Commentary for Tuesday, February 27, 2017 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc ……
Gold closed up $0.50 at $1,258.80 USD on Monday, which was a bit of a disappointment considering the early gold & silver market traded nicely above gold’s 200-Day Moving Average ($1,261.00) before settling almost unchanged. So even if you are pessimist the 30-day gold picture is interesting in that gold has easily moved above the overhead resistance between $1,230.00 and $1,240.00 – a solid break to the upside and the bulls remain in charge on the short-term.
So is this a bear trap or has the landscape changed?
The really loose end is that potential rate hike in March but recent price action in gold would suggest that physical demand is behind this Gold & Silver Market. Reference the total holdings of the Gold Exchange Traded Funds (Gold ETFs) – up more than 400,000 ounces as of last Wednesday.
So what gives? Gold is acting like we will not see a rate hike this time next month – if true look for another pop to the upside of $25.00 to $50.00. Keep in mind however the FOMC is still hawkish about that interest rate hike.
At the same time CNBC claims that Wall Street became cautious on this “already in the bag” interest rate hike when recent compensation in the financial sector weakened. Also worth noting is that durable goods orders were announced at a disappointing – 0.2% decline – expectations were for a + 0.5% rise.
One thing is sure – we won’t have to wait too long and in the process the so-called “long-paper”, which has joined the ETF party, will be nervous and looking for any close airport to land.
So I would enjoy the recent bullish sentiment and higher prices in gold but look for profit taking. Keep an eye on what the paper traders do – as long as they continue to buy the dips in this market gold will overcome that “wall of worry” it is still working on.
Finally look for that “outside” occurrence to push this market.
Everyone knows the negative case for gold bullion ownership – higher interest rates, stronger dollar, industrial recovery, stable world, no inflation and no chaos. These have been hammered home now for the past five years. But all bearish markets have cycles and sooner or later, especially with the amount of fiat money still being printed, this bearish ride for gold will be replaced with the next “super cycle” as we all pay for the sins of the father.
That feeling that the end of this bear market may be at hand is what prompts traders to buy the “dips”–but “most traders” are still not righteous believers. The “negative” longer term case is still fresh in their minds but not near as convincing as it was in late November.
As for that “outside occurrence” – what might tip the balance in favor of gold bullion? A 1,000-point drop in the DOW would most likely do the trick for the American buyer – everyone else in the world is already on “alert” because no one completely trusts their government machine. Complete trust in government is just not part of the human psyche – and that’s a good thing.
So as our detective friend Sherlock Holmes was fond of saying “The game is afoot!” – Tuesday night will feature the State of the Union Address by President Trump. Analysts should be glued to this paying particular attention as to how Trump plans to pay for a 10% hike in military spending, massive infrastructure spending and significant corporate and personal income tax cuts. Anyone of these will present a nice “outside occurrence” capable of pushing the price of gold higher.
Silver closed up $0.08 at $18.42. Gold Flirts with the 200 DMA
Platinum closed up $10.20 at $1038.90 and palladium closed up $13.35 at $785.00.
The walk in cash trade was surprisingly busy today but the phones were only average.
The GoldDealer.com Unscientific Activity Scale is a “4” for Monday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Tuesday – 4) (last Wednesday – 3) (last Thursday – 3) (last Friday – 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.
Thanks for reading. As always we appreciate your business and enjoy your evening.
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