Gold Market Report Commentary for Monday, September 24, 2018 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc ……
Gold closed up $3.10 at $1199.30 – off the highs of the day but still in the green nonetheless. So gold continues firm – a bit higher today – the Dollar Index dipped in early trading but recovered nicely above 94.00. The FOMC meeting is in progress this week but their decision on interest rates will not be known until after the market’s close on Wednesday. Most likely they will “raise” perhaps a ¼ point so I expect the dollar to be at least firm.
All this is old news so why is gold moving higher today?
It might be because of a Reuters report – Euro rises to more than three-month high on Draghi’s inflation comments – “The euro rose to more than a three-month high against the dollar on Monday after European Central Bank chief Mario Draghi said he sees a vigorous pickup in euro zone inflation, backing moves toward unwinding an ECB asset purchase program meant to stimulate the economy.” You might also be seeing a small reaction to higher oil prices after OPEC rebuffed Trump’s call to action in raising global supply.
Whether any of this will hold up after the FOMC pushes rates higher remains to be seen. But it is interesting that the ECB also claimed it will keep interest rates low through next summer.
I would add that while there are still too many bears in the woods the fact that gold has basically been moving sideways since late August might suggest a bottom is in place – perhaps waiting to see what fallout if any is seen over the FOMC decision.
This from Zaner (Chicago) – “With a moderate failure on Friday temporarily resulting in the lowest gold price in eight days, and not benefiting from dollar weakness (to the degree that many bulls hoped) the path of least resistance in gold looks to be down early this week. Certainly the gold market is benefiting from initial weakness in the dollar today but divergence with silver takes some of the bullish tilt out of this morning’s early bounce in gold.
The gold market might be drafting some support from a very impressive range up extension in crude oil, as that market reaches a fresh 2018 high and should foster some measure of inflationary hope. So far the precious metals markets and many other commodities have not embraced the potential for inflation inspired by spiraling tariff action, but we must continue to reiterate that prospect.
There was a large gold company buyout of a South African gold miner overnight (Barrick gold buying Randgold Resources in an $18.3 billion deal) that highlights views that gold assets in general are undervalued. Furthermore that buyout also suggests gold miners think there is long term value in gold related assets.
News that China had to cancel trade talks with the US is a negative as is comments from a CNBC Chinese commentator suggesting that the tone in China is downbeat because of the tariffs.
Another issue that might serve to undermine gold later this week is the FOMC meeting results on Wednesday as that could temporarily lift the dollar off the anticipation of a notching higher in US interest rates. The most recent positioning report showed both gold and silver holding net spec and fund short positions and that should dramatically reduce the potential of stop loss selling by longs.
The Commitments of Traders Futures and Options report as of September 18th for Gold showed Non-Commercial and Non-reportable combined traders held a net short position of 17,815 contracts. The Commitments of Traders Futures and Options report as of September 18th for Silver showed Non-Commercial and Non-reportable combined traders held a net short position of 8,072 contracts. This represents a decrease of 3,406 contracts in the net short position held by these traders.
The palladium market might benefiting from China pre-buying supply for electric vehicles; but that is somewhat concerning for the bull camp as the trade war continues to extend and sentiment inside China is deteriorating and there are signs that the trade war is unending. However, recent price action at the very least should be taken as an indicator of strong physical demand for palladium.
On the other hand some of the purchases might have been ahead of the possible increase in tariffs, but some of the recent buying might be classic technically orientated buying because of long term trend reversal signals. In the end the PGMs are relatively small and mostly inactive markets, so minor fund or Chinese strategic buying can have an outsized impact on them.
Like gold and silver, the PGMs would stand to benefit by tariff inspired inflation, but we are not sure that is a force in the trade yet. Palladium is probably overdone on the long side from a fundamental and technical perspective, but the trend remains up! However, platinum specs have just recently switched from a net short to a net long position, but platinum is not overly long and without additional buying capacity. The Commitments of Traders Futures and Options report as of September 18th for platinum showed non-commercial traders were net short 1,500 contracts, a decrease of 5,661 in their net short position for the week. Non-commercial and non-reportable traders combined were net buyers of 5,277 contracts, bringing them from a net short to a net long position of 4,614. For palladium, non-commercial traders were net long 7,549 contracts, an increase of 854. Non-commercial and non-reportable traders combined held a net long position of 7,462 contracts, an increase of 1,241.”
Silver closed down $0.02 at $14.25.
Platinum closed down $0.30 at $828.20 and palladium closed up $4.70 at $1071.60.
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