Gold Markets Commentary for Monday, November 14, 2016 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc ……
Gold closed down $2.80 today at $1,219.10. Well so much for my feeling Friday that gold markets were oversold – I was sure we would see a bounce to higher ground today. The overnight gold market held firm in Hong Kong and London but the domestic trade pushed prices lower – at one time touching $1,212.00 and then gold recovered to close virtually unchanged on the day.
So without that big oversold bounce let’s consider other factors – the gold markets old nemesis has reasserted itself – the dollar is hot enough to cook hamburgers. The Dollar Index is trading around 100.00 and the bond market continues to get attention.
This will be called the “Trump Effect” and the story goes something like this – everyone is buying into the notion that President Elect Trump will initiate policies which are good for business – his first priority being a corporate tax cut. The Republican position is that moving corporate taxes from 35% to 15% will stimulate jobs and corporate investment – this is the Regan model and if it works business will boom.
Wall Street already believes – look at stocks post Trump victory and the bond market. Rates on the 10 year bond are topping 3% which might indicate everyone is expecting higher inflation rates – so why is gold moving lower? It takes time for these possible changes to walk through the system.
So with all this possible success and happiness being expected at any time the dollar moves higher pressuring gold lower. There are however consequences – like a ballooning debt problem and the cost of higher interest rates. Now let’s throw that possible trillion dollar infrastructure program into the pot and the next question might be “Who is going to pay for all this happiness?”
The answer of course is “you and me” but a tax cut was also promised to the people who have to work for all this money. This brings me to an old question – Is it ethically right to promise a chicken in every pot – when there are not enough chickens? I just made up the new phraseology but you get my old point.
You could make a case that gold held up today despite the stronger dollar. That is the most optimistic picture but the technicians are worried because this market remains defensive. Gold could break down at the $1,200.00 level – not pretty from the computer trading viewpoint. A breakdown at $1,200.00 would leave gold vulnerable to the famous “pile on theory” and the next big support level is $1,100.00.
Let me leave you with my not yet abandoned position – today’s fight-back is promising in an otherwise cloudy world of higher interest rates. I still think gold is oversold – all this wave of Trump happiness and the transition team still has more than 4,000 jobs to fill and a whole basket full of promises on the table. He really has his hands full even with a public and congressional mandate. Let’s give him the benefit of the doubt, hope for best and plan for the more predictable inflation payback, probably sometime in 2017 – remember we already have a huge head start in the fiat money production game.
Silver closed down $0.49 at $16.87. This market has settled into a sweet spot where physical demand usually picks up so look for solid support. Also of late the peso has plummeted – Mexico being the world’s largest silver producer and with the decline in the peso Mexican silver producers are actually seeing higher prices. The prospect of higher peso prices could spur production. We have seen some outflows from the exchange traded funds after record highs this year.
Platinum closed down $9.00 at $932.00 and palladium closed up $10.00 at $694.00. Platinum is selling at $287.00 less than gold – this discount has been moving lower but is still gigantic relative to long term norms.
The walk-in cash business was busy all day and the phones finally slowed down after lunch.
Just a reminder – next week is Thanksgiving! GoldDealer.com will be closed Thursday and Friday (November 24 and 25) so that we may thank God for His bounty and partake in that second piece of pumpkin pie!
The GoldDealer.com Unscientific Activity Scale is a “5” for Monday. The CNI Activity Scale takes into consideration volume and the hedge book: (Tuesday – 4) (Wednesday – 4) (Thursday – 4) (Friday – 7).
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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