Commentary for Thursday, July 30, 2015 (
Gold closed down $4.60 today on the Comex at $1088.10 – so we appear
married to this cross-traffic at least on the shorter term. Yesterday’s
close was $1092.70; Tuesday’s close was $1096.30 – so in the
last few days gold has traded within a $4.60 range.
This would normally be like watching the paint dry but traders and even
the physical market are tense – waiting for some sort of follow
through (one way or the other) after the FOMC announcement that the Fed
would not raise interest rates for now but the door is open.
The dollar today was stronger – keeping gold on the defensive. The
Dollar Index previous close was 97.17 and the range today was between
97.17 and 97.77 – as of this writing we are trending around 97.55
- and with good GDP numbers it figures that the Fed will push forward
with that rate hike pushing the dollar even higher.
I think the precious metal trade remains negative – anyone claiming
a positive attitude would be considered a perma-bull and definitely in
the minority. Bullish bets on gold paper contracts have declined by 50%
and gold ETF’s are moving lower. But the morning trading pattern
was erratic – higher then lower so there is tension right under
the surface even though the daily price spread was short.
Still the physical delivery market keeps banging away – the US Mint
is now in back to full production and can’t make enough of the popular
American Gold Eagle or Silver Eagle.
So whether you remain a believer or not one thing is sure – gold
is not acting as a safe-haven choice for now and there remains a dichotomy
between the paper and physical market.
Silver closed down $0.04 at $14.69. Physical action across the counter remains steady but things have cooled
since the Federal Open Market Decision.
Platinum closed up $5.00 at $989.00 and palladium was higher by $4.00 at $618.00. The physical trade in this area has really slowed – this is probably
caused by two factors: first the public just does not include the platinum
group metals in their day to day thinking – this has been the case
since the 1970’s. For some reason they embrace gold or silver bullion
but not platinum or palladium or rhodium bullion – this is changing
with internet knowledge spreading rapidly but old habits linger.
Second, there has not been a constant supply of new and therefore
publicized PGM bullion products coming to market. The Perth Mint is producing the
Platypus (1 oz) but the Canadians and Americans are not minting platinum
bullion coins at the moment. If there was any big interest generated in
either platinum or palladium they would easily be $500.00 or even a $1000.00
more per ounce than gold – but for the moment platinum is trading
at a $99.00 discount.
LONDON, July 30 (
Reuters) - Gold fell 1 percent on Thursday to a near a 5-1/2-year low as the dollar
rose after data showed the U.S. economy improved in the second quarter,
supporting views the Federal Reserve would lift rates by year-end.
The U.S. Commerce Department said gross domestic product expanded at a
2.3 percent annual rate. First-quarter GDP, previously reported to have
shrunk at a 0.2 percent pace, was revised up to show it rising at a 0.6
Spot gold dropped as much as 1.3 percent to a session low of $1,081.85
an ounce in earlier trade, not far from its cheapest since February 2010
at $1,077 hit after a selloff on July 20. It dropped 1.1 percent to $1,084.21
by 1337 GMT.
"$1,080 and $1,050 are critical technical support levels. I don't
know if there are big stops below there but the market is nervous about
a further bear raid and prices remain under pressure," bullion broker
Sharps Pixley head Ross Norman said.
After a two-day meeting, Fed policymakers said the economy had overcome
a first-quarter slowdown and was "expanding moderately". A Reuters
poll showed the U.S. economy may have rebounded in the second quarter.
That buoyed the dollar, up 0.4 percent against a basket of leading currencies,
making dollar-priced gold more costly for non-U.S. buyers.
U.S. gold for August delivery slipped 0.8 percent to $1,083.90 an ounce.
"The Fed yesterday gave a stronger hint of a sooner-rather-than-later
rate hike and the dollar strengthened and that impacts all the commodities,"
Citigroup strategist David Wilson said.
"As the focus is back on the dollar and its strength, the trajectory
for gold is down until a hike actually happens."
"We think that the Fed will adopt a gradual pace of tightening, we
expect only one rate hike this year. And policy will continue to be conditioned
on data," Mizuho Bank said in a note.
Holdings of the largest gold-backed exchange-traded fund, New York's
SPDR Gold Trust, were unchanged at 21.87 million ounces for a second day
on Wednesday. That level is the lowest since September 2008.
So with all the talk of the expected FOMC rate hike, the recovering US
economy, the robust stock market which should be expected with a zero
interest rate environment is it any wonder that real gold buyers are sad?
Now let’s also consider that with all this negative news the technical
price picture of gold is just awful, we have lost about $200.00 in value
these past 12 months.
But there must be some reason you are still reading this missive. And for
most people who want to own some physical metal that reason usually surrounds
the notion of value. They want to buy gold or silver bullion but they
don’t want to throw their money out the window.
Now let me introduce another completely different dynamic that the average
American does not consider but which indirectly supports gold ownership.
There is an entire different universe out there that actually considers
gold or silver bullion real money. Granted a much smaller minority but
one nonetheless that would rather have real metal in their hands than
cash. And this contingent virtually never sells so there is at least one
constant in the changing gold price dynamics.
With that in mind let’s look at the more optimistic view that the
price of gold is settling into the lower range of this latest unwinding
leg. Of course “settling” is a defensive word – people
actually in the gold business always want to give themselves some wiggle
room. But this rule always applies – avoid those who claim ultimate
price knowledge – they will probably be selling aluminum siding
in Florida next summer.
Looking at the 1 year price chart for gold it’s easy to see the technical
picture looks like a bad movie. We have moved from just above $1300.00
to just below $1100.00 and in the process have tested $1150.00, surviving
twice and breaking down this third time. Besides all the fundamental problems
this price picture sets up a host of computer and momentum players just
waiting to cash in all that short paper.
But like everything else relating to gold the “picture” is
more complex. There is that pesky issue of too much fiat money still floating
around and still being created out of thin air. Now this argument has
been made so many times I’m even ashamed to bring it up once again.
But the fact is there is a lot of currency still floating around.
At this point in time we all just need to take a deep breath and play the
hand we have. The gold market, both the paper and physical market do not
act as quickly as most believe – the daily headlines (the Chinese
factor, the interest rate factor, the technical picture, the strength
of the dollar) only provide a piece of the price puzzle. If they were
sure indicators all the time the market would provide no opportunity for
profit or loss.
Those who are very negative about gold (now in the majority) believe because
we have broken down at $1150.00 we must continue to test lower price levels.
Perhaps even into the $1000.00 range which was established in the summer
of 2008. This process will continue until gold finds its footing the market
has bottomed and further risk is virtually zero.
Those committed physical holders who are less negative and want to increase
their holdings at these knock down prices are already doing so believing
this entire monetary tent show will one day end in tears.
But at this particular junction let me add another dimension. Today more
than 40% of our website viewers are “new” not returning. This
metric will tell you that the well expressed notion that gold is “dead”
is much overplayed. Granted gold is out of favor but there are a huge
number of people who watch prices over the internet and watch very carefully.
This “pool” of new viewers provides still untapped potential
and yet is seldom mentioned in gold commentary.
For now, whether you are a “watcher” or “player”
be content that the number of people who still have a big interest in
the price of gold is growing. This metric alone should keep you reading
and commenting as most of the countries in this world continue to print
And gold bullion, in the end will do what is has always done – signal,
loud and clear when government leaders are heading in the wrong financial
The walk in cash trade today was much slower and and the phones have gone
back to average – notice the drop in our Unscientific Activity Scale
– we are down about 3 points from earlier in the week.
Unscientific Activity Scale is a “
5” for Thursday. The CNI Activity Scale takes into consideration volume
and the hedge book: (last Friday –
8) (Monday –
8) (Tuesday –
8) (Wednesday –
7). 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 generally increasing
– it would indicate things are busier – decreasing numbers
over a longer period would indicate volume is moving lower.
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