Commentary for Tuesday, May 3, 2016 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc ……
Gold closed down $7.30 today on the Comex at $1287.40. This will disappoint the over $1300.00 crowd but there is a great deal going on and most of it is not obvious.
It’s funny how fast the gold market can develop a case of the “worries” – I worry all the time so it’s not unusual for me. That is why I “worried” over the European holiday (May Day) yesterday when gold moved above $1300.00 over the weekend.
And like I said the technical picture is looking solid short-term – there are too many variables still on the table for the price of gold to look “solid” so that was a small “worry”. And then there is that pesky “follow-through” in the momentum pricing. For people who really study the gold price moving to higher ground is just the first positive step. It must confirm (in this case something into the $1315.00 range would have worked).
Obviously it did not with today’s weakness in the price of gold – caused by a small case of financial worries worldwide. The primary culprit here is again – China.
This from Market Watch – “An unofficial reading on factory activity in China fell further into contraction in April, cementing concerns over the health of the world’s second-largest economy. The Markit and Caixin Media survey saw activity fall to 49.4 in April from 49.7 in March, declining further below 50, the level separating expansion from contraction. This is the 14th straight month in contraction.
A change in policy from the Reserve Bank of Australia also triggered fears over the health of the global economy. The central bank cut rates for the first time in a year as its economy faces record-low inflation and a stronger U.S. dollar that pressured demand for its oil, basic materials and other local products internationally. Its cash rate target was cut to a new low of 1.75%. The chances of a rate cut were over 50%.
Crude oil was also sharply lower for a second day ahead of weekly inventory data that will be released after the closing bell. Oil has pulled back as fears over a supply glut and growing production returned after a surge of nearly 20% in April. West Texas Intermediate was down 1.5% to $44.12 a barrel.”
If you read about the “contraction” in China it is not large – but their pie is very large and a sniffle from them might give Europe pneumonia. Considering the EU is already being fed large amounts of antibiotics any further deterioration of their financial health might prove dangerous to everyone else (that includes us).
So while gold was on the way to setting new recent highs and everyone was getting out the champagne – I worried – perhaps needlessly but today the rest of the world decided maybe there were other troubles in River City and so “worry” brought the price of gold back into focus.
If you don’t care for my latest read you can also substitute the above for another prevailing theory – “too far too fast”. Gold is up more than $60.00 in 30 days so look for profit taking. It is just too easy for the bulls to book profits and move to the sidelines.
There is also the dollar to consider – this from Market Watch – “With U.S. economic data showing some deceleration the market has given up on any chance of a rate hike by the Fed and the dollar dump has now turned into a momentum move,” said Boris Schlossberg, managing director of currency strategy at BK Asset Management, in a note to clients.
The Dollar Index today rebounded off recent lows of less than 92.00 – surging in late trading to almost 93.00 before settling (92.75). This did create a headwind for gold but the “talk” of a weaker dollar grows – the dollar has trended steadily lower for the past 6 months and a break below 92.00 might produce “pile on” momentum to the downside – this obviously would be good for the price of gold.
So I would not get too “worried” – after all we are capitalists and there is solid business being done across the counter at GoldDealer.com and other large bullion dealers nationwide.
Yesterday our Brink’s pick up was the largest I have seen in months – that means the public is buying large and the ETF gold numbers also “jumped” higher.
Consider the following from Allen Sykora (Kitco) – Commerzbank: U.S. Gold Coins ‘Proving Very Popular’ – “U.S. gold-bullion coins “are proving very popular at present,” says Commerzbank. Analysts cite data showing that April sales of American Eagle gold coins were 105,500 ounces, more than triple the 29,500 ounces sold in the same month a year ago. “Four months into the year, U.S. coin sales have already totaled 351,000 ounces, twice as much as in the same period last year,” Commerzbank adds. Silver-coin sales totaled 4,072,000 ounces last month, down marginally from March but up sharply from 2,851,500 in April 2015, according to data on the U.S. Mint’s website.”
This Friday will see the release of US non-farm payroll information – which will allow the world to ponder what the Federal Reserve will do with interest rates this next meeting.
The Federal Open Market Committee (FOMA) holds eight regularly-scheduled meetings each year and can announce an unscheduled comment whenever it feels it is necessary. Of these eight meetings four are “special” meaning the chair (Janet Yellen) holds a press conference and offers projections – the next meeting of our financial leaders will be June 14-15 and this meeting is one of the four special occasions. Given that some people smarter than me believe the summer holds significance – there is talk that this next meeting may produce an interest rate hike.
The more practical ducks in the pond think an interest rate unlikely because the Fed does not want to rock the boat. I think they will do just the opposite and the boat will have no trouble floating along – the rate increase will be small and soon forgotten.
Silver closed down $0.20 at $17.45. This market remains “warm” – one of the distractors when it comes to silver bullion is storage if you are a large player. And now that most believe we have seen a “bottom” in the silver price, ETF numbers are moving higher and the “cheap” buyers are out of the market so we expect prices to remain firm.
If you are considering “larger” silver bullion deals consider our COMEX insured storage program. The price is right for guaranteed professional storage and you can move into and out of the market with a telephone call. If this sounds like less hassle you are right – so talk with Ken Edwards for details (1-800-225-7531).
Platinum closed down $14.00 at $1070.00 and palladium closed down $16.00 at $609.00.
The walk-in cash business was busy most of the morning – there were 10 or 15 people either buying or selling – and some of these were size. The phones were not as active especially in the later part of the day – also something to think about – seasonally gold is heading for a traditionally slower period of the year (the summer doldrums – it’s still too early to “guess” but a trend to keep on the radar). Today the popular product was the Austrian Silver Philharmonic
The GoldDealer.com Unscientific Activity Scale is an “7” for Tuesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 5) (last Thursday – 5) (last Friday – 7) (Monday – 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.
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