Commentary for Friday, Oct 9, 2015 (
Gold closed up $12.00 on the Comex at $1156.30 today – another small
surprise. We seem to be one day behind ourselves lately as far as gold’s reaction
to world events. With no follow-through yesterday I would have expected
today’s market to be very quiet.
Instead the price action moved the needle somewhat and going into the long
weekend it has once again regained its footing. The close today ($1156.30)
will get everyone’s attention because we have again moved above
the 50 Day Moving Average ($1142.00).
This was gold’s highest close of the week today and the highest close
since August 21
st – this is important not because $1156.30 is a big deal but because
it sets the groundwork for improving the technical picture.
You can pin this shorter term price reversal on a combination of a weaker
dollar and higher oil. The Dollar Index traded between 94.60 and 95.34
today and we are now around 94.83. Yesterday’s close was 95.31 so
the trend is generally lower. This is probably the result of yesterday’s
FOMC release indicating that interest rates in the US would remain low.
Oil is also part of the price picture – these past 5 days crude oil
has moved from $45.00 to $51.00. This is probably the result of two factors
– a market bottom supported by increased Middle East tension. Today’s
market came off somewhat – we are now trading at $49.66 a barrel
but there is no question that oil has reinvented itself.
A reminder we will be closed this Monday for Columbus Day, the banks, post
domestic commodity trading will also be closed.
Silver closed up $0.04 at $15.81. It is up to you to decide whether this new interest in silver bullion is
a flash in the pan or the beginning of higher prices in general –
but we were up $0.81 on the week which is impressive. Technically silver
is also looking good as this close ($15.81) is above the 50 DMA ($14.94)
and the 100 DMA ($15.32). We have some work to do with the 200 DMA ($16.00)
but have seen a definite shift in investor sentiment.
Platinum closed up $26.00 at $979.00 and palladium is up $5.00 at $706.00. This is another re-born area – platinum closed up $72.00 on the
week and the word between physical dealers is that in view of the actual
physical metal available platinum has become too cheap.
And the US Mint is at least talking about its platinum bullion and proof
coin production according to Coin World. It would appear the designs for
both the proof and bullion coins have been approved but there may be hitch
in planchet production (coin blanks). Planchets were last provided by
Gold Corp but this time around it appears that the US Mint will use Sunshine
Minting in Coeur d’Alene, Idaho. The US Mint is fanatical about
quality control - “This validation is ongoing, and we hope the process
will be completed in the near future. This would allow us to provide platinum
bullion and numismatic products before the end of the year.”
Reuters is interesting – “The spike in platinum prices follows Glencore's
announcement earlier this week that it will shut its Eland platinum mine
in South Africa due to low prices and a difficult market environment.
The metal dipped near a seven-year low last week on concerns that the
Volkswagen emissions scandal would reduce demand for diesel cars, in which
platinum is used in catalysts.”
Much has been made of how much gold China holds – it’s up –
it’s down – it’s all around. My position has always been that few, outside of Chinese insiders will
actually know because there is not enough transparency in Chinese business
or politics. My position has always been that the Chinese will certainly
offset their huge dollar position with gold bullion regardless of price
because it is in their DNA. And
within this generation the biggest players in the real gold world will be China and India. But
there is one person who knows more about this minor mystery than most –
Koos Jansen (BullionStar Blogs) – his latest thoughts follow.
“There are a few analyses making rounds on the internet about gold
owned by the People’s Bank of China (PBOC). I’m always interested
in these analyses, as I like to be aware of all knowledge available on
this subject, but I rarely agree with them.
The big questions that remain in the gold space are, (i) how much gold
does the PBOC truly have, (ii) how and where is this gold stored, (iii)
how much of the imported (non-monetary) gold ended up at the PBOC or at
the private sector.
In previous posts I’ve shared my analyses: I think the PBOC buys
most of its gold abroad where they monetize the metal after which it can
be imported into China mainland without having to be disclosed in publicly
available customs reports (these monetary gold flows would be invisible
to us, therefor I don’t know how much gold the PBOC has). All the
gold that is disclosed in publicly available customs reports as export
to China is directed through the Shanghai Gold Exchange (SGE) where it’s
bought by private investors and institutions, not the PBOC. That’s
my main thesis, although I don’t rule out the PBOC is able to interfere
in the domestic Chinese gold market and the SGE.
The problem we encounter is that there has been a lot more gold sold through
the SGE than all consultancy firms (WGC/GFMS/CPM) disclose as Chinese
gold demand. The difference, which is at least 2,000 tonnes, is thought
to be PBOC gold accumulation. In addition, there are a lot of precious
metals on the balance sheets of Chinese commercial banks, although it’s
unknown what these precious metals truly represent. Is it gold, silver
or platinum and who is the owner? Many analysts think the PBOC buys gold
on the SGE through commercial banks and leave this on balance sheets of
these banks before it can be flipped to the PBOC’s balance sheet.”
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 – 7 believe
gold will be higher next week – 2 think gold will be lower and 3
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: 49 people thought the price of gold would increase
next week – 37 believe the price of gold will decrease next week
and 14 think prices will remain the same.
Precious Metal Closes & Dollar Strength – Oct. 5 – Oct. 9
This from Kira Brecht (Kitco) -
Are Commodity Markets Bottoming? Watch Crude Oil - Don't look now, but a number of commodity markets are marking out minor
bottoms. In the past month, a number of commodities have actually posted
solid gains, with palladium futures up 18.6%, sugar up 15.6%, wheat up
8.8% and corn up 7%.
The commodity arena has been hit hard in 2015, with many markets falling
to multi-year lows. Heading into the fourth quarter, however, that trend
may be changing. A number of markets have formed at least minor technical
"bases" on their respectively daily charts, which sets the stage
for potential continuing gains ahead.
Watch crude oil. For gold investors, however, a critical market to monitor is crude oil,
in part due to its inflation generating potential. Looking at the big
picture, nearby Nymex WTI crude oil futures are trading more than 50%
lower than where there were two years ago. However, the $45 per barrel
zone in crude oil appears to be a little "sticky" for that market.
Nearby crude oil futures have been testing that zone in recent months,
with brief forays below the $45 level. Two-way trade has emerged around
that level as bargain hunters emerge and demand is seen below that price zone.
Commodity markets like crude oil often move in boom and bust cycles. It's
simple really. High prices entice new producers to jump into the marketplace
and supply increases. The higher levels of supply, then in turn pressure
prices lower. The low prices in turn decrease production as it no longer
becomes as profitable to grow, drill, or mine whatever that particular
commodity may be. Already, U.S. oil producers have pulled back significantly
in recent months amid the sharp drop in crude oil prices, it's just
not profitable for some producers at these depressed levels.
Picking tops and bottoms is dangerous business. But the crude oil market
is showing signs of developing a floor. A "spike" low has formed
at $37.75 in August basis the nearby Nymex crude oil contract.
Recent gold market action. Gold has been trading in a large range between roughly $1,100 per ounce
and $1,170 per ounce. Buyers have supported gold in recent months on price
retreats. Higher daily lows are seen on the daily December Comex gold
Markets can build bottoms quietly. Crude oil appears to have found a base.
In the softs arena, sugar and coffee are posting gains in recent weeks.
Corn, and wheat and to some extent soybeans are posting gains from their
late summer lows. Commodities have taken a beaten throughout 2015, but
for now some markets may be attempting to build a bottom.
Stay tuned. A turn higher in commodities would be gold supportive. All
markets go in cycles and the beaten down commodity cycle may be nearing
The walk in cash trade today was surprisingly busy but the phones were
Unscientific Activity Scale is a “
6” for Friday. The CNI Activity Scale takes into consideration volume
and the hedge book: (Monday –
5) (Tuesday –
5) (Wednesday –
7) (Thursday –
6). 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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