Gold Commentary for Thursday, May 23, 2019 (www.golddealer.com)
By Richard Schwary of California Numismatic Investments Inc ……
Gold closed up $11.20 at $1,284.80 today. It was steady overnight in both Hong Kong and London but broke higher in the domestic trade – pushing through $1,285.00 most likely on a case of the jitters. I watched House Speaker Pelosi this morning over coffee and am getting more worried than I was yesterday over the situation between the Democrats and Republicans.
The problem with this food fight is that it is getting serious and more toxic so less will be accomplished in Congress. The big thing both sides seemed to agree on was infrastructure funding and now that is being held hostage. No one needs to be reminded there are serious issues facing Congress – not that there is a magic bullet for any of this but the world gets more concerned if both sides even refuse to talk.
World financial markets today are also jittery over the increased tension between the US and Iran. This is another mess escalated for no apparent reason and Trump’s comments claiming a fight with the US will be the official end of Iran is scary.
The world is not as sophisticated as war staff military who claim that this US reaction is justified under the Powell plan – which is basically “warn them to be good while reviewing all options”. Trump’s comments are especially worrisome because of US troop deployment in the area.
These newly developing threats are creating safe-haven buying in the metals and providing more conviction at least on the short term that the scary $1,270.00 shelve for gold continues to hold up. The Dollar Index was strong today around 98.2 – pushed to 98.4 and then quickly sold off to below 97.8. This obviously helped gold.
And the DOW moved lower by 400 points – reinforcing world tension over what appears to be a protracted US-China standoff.
This is another reason gold remains firm – the world is beginning to think that both the Chinese and Americans are not just saber rattling and looking for a better deal. It’s hard to believe we are in this situation because both sides have a goose that lays golden eggs.
And it appears that both sides instead of feeding and caring for the goose have decided to have it for dinner. Don’t laugh at this symbolism it happens all the time when you deal with gigantic egos. This factor alone is enough to support gold and also helped push prices higher.
If you think this disruption is US/China relations is just a ship passing in the night you might be wrong. Nomura said this morning that trade tension could well last into the 2020 US election.
Todd “Bubba” Horwitz (Kitco) makes an interesting point. If equities are being hammered why isn’t gold reacting? He claims there is no correlation between gold and stocks and he is right as long as people still have faith in the stock market. But if stocks even come close to moving back to pre-Trump days gold would shine not just because of safe haven demand but because this move would likely also mirror a dramatic drop in the dollar.
So there is plenty of background noise in the gold market. Still, I would not get too excited over today’s pop in prices. If you look at the 30-day pricing chart we have once again bounced off the $1,270.00 support and have moved back to more bullish support between $1,280.00 and $1,285.00. Not a big deal but something to at least build the possibility of gold pushing higher perhaps even challenging $1,300.00 but that is a story for another day.
Remember this coming Monday is Memorial Day – presenting a long weekend which might suggest a calmer gold market through next Tuesday – or not.
This from Zaner (Chicago) – “Gold is higher this morning despite the nearby dollar index reaching its highest level in two years overnight, as sharply lower equity markets are contributing to safe-haven inflows into the precious metals. Having tested the 200-day moving average three times in the past month, gold looks vulnerable to a selloff. It showed little reaction to the Fed minutes released on Wednesday, as they suggested that the Fed is in no hurry to adjust monetary policy. It also conveyed a slightly optimistic tone towards the US economy, and that is bearish for gold. We would argue that until some there is some bad news for the economy, the gold market is likely to stay under pressure. Treasury Secretary Mnuchin stated that the United States is at least a month from enacting its proposed tariffs on $300 billion in Chinese imports, which could be interpreted as an opportunity to achieve some sort of trade agreement with China. The US and China seemed to have underestimated each other’s resolve when regarding these trade talks, and it gets more difficult for them to come to an agreement the further we go down this road of tariffs and retribution. That could be a long-term supportive factor for gold but probably not until the trade issues start to show a more widespread effect on the economy. In the meantime, gold is subject to a selloff if it takes out the May low.
July platinum has closed lower in six of the past seven sessions, and it pushed lower again overnight. The trade dispute is bearish for autocatalyst consumption. This is particularly bearish for palladium, but platinum is already dealing with an oversupply. Palladium supplies are tighter, and even though the market tested the low of its recent trading range on Wednesday, it is starting from a better position fundamentally. Look for support in June palladium at $1,291.70 and $1,256.50, with resistance at $1,339 and $1,388. Look for support in July platinum at $786.20, with resistance at $825 and $837.50.
June gold has tested the 200-day moving average three times in the last month, and we do not have much faith that it will hold this time. It is also approaching the bottom of a month-long consolidation at $1,267.30. A break below there (just below the 200-day moving average at $1,270.00) could spark a heavy round of liquidation that could send the market down to and perhaps below the next retracement target at $1,260.80. Like gold, July silver was higher overnight. The market is oversold and due for a correction. There is no technical sign of a low, but it could rally 24 cents and still be in a downtrend. Look for with support at $14.30 and $14.175, with resistance at $14.57 and $14.75.”
Silver closed up $0.17 at $14.58.
Platinum closed down $5.60 at $797.20 and palladium closed down $5.70 at $1312.50.
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