Commentary for Tuesday, Oct 3, 2017 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc ……
Gold closed down $1.20 at $1,271.50, and while opening choppy prices firmed toward the end of the session. I would not make much of this one way or the other – it’s too soon given we have a technically damaged market. China is also on her Golden Week Holiday – the government provides free travel – and the tragedy in Las Vegas continues to unfold.
So by now most people are thinking either the gold market is in real turmoil or is this a “a no brainer gold buying opportunity” (Frank Holmes). To which category do you belong?
For sure gold is in a dive to the downside – steep enough to raise eyebrows. We have moved from $1,350 to $1,270 in less than a month – so the bulls have given way to the bears.
But it is not time to panic for two reasons – the first being that no one knows what the Federal Open Market Committee (FOMC) will do short to medium term – they don’t even know – this economic indecision should provide solace to the gold bulls.
The second reason is getting more obvious. Traders and the public buy these price dips on a regular basis.
Since January the threat of higher interest rates has been hanging over this market – nothing has changed – Janet Yellen is still threatening. Under this framework traders have bought weakness on four separate occasions keeping the market range bound between $1,200 and $1,300.
As noted before let’s be a bit conservative and choose $1,250 as a value judgment.
Today’s bounce from $1,269 through $1,274 is a nice example of that short-covering. No short paper trader stays in business by being a permanent bear – they must cover their bet to make money and this is the dynamic everyone is now looking for.
While you are considering the price of both gold and silver remember the reasons for owning the precious metals are still in place. In fact the basics have doubled down – they are just hidden nicely with an abundance of free money.
Nothing has changed – speculation in stocks is wild – the international printing presses are running 24/7 and few of the promised government banking protections are in place.
Even if you do not belong to the group that claims all of this will end badly a small insurance “bet” using the precious metals as a hedge seems like a good idea.
If you are convinced we are heading lower be patient – look for that “bounce” supported by the actual physical trade. It would now appear this market’s last push above $1,300 was speculation supported by strong momentum to the upside. The market caved because I believe the Asian buyer simply thought gold was too expensive and decided to go fishing.
Watch carefully the ETF numbers – we are not “cheap” yet – but we are not too far away either.
Finally in my experience when “everyone” is either too bullish or too bearish the market will surprise. Stay tuned – as they say – this is just the beginning of the fiat currency show.
This from Zaner (Chicago) – “The precious metals remain on the defensive with both gold and silver posting moderate losses yesterday and new lows for their moves again early today! Apparently the events in Catalonia and Las Vegas did not result in noted safe-haven inflows to metals, and that suggests that safe haven mentality is simply out of vogue. Furthermore, the Dollar has started the week with impressive gains and it should be supported going forward following a series of US scheduled data points that came in positive yesterday. Furthermore with ongoing technical damage on the charts, many physical commodities under pressure and paper assets like equities dominating investor and trader psychology, it is very difficult to argue against a straightaway extension of the September slide deeper into the month of October. In fact, the Dow Jones industrial average has now posted eight straight quarterly gains for the longest quarterly winning streak in 20 years and that clearly is capable of pulling even more money away from gold and silver. It is also likely that rising Treasury yields and hope for diplomatic progress with North Korea is serving to embolden the bear camp and weaken the resolve of the bull camp. It should also be noted that total gold derivative holdings fell to 55.6 million from a recent peak of 55.84 million ounces in the first such decline since early September. With the range down extension yesterday the December gold contract fell below its 100 day moving average at $1,277.60, and that level could now become stiff resistance. With the gold contract also failing to hold two retracement points from the July through September rally that could leave a further downside retracement target of $1,268.84 during today’s trade. While the December silver contract managed to reject a large portion of the range down effort in the prior trading session, there would appear to be very little in the way of support until the $16.52 area. In retrospect, the inability to garner safe haven interest from the events in Europe and Las Vegas clearly shows a lack of near term interest in gold or silver.”
Silver closed down $0.01 at $16.58.
Platinum closed down $0.50 at $911.10 and palladium closed up $5.60 at $918.00.
The walk-in cash trade and the phones were surprisingly active today – action was modest but questions and tire kicking are in place – always a good sign.
The GoldDealer.com Unscientific Activity Scale is a “2” for Tuesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 2) (last Thursday – 3) (last Friday – 3) (Monday – 2).
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