Commentary for Tuesday, May 16, 2017 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc ……
Gold closed up $6.40 at $1,236.40 today. The gold market continues to attract minor attention – I say minor because most investors are still looking at stocks as investor “fear” has exited the theater. This is curious considering world turmoil but pretty predictable – for the system to work investors must have a short-memory. Not to sound glib but that’s how Wall Street works – to invest in stock that represents a company that hasn’t made any money since inception takes faith.
Gold pricing was flat in the Hong Kong and London markets – moved slightly higher in early domestic trading and then popped into the $1,238.00 range before settling. This upward push is probably the result of a slumping Dollar Index today – previous close was 98.88 and we are now trading around 98.28 – this is enough weakness to push gold higher but the reaction was a bit on the anemic side. Think about it – CNBC headlines this morning – Dollar Hits 6 Month Low – and gold can only manage $6.40 – still it is better than nothing.
While the economy looks fairly quiet – positive growth, but not the 3% that everyone wants – April industrial production was up 1%. Keep in mind that most of the optimism in the economy still centers around the ability of Trump to enact new tax laws and implement infrastructure spending – stock market gains are in front of this curve. If the wanted change does not occur and Wall Street swoons, then safe haven gold buying will be given a new life.
I think traders are a bit surprised that gold has found traction since last Wednesday – this accounts for minor bargain hunting and short-covering. This supports the notion that no one really knows which way this market might pop.
Sentiment is still probably backburner bearish – but shorter term neutral – traders might be waiting for the second shoe to fall which is why the Dollar Index can lose a half point and gold gathers no headlines. I would also watch the price of crude oil – whether this latest “small cartel” can hold it together remains to be seen but these past few days the price has held in the $48.00/$49.00 range. This is a pretty big deal actually considering $46.00 was being served up last week and higher prices support the physical gold market.
All of this undercover drama might also be influenced by a small change in the FOMC wind. Just a few weeks ago the Federal Reserve was gung ho relative to further interest rate hikes meaning plural. There is now reasonable argument that would suggest this rhetoric is simmering down; in other words we will see that promised summer hike but nothing more in 2017.
This is not the first time I have talked about this but if this conjecture is correct it paints a much difference picture for the price of gold in the shorter term. Instead of being defensive through Christmas the market will have time to repair the damage done to the moving averages. And the longer gold remains above $1,200.00, the confidence will grow that a reliable bottom is already in.
This from Zaner (Chicago) – “In addition to revived safe haven interest off the latest North Korean missile test and uncertainty from the cyber-attacks over the weekend, the gold market saw support from news Monday that April Indian gold imports were up sharply from year ago levels. While the sharp rise in Indian gold imports was at least partially the result of restrictive government import policies and de-monetization efforts last year, the magnitude of the increase in physical imports (+211% in dollar value) should not be discounted. It is also highly likely that ongoing weakness in the dollar (which is primarily the result of a developing pattern of disappointing US data) is set to contribute to more near term gains in gold, silver and platinum ahead. With only moderate gains in gold prices since last week’s lows, it is not surprising to see short-term technical indicators remaining in “buy” modes. Following disappointment from the New York Fed manufacturing readings yesterday, that should make US housing data due out later this morning even more critical to the Dollar and therefore important to precious metals. The gold market might be drawing some fresh support from the latest Washington flap flowing from a Washington Post story suggesting that the US President revealed classified information to visiting Russian officials. Gold derivative holdings declined overnight by 20,513 ounces.”
Silver closed up $0.15 at $16.75. This market is usually predictable – as prices rise volume numbers move lower but today’s price is considerably less than recent highs and the public sees this region as a “sweet spot”. The latest ETF holdings for silver are still rising – today saw a record (2017) high.
Platinum closed up $8.30 at $937.00 and palladium closed down $5.00 at $792.00.
The GoldDealer.com Unscientific Activity Scale is a “4” for Tuesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 4) (last Thursday – 5) (last Friday – 4) (Monday – 3).
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 increasing – it would indicate things are busier – decreasing numbers over a longer period would indicate volume is moving lower.
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