Commentary for Tuesday, March 7, 2017 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc ……
Gold closed down $9.40 at $1,216.10 on Tuesday and if you haven’t been watching let’s just say the gold trade is getting heavier. It’s not necessarily the dollar although the buck is strong – the Dollar Index today is trading around 101.80, which is unchanged from yesterday. What’s troubling traders is the possible rate hike which might visit as soon as next Wednesday.
There are other timing issues which everyone will watch leading up to the big Federal Open Market Committee (FOMC) news like the meeting of the European Central Bank (ECB) this Thursday in which they will opine about interest rates or the lack thereof and the state of the EU now that quantitative easing has become a way of life. This is not just a loose end–there is plenty going on over there which will push the price of gold higher through safe-haven buying but the fuse to this bomb is slow burning and it sometimes even goes out. If you’re looking for a reason to run, watch the upcoming French elections – this could be as spectacular as the Trump win for the same reasons.
The continued weakness in gold today was expected – but as support at the $1,220.00 level looks like history the next big line in the sand will be $1,190.00. The problem being that while the technical picture deteriorates the psychology of the market is turning negative. So gold must again prove itself in the face of the storm of fiat currency being produced here and in Europe.
In the meantime gold’s moving averages are important – compare the close ($1,216.10) against the 50 DMA ($1,210.00) the 100 DMA ($1,209.00) and the 200 DMA ($1,261.00). Not too long ago the gold trade was hoping for a break above the 200 DMA – now we are faced with the sad news that gold moved in the opposite direction the 50 DMA and 100 DMA are being challenged – so goes the show in the face of rising interest rates.
But don’t jump out the window yet – actually the price of gold at this point might have been far less were it not for a revival of the “insurance trade” protecting your wealth as turmoil increases.
And it is not just the junk paper money that should have you worried. There are macro trends in place which do not look good – especially as the US middle class continues to get smaller and the difference between the top earners and the working class widens again in favor of the rich.
And as far as the Trump revival is concerned – keep in mind that Ronald Reagan was a master at making the books look good and safe – underline the word safe. After the Reagan boom came the Reagan bust as deregulation led to the saving and loan crisis – which you and I paid for in the form of big bail-out money – thank you very much.
My point relative to owning gold bullion is simple: expedited business growth a la Reagan or President Trump in a low-interest and unregulated environment is a witch’s brew. It leads to stupid speculation because the money is flowing in the streets, and regardless of what the papers claim the financial institutions have done little to clean up their act since the crisis of 2008. Executive pay is still not tied to corporate performance and the still-unregulated derivative market is massive, which leads me to the classic Warren Buffett comment – derivatives – “weapons of mass destruction”. The 2008 financial collapse was not an isolated event – in fact the number of these kinds of emergencies has increased dramatically since the banks were deregulated. Protecting yourself only makes sense given the track record of financial institutions.
Silver closed down $0.23 at $17.54.
Platinum closed down $17.10 and palladium closed up $1.85 at $775.00.
The walk-in cash trade was again surprisingly busy; we saw a few bigger sellers today but the public is still buying lower prices.
The GoldDealer.com Unscientific Activity Scale is a “6” for Tuesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 4) (last Thursday – 4) (last Friday – 4) (Monday – 3).
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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