Commentary for Wednesday February 11th, 2015 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc.………
Gold closed down $12.60 on the Comex today at $1219.00 reacting to a stronger dollar and a negative technical picture. The overnight gold market was actually quiet in Hong Kong and London – and the domestic market was uneventful on the open but soon the Dollar Index moved over 95.00 and gold began to weaken.
And talk of a 240 billion euro restructure in the Greek debt problem also encouraged lower prices in gold. This short-term lending package has lowered the immediate fear factor surrounding default on debt or exit from the euro. I’m not unsympathetic to the Greek state but this hole is becoming insurmountable.
This looks like the short trade pushing an advantage to me. Granted the dollar is stronger and oil is once again unsteady. Oil traders and the world were hoping for stability at or above $50.00 and that was the case in early February but once oil dipped below $50.00 the old fears returned and some traders now see a short-term end game for oil around $40.00. What gold needs now is a stable oil price which does not enter the trading equation week in and week out – lower oil is not good for gold and it’s not good for Europe.
It’s not that gold does not have reasons to move lower – deteriorating technical trading have the bears in charge, gold ETF numbers at the lower end of the range, a strong dollar.
It’s just that this move looks funny to me – especially with the Russian/Ukraine problem – now completely ignored by traders and any eventual settlement over the Greek debt looking cloudy.
You also have to consider the upcoming Chinese Lunar New Year (February 19 th) and the foreign buying dynamic. Consider that when gold moves lower in the United States it chills the over the counter trade.
The American buck looks for continually lower gold prices because psychologically this buyer has no real attachment to gold bullion.
On the other hand lower prices in the Asian community excite the audience – don’t be fooled however into thinking that any lower price will bring in this dedicated trade. These folks are some of the most savvy price buyers I have seen with 35 years in the business. They just seem to have a feel about judging value – for example we saw little of the Indian trade across our counter (usually big cash players) during the January rush to higher ground. We still don’t see much relative to what appears when they are ready.
Still as the market softens there will be a point – probably not too much lower than current trading ranges when a bus load of these eager buyers will appear – because they love to own gold.
Let’s look once again at the important Gold Moving Averages – 50 DMA ($1229.00) – 100 DMA ($1216.00) and the 200 DMA ($1250.00)
With today’s close ($1219.00) we are obviously below the 200 DMA ($1250.00) which is discouraging the long trade and to add insult to injury we moved below the 50 DMA and the 100 DMA as well. This should take what buzz was left in the early January bull market and retire it to the back 40.
But before we all jump out the collective window consider that gold at the beginning of January was trading around $1180.00 so even with all the commotion (Europe/Russian/Ukraine/Dollar) we are still higher by a small percentage ($40.00). Of course all this has created a bit of a technical mess but some cake is better than…well, you know what I mean.
Silver closed down $0.10 at $16.75. There is nothing like higher prices to generate buzz but when this approach fails consider that silver is still the “big percentage winner” in an up-draft market. This of course is what everyone is waiting for – and waiting for and – well, you get the idea. The patient however remember that a 50% move in the price of silver will only take our cheaper friend back to $25.00 – which is still about half of the 2011 high.
Platinum closed down $11.00 at $1198.00 and palladium was up $1.00 at $767.00.
The walk-in cash trade was again quiet and so were the phones. It may be time to resurrect my popcorn machine idea downstairs. At least we could make believe we were just watching a movie.
The GoldDealer.com Unscientific Activity Scale is a ” 3” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 3) (last Friday – 4) (Monday – 4) (Tuesday – 4). 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”.
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