Commentary for Monday, February 6, 2016 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc ……
Gold closed up $1.40 at $1,220.80 USD on Friday and is higher by $32.40 on the week. My concern last week over price follow-through remains in place but it is nice to see that gold has not fallen out of bed – we are finishing the week on an upbeat note.
Yes we are back to looking at the dollar – an old story at best. Still it is what it is – as they say and the Dollar Index is not only weaker today – it was generally weaker over the last week of trading. It is worth noting that some believe the Trump rally relative to the dollar has peeked. The Dollar Index high saw a high of 103.50 and is trending lower – Friday was choppy (99.84).
If you consider that a higher dollar usually pushes gold lower, then this recent almost-famous price rise as Trump took office would suggest that fear is still alive and well in the gold trade.
It’s also worth noting that gold is having trouble in the $1,200.00 / $1,220.00 range – looks a bit stymied but is still very much in the game – today’s price close being a good example – more of the same – not too hot and not too cold.
So the bears are pushed away by the weaker dollar but traders can’t get an improving economy out of their coffee.
This from Jim Puzzanghera (LA Times) – “The labor market started the year strong, adding a robust 227,000 net new jobs last month while more people began looking for work, the Labor Department said Friday.
Although the January job growth figure exceeded expectations — and was the best since September — that was somewhat offset by a downward revision of job growth the previous two months by 39,000.
Those changes meant job growth averaged 187,000 for 2016 and that President Trump took office with the job market expanding at a solid pace.
“He’s inheriting a very healthy labor market and a healthy economy,” said Stuart Hoffman, chief economist at PNC Financial Services Group. “Obviously some of his core voters don’t feel that way. But overall the unemployment rate is under 5% and jobs have been growing for seven years.”
Before a White House meeting with business executives, Trump said he was “very happy” with the job growth.
“There’s a great spirit in the country right now,” Trump said.
“I think it’s going to continue big-league,” he said. “We’re bringing back jobs. We’re bringing down your taxes. We’re getting rid of your regulations. And I think it’s going to be some really very exciting times ahead.”
The unemployment rate last month inched up a tenth of a percentage point to 4.8%, but that wasn’t bad news.”
With this generally bubbly attitude toward a new presidency the obvious conclusion would be higher interest rates are right around the corner. But there are also distractors – claiming that the Trump business plan is more smoke and mirrors than substance and this latest Wall Street rally is tenuous at best and might even be dangerous.
So this tension continues and supports gold but in a negative way – the physical world wants its cake and wants to eat it too. So they do buy physical but just enough to support the current trading range. This supports my current theory that gold had a nice ride this past month bouncing off recent lows of $1,133.00 in December but still has not shown the ability to move above overhead resistance. This recent low ($1,133.00) is an important number to keep in mind.
Even if we break to the upside above $1,250.00 traders will lament that this market has been trading generally lower for six months now and the technical picture will remain either neutral or negative. Until gold moves above $1,350.00 – a level we saw last August.
The big catalyst here might be inflation and every nation in the world is producing fiat paper money at an unprecedented rate. If the Trump plan actually works the labor market will become tight and push wages higher – which is inflationary. The Fed just cited persistent inflation and noted rising industrial metal prices. Finally the possibility of trade barriers and tariffs under Trump will result in higher prices for Americans.
Also note crude oil remains cheap. This past year we have moved from a gift ($40.00) up through $54.00 (still cheap). The central banks have gotten away with this fiat currency stick-up because crude oil played ball. But this lower price trend will not last – the world is sold on oil and sooner or later what is left of OPEC will figure out a way to turn this into an advantage.
Silver closed up $0.05 at $17.48. I have been saying for some time now that silver bullion sales are lagging – why I’m not sure as prices are cheap relative to old highs. But Coin World now claims that in 2016 the US Mint sold nearly 9.2 million fewer American Silver Eagles.
Platinum closed up $7.10 at $1,006.70 and palladium closed down $10.05 at $749.00.
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: 5 believe gold will be higher next week – four think gold will be lower and two 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: 12 people thought the price of gold would increase next week – 81 believe the price of gold will decrease next week and seven think gold prices will remain the same.
Precious Metal Closes & Dollar Strength – Jan. 30 – Feb. 3
The walk-in cash trade was on the slow side today, it’s raining again in LA and the phones were also quiet.
The GoldDealer.com Unscientific Activity Scale is a “3” for Friday.
The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 4) (Tuesday – 4) (Wednesday – 4) (Thursday – 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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