Commentary for Friday, April 1, 2016 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc ……
Gold closed down $13.80 on the Comex today at $1220.20. This move is a bit on the curious side in that the market initially moved to the $1210.00 range and then recovered half of the loss in what appeared to be bargain hunting into the weekend.
Today, besides being April Fools presents “too much” data for the number crunchers. There is the important Job’s Report (the economy added a solid 215,000 jobs in March), there is manufacturing data out of China and Europe (let’s call this decent – it will move commentary away from the panic button).
And then there is the curios Dollar Index – it jumped ¾ of a point on the job’s number (a big negative for gold) and then corrected back to virtually unchanged. Finally crude oil lost $1.50 – now trading around $36.80. The dip probably the result of the Saudi comments – even though some sort of “production caps” might be in place if you can get anyone to tell the truth.
This all makes for a “fine kettle of fish” when you finally realize that gold is struggling – consider it has tried three separate times in the past month to move over $1270.00 and failed. The newly minted concept that gold has entered a “new phase” only works if recent 2016 gains based on a deteriorating Chinese and European economic model continue.
The conservative commentary at this point is probably that gold is back to acting defensive.
But because 2016 price history has been positive and we have broken above a long standing negative trend line enthusiasts are hoping this is just a rest after a substantial push to the upside.
It might well be – if the Chinese and European model begins to show signs of weakness. But the latest economic numbers from both places do not support the notion that things are going south.
This is what I was talking about yesterday – the price curve in gold was flat and this standoff between the bulls and bears is only good for a short time. Sooner or later the forces of light prevail over the forces of darkness (or visa versa) and that is what we are seeing today. The short paper is back in the game obviously helped by a decent job’s number.
This is a case of buying the rumor and selling the fact. Traders believe in their heart of hearts that the Federal Reserve must raise interest rates regardless of how dovish Yellen appeared in her last New York speech. This will push the dollar higher creating more head wind for the price of gold.
There is a “plus” in this scenario. The latest GFMS report claims that gold may trend lower but the “big bottom” is in – meaning most in the business believe gold prices have bottomed, supported by world safe-haven demand. In other words gold appears too cheap at $1050.00.
So where does that leave the regular old gold bullion player – looking for inflation. Without this number pushing higher look for the price of gold to remain range-bound on either side of its current trading range. It will continue to be pushed one way or the other by interest rates and the occasional rumor of panic in one of the many subsystems which everyone continues worry about (financial bubbles).
So at this point I would either stand pat with core gold holdings or consider rearranging the balance. If you don’t have platinum or rhodium, consider trading a small portion of your gold bullion for platinum or rhodium bullion.
Silver closed down $0.40 at $15.04. While this latest close does not seem cheap to me the silver exchange traded fund numbers tells a different story. The ETF all-time high total was seen in October of 2014 (645 million ounces) and the new 2016 high looks like 627 million ounces. These kind of numbers indicate that long-term holders remain in the game and perhaps even eager to add to positions if prices get much cheaper.
Platinum closed down $22.00 at $953.00 and palladium closed down $2.00 at $561.00. Platinum is now trading for $267.00 less than gold.
This from Jan Harvey (Reuters) – Gold may drop below $1,200 an ounce in coming months – Gold prices are likely to slip below $1,200 an ounce in the months to come, GFMS analysts at Thomson Reuters said in a report on Thursday, with U.S. interest rates expected to rise and physical demand remaining soft.
The metal has rallied more than 16 percent this year, reaching a 13-month high of $1,282.51 an ounce this month, but may struggle to maintain those gains, the report said.
“Following three consecutive years of annual price declines, gold has recorded a blistering start to 2016,” GFMS said in its Gold Survey 2015. “Such an impressive performance has been largely attributed to a reduction in risk appetite among investors and fresh interest in safe haven assets.”
While reduced expectations for U.S. interest rate increases this year have also helped gold, the fact the Federal Reserve remains on a path to tighten monetary policy will cap gains for the metal, along with other factors, it said.
“We believe that the recent price rally will prove to be short-lived, and once current market turbulence starts to ease, we are likely to see the price retreat again, particularly as physical demand in key Asian markets is already weak.”
Global physical gold demand fell to a five-year low of 4,124 tonnes in 2015, down 2 percent year-on-year, while global jewellery demand fell to a three-year low of 2,166 tonnes, down 3 percent, GFMS said.
China and India, which vie for the position of the largest global gold consumer, saw divergent trends last year. Chinese gold fabrication, including scrap, slipped to 668 tonnes, while Indian fabrication rose to 812 tonnes, up 5 percent.
Chinese jewellery consumption fell 11 percent to 563.7 tonnes, a four-year low. Jewellery fabrication in the country slid nearly 10 percent to 580 tonnes.
“The biggest drag on China’s annual gold demand last year mostly took place during the first half, when the strong performance of the domestic equity market … attracted much of the society’s capital into the stock market,” GFMS said.
India’s jewellery consumption rose, however, to 674.5 tonnes, up nearly 2 percent, while fabrication climbed to 736 tonnes from 690 tonnes.
An improving market balance will underpin gold in the longer term, GFMS said. It expects gold mine output to post its first annual decline since 2008 this year after reaching a record 3,158 tonnes in 2015, and sees physical demand improving as the year progresses.
“The forecast reduction in global mine output and a gradual recovery in demand will see the physical surplus narrow in 2016, providing support to the gold price and laying the foundations for better prospects,” it said.
Our Patented Employee Survey – Gold’s Direction Next Week?
Of course it’s not really patented but we do have some fun along the way. This is what the GoldDealer.com employees think – 6 believe gold will be higher next week – 5 think gold will be lower and none think it will be unchanged.
Our Patented Customer Survey – Gold’s Direction Next Week?
Like the employees our customers were given three choices – up – down – unchanged. We limited the survey to a random sampling of 100 transactions – unscientific but worth considering because these people took action: 39 people thought the price of gold would increase next week – 47 believe the price of gold will decrease next week and 14 think prices will remain the same.
Precious Metal Closes & Dollar Strength – March 28 – April 1
The walk-in cash business was busy today – not hopping but there was significant action on both sides of the isle. The phones were about average – the mix of the calls however favored customers buying not asking questions – this would support the notion that the public is still just looking for a good price point before joining the party.
By the way – if you are new to the metals don’t be in a hurry. The process of protecting yourself financially with real gold or silver bullion has been around for a long time and can be abused when prices move higher. Avoid pressure from telemarketers who are on commission – and especially avoid promises of quick profits – a sure sign that the dealer will be the only one who makes money. Be careful if the dealer calls you describing a profit opportunity. Take your time in the process – sleep on the idea – and make an informed decision.
The GoldDealer.com Unscientific Activity Scale is a “5” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 3) (Tuesday – 4) (Wednesday – 3) (Thursday – 3).
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