Precious Metals and Gold Market Report – Gold “Pops”

Commentary on the gold market for Wednesday, February 14, 2018 (www.golddealer.com)

By Ken Edwards and Richard Schwary of California Numismatic Investments Inc ……
 

Gold Market closed up $27.40 at $1,355.50. Prices jumped higher today after early trading opened flat then lost $10.00 in value. This big reversal is the result of higher than expected inflation news – released today. The Consumer Price Index was hot – up 0.5% in January – the biggest increase in five months according to MarketWatch. This news led to renewed safe-haven buying but keep in mind this kind of information cuts both ways.

Rising inflation numbers will almost certainly encourage the Federal Open Market Committee (FOMC) at their next get together (March) and perhaps push the board into a real hawkish position.

At the same time the dollar weakened – the Dollar Index moved 90.00 through 89.08 in three hours! This of course pushed gold higher. These price ranges for gold are now familiar – during the past 12 months gold has sold off into the $1,220.00 range on four separate occasions. The big question on everyone’s mind today is whether this latest move from $1,240.00 through $1,360.00 is the real deal. Because this market settled lower ($1,320.00) it should give the bulls “pause” – because prices have fought back to $1,355.00 the question is reasserted – will this latest bullish leg led to the breakout everyone is looking for?

The reason I think it might be too soon for champagne is that we saw the same pricing level January 24 and the market turned again defensive. Everyone sees this same inconsistency so I think gold will have to push towards $1,400.00 before the momentum players will join the ride.

This “inflation” scare, however, is overdone – for now. What makes the news a bit supercharged is the slowly but generally improving technical picture for gold. Like I said yesterday gold’s rising bottom’s patter remains in place and today’s “pop” seems to have slowed down the developing “head and shoulders” talk from technicians – a negative price pattern suggesting that lower prices might be seen near term.

I still think there are better things to do with your time than trying to second guess the price of gold during this clearly transitionary period. The basic plan should be to balance your holdings – during times of low inflation less gold and silver bullion seems reasonable.

But “a core position” is always necessary in our view. The increasing debt both personal and corporate makes this case clearly – both are at all-time highs according to CNBC this morning.

Is this then a pressure cooker ready to blow? Probably not – money is cheap and there are more “ways” to “invest” than at any other time in my lifetime. This is why there are no longer lines at our backdoor and you can find a nice parking place in our private lot.

The big plus in a slower market is simple – cheap prices for gold and silver investors. The precious metals are still on sale – trading significantly lower than recent highs.

It’s easy to see using today’s CPI numbers that inflation is not dead so use these kind of numbers as a kind of “canary in the coal mine” scenario. They are not written in rock but they do provide sign posts that are easier to see.

If you are still not convinced – keep an open mind and look at our spending. Had a reader that pointed a “spending” finger at President Obama yesterday – I could not agree more. Between him and Trump the red ink is piling up fast – the trillion-dollar deficit may even become the new “normal”. That is why the dollar is weakening at the same time that the FOMC is claiming that interest rate hikes are already baked into the cake this year.

Keep in mind the precious metals are trading at substantial discounts to old highs – this is sometimes easy to forget when there are no fireworks. Even if you think the metals might trend lower consider “averaging” with smaller purchases. You will not need much encouragement to buy more metal as inflation heats up – in the meantime you have options.

This from Zaner (Chicago) – “Once again, the gold market is showing its single-minded focus on the direction of the dollar as prices continue to rise in the face of further downside in the Greenback. Apparently fears of unrelenting US deficit spending combined with the fear of ongoing US equity market volatility is thought to be generating headwinds for the US economy, and that creates safe haven interest in gold and in turn weakens the Dollar. The gold market might be supported by talk that the Bank of International Settlements increased its activity in gold derivatives last month, as some might jump to the conclusion that could be a signal of conditions that might renew central bank buying interest. While the gold and silver markets continue to have rising rate fears hanging over the trade, they might take on added importance later today following US CPI readings that are expected to be a touch hot. Fortunately for the bull camp in gold, the Cleveland Fed President discounted the prospect of inflation on Tuesday and she also indicated that 2018 should see the same number of rate hikes (three) as in 2017. In other words, the fear of four rate hikes that looked to be part of the slide into last week’s lows have been discounted somewhat, but that argument could be settled with the CPI release later today. In the event that CPI does match expectations of a.4% gain that could result in a quick setback in gold as that type of reading would at least temporarily lift the Dollar.

For a change, the platinum group metals seem to be trading in sync with each other with both markets generally extending a bullish pattern from last week’s spike low. Unfortunately for platinum bulls, volume and open interest has declined in the face of the recent bounce and that might suggest limited interest in chasing the market higher directly ahead. Furthermore the April platinum contract would appear to have returned to a past pivot point around $975 and therefore we would no longer consider the market to be cheap! In a similar situation, the palladium market has also seen declining volume and open interest on the recent bounce and the market has also closed each of the last two trading sessions near its lows of the day in a fashion that suggests little appetite to hold positions overnight.”

Silver closed up $0.35 at $16.86. Silver bullion is leaving the building – wound not call it a buzz yet but something is stirring.   

Platinum closed up $23.40 at $996.10 and palladium closed up $16.60 at $1,001.25.  

This is our usual ETF information – All Gold Exchange Traded Funds: Total as of (2/6/18) was 68,527,321. That number this week (2/13/18) was 68,293,061 ounces so over the last week we dropped 234,260 ounces of gold.

The all-time record high for all gold ETF’s was 85,112,855 ounces in 2013. The record high for Gold ETFs in 2018 was 69,101,962 and the record low for 2018 was 68,169,590.

All Silver Exchange Traded Funds: Total as of (2/6/18) was 639,299,902. That number this week (2/13/18) was 640,624,204 ounces so this last week we gained 1,324,302 ounces of silver.

All Platinum Exchange Traded Funds: Total as of Total as of (2/6/18) was 2,455,927. That number this week (2/13/18) was 2,452,410 ounces so over the last week we dropped 3,517 ounces of platinum.

All Palladium Exchange Traded Funds: Total as of (2/6/18) was 1,242,462. That number this week (2/13/18) was 1,229,600 ounces so last week we dropped 12,862 ounces of palladium.

The GoldDealer.com Unscientific Activity Scale is a “4” 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”. 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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