Commentary for Tuesday, March 21, 2017 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc ……
Gold closed up $12.50 today at $1,246.50 as the updraft continues. Gold has remained firm because generally the dollar has trended somewhat lower since last Wednesday. Last week the Dollar Index was happy between 101.00 and 102.00 but began to sag on Thursday moving into the 100.00 range – this morning we saw lows of 99.75. This might be the result of a stronger euro after the first French election debates but generally the EU will continue to inflate the euro by design – this will eventually weaken the currency so gold will eventually trend higher relative to the euro.
The Federal Reserve really wants a weaker dollar but is in a difficult position as the FOMC ponders further interest rate hikes. Janet Yellen’s recent comments seem to indicate that the Federal Open Market Committee (FOMC) will seek further interest rate hikes this year but at the same time is in no hurry to do so.
The Fed could raise rates at any time they deemed fit but most likely the timing of the next hike will be either June 14, September 20, or as late as December 13. Since last December we have seen two quarter point rate hikes – this most recent just two weeks ago and in each case most commentary suggested that higher interest rates would lead to lower gold prices. Surprisingly this has not been the case – gold now seems conformable above $1,200.00 and is trading above its 50 Day Moving Average ($1,215.00) and 100 Day Moving Average ($1,206.00).
But I think the market is still anticipating steady to lower gold prices as long as the Federal Reserve remains hawkish on the US economy and pushes interest rates higher between now and the end of the year.
It will be during this time that everyone will need to dig for further reasons to be long gold – like perhaps an unstable European Union or rising inflation.
In the absence of fresh news gold will probably hold its current ground trading between $1,200.00 and $1,250.00 but remember we are not far away from that important 200 Day Moving Average ($1,260.00). A break above that number and these markets will run to the upside and meet stiff overhead resistance between $1,300.00 and $1,350.00.
Keep in mind that gold has been on a rally since traders realized that the selloff was overdone and has regained 75% of the loss it experienced from the rate hike discussion.
If you are less bullish the downside here is also not much – there seems to be plenty of bargain hunters as the physical market heats up around $1,150.00.
We think that gold is still very much in the financial game and will reassert itself in 2017 as the countries of the world wake up to the next big debt hangover. A look at our recent Activity Scale will show that the numbers are stuck between 3 and 4 – 5 being an average day. So there is daily business but volume numbers are off as the public does not seem too interested in the latest political theater out of Europe or what the FOMC has to say one way or the other – they appeared more bored than anything else.
This from Chuck Butler (EveryBank) is also interesting. “Jim Rickards wrote about the strange move Gold had last week when the Fed hiked rates, and this was in the 5 Minute Forecast (https://agorafinancial.com/2017/03/20/golds-irresistible-forces-in-2017) here’s Jim Rickards.
“There is more driving the gold price right now than central bank policy and U.S. interest rates. Fundamental supply and demand has entered the picture, with physical shortages being reported from Zurich to Shanghai. As well as strong demand coming from central banks in China, Russia, Central Asia and elsewhere. Individual demand for physical gold remains high in China and India. There’s just not enough physical gold to go around. Normally, an environment like this would bring out the ‘paper gold’ crowd hitting gold from the short side in the futures markets. Yet leveraged manipulation by shorts is a dangerous game when there is a genuine shortage of physical gold to cover open positions. The physical gold market is calling the paper gold market’s bluff.” – James Rickards in the 5 Minute Forecast”
Silver closed up $0.14 at $17.58.
Platinum closed down $1.00 at $971.40 and palladium closed up $6.00 at $787.65.
The walk in cash trade was steady but not hurried – the phones likewise.
The GoldDealer.com Unscientific Activity Scale is a “3” for Tuesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 4) (last Thursday – 3) (last Friday – 5) (Monday – 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”. Our “activity” is better understood from a wider point of view. If the numbers are increasing – it would indicate things are busier – decreasing numbers over a longer period would indicate volume is moving lower.
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