter Hug (Kitco) – Very Nervous Markets – “The metals markets are showing high anxiety as the fed announcement date draws closer. The industrial metals are softer against the background of renewed weakness in the Shanghai index overnight, as concerns grow about the extent of the slowdown in China. Slightly higher inflation numbers on Friday, in the U.S., nudged the bears to sell gold, which created a brief dip below $1,100 before recovering. Gold this morning remains in the middle of the $1,100 – $1,112 range. Physical demand for silver investment bars continues at unprecedented levels. American silver eagle premiums are north of $6, as supplies continue to be tight and the added uncertainty of supply shortages as the U.S. Mint mulls over the transition timing to 2016 coins. Silver maples are on small weekly allocations and silver bars are a day to day struggle, for dealers. The release of the 2016 Australian 1 oz silver .9999 kangaroo, intended to compete with the eagle/maple is already in such demand that production is under serious stress. Production on other 2016 silver products has been delayed by the Australian mint to maintain production levels on the Roo against the global demand. If silver trades at a $13 handle, premiums will continue to increase, as demand will accelerate.”

This from Clara Denina (Reuters) – Gold eases to around one-month low as Fed meeting nears – LONDON, Sept 14 (Reuters) – Gold edged down on Monday to just above a one-month low, as the dollar recovered and global stocks rose ahead of a Federal Reserve policy meeting that will be scrutinized for clarity on when the U.S. central bank will raise interest rates.

Spot gold fell 0.2 percent to $1,105.05 an ounce by 1337 GMT. It had fallen to $1,098.35 on Friday, the lowest since Aug. 11. U.S. gold for December delivery was up 0.2 percent at $1,104.90, but also close to its lowest in a month.

The Fed will kick off a two-day policy meeting on Wednesday. Though some in the market still reckon a “lift-off” could come this week, the view is gathering steam that faltering global growth could push that back even into next year.

“There has been so much anticipation (about the Fed rate hike) that we are now anticipated out,” Macquarie analyst Matthew Turner said.

“I don’t think that not raising rates in September could feel like a complete change of policy,” Turner said, adding that one concern for gold could be if the dollar resumes its upward move against developed market currencies.

The dollar recovered from an almost three-week low against a basket of major currencies, while European shares rose, showing resilience to weak China data published over the weekend.

Gold has benefited in recent years from ultra-low rates, which cut the opportunity cost of holding non-yielding gold while weighing on the dollar, in which the metal is priced.

Concerns over slowing economic growth in China, mixed economic data and volatility in financial markets have increased doubts about the timing of any U.S. rate increase, which had been expected as early as this month.

A small majority of forecasters are sticking to their guns and predicting the Fed will pull the trigger this week.

“A non rate hike in September could give a temporary respite to gold, but prices are unlikely to breach recent highs around $1,170,” ActivTrades chief analyst Carlo Alberto de Casa said.

Investor positioning has not been encouraging for gold prices.

Hedge funds and money managers cut their bullish stance in COMEX gold contracts to a three-week low in the week ended Sept. 8, while boosting their short positions, U.S. Commodity Futures Trading Commission data showed on Friday.

Other precious metals were also under pressure, with silver down 1.4 percent at $14.39 an ounce and platinum falling 1.5 percent to $951.50.

Palladium fell 1.6 percent to $582.75. (Additional reporting by A. Ananthalakshmi in Singapore; Editing by David Holmes and Louise Heavens)

The walk in cash trade was on the slower side today but the phones were active call day and the numbers coming across the counter are on the high side judging by the Activity Scale. There were also some rather large sellers of gold bullion today. Silver bullion is still the center of activity along with IRA activity.

The GoldDealer.com Unscientific Activity Scale is a “9” for Monday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Tuesday – 8) (last Wednesday – 9) (last Thursday – 8) (last Friday – 8). 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.

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