commentary for Tuesday, Jan 26, 2016 (www.golddealer.com) – Gold closed up $15.50 on the Comex today at $1121.70. This will be described as a combination of safe-haven buying and technical follow through – but there is something that is just not right with this latest push.
Granted gold continues firm in early trading today but frankly I was surprised there was not more buying action across the counter both yesterday and today.
In fact we saw just the opposite – a few large sellers, very large. Not that a few sellers should be unnerving – first, what the public does is not necessarily always right and second this market has been so choppy that day to day trades are a tough way to go.
What did bother me about the sellers yesterday however is that this latest run above $1100.00 does not seem to be creating the usual follow-through and there is no buzz – even with today’s continued move to higher ground over fear of a Chinese meltdown.
Remember the big push to higher ground we saw at the beginning of the year? Everyone was surprised by this strength especially because 2016 was supposed to bring additional interest rate hikes and the ‘safe-haven” aspect for gold was diminishing. Gold being contrary as usual pushed from $1060.00 (Jan 1 st) though $1110.00 (Jan 7 th), and then moved decidedly lower, bouncing off $1080.00 (Jan 14 th).
All of this “surprise” was created by the “scare” in the Chinese stock market as the world feared further weakness in the Chinese economy. I think that the word “weakness” is probably misleading here – let’s just say China remains a manufacturing giant – she is producing and spending at giant levels but these numbers are diminishing.
Now let’s compare the most recent jump – it too began at $1080.00 and quickly moved to approximately the same level we saw in early January – so technically the short term picture for gold especially since the beginning of the year is improving.
But we are still not producing the necessary follow-through even though the world stock markets look shaky and this week’s meeting of the FOMC is unlikely to produce any change in interest rates. This is actually day one of the two day meeting and the results will be released, as usual after market closes on Wednesday
The world obviously fears the China stock market and this weakness also creates problems for Wall Street. The miserable state of affairs in crude oil helps fan these fires and yet the American investor is still missing in action when it comes to actually buying gold bullion. How do I know – just look across the counter to see which way the wind is blowing.
Forget all the publicity hokum – in the last few years 3 major bullion dealers have gone bankrupt and a few remain on shaky ground. And I’m not talking about small potatoes – each of the three did in excess of $200 million in sales each year.
My point being is that even with these sad events the redistribution between legitimate dealers is not what it should be considering gold is relatively cheap relative to old highs. Remember the great old hamburger commercial “Where’s the beef?”
This is exactly the right question from an American bullion dealer if you got an honest answer. I would conclude that the world sees a need for a solid bullion hedge against ridiculous paper expansion but the American consumer is looking elsewhere – at least for now. If this were not the case we would not be questioning whether gold can get traction above $1100.00 – we would be blowing through $1200.00 by now and the downstairs would be crowded.
No doubt the Chinese stock market, coupled with the weakness in oil are fueling today’s higher prices. But it remains to be seen if gold can hold these numbers – for now watch carefully the moving averages – 50 DMA ($1077.00) – 100 DMA ($1106.00) and the 200 DMA ($1133.00).
A move above the 200 DMA and we have a horse race – not just another adjustment in the insurance bet. Finally don’t get me wrong – there is safe-haven buying happening here, especially in countries where their currency is not holding up.
But things may not be so bad for the American consumer – this drop in oil helps everyone especially at the pump. The US real estate market is doing just fine and the jobs picture – while not stellar is not falling off the cliff. There is not much of a fear factor here in the US and until that happens again look for gold to remain modestly firm.
Silver closed up $0.30 at $14.54. Still no land-mind action here – although we are shipping a great deal of US Silver Eagle Monster Boxes.
Platinum closed up $15.00 at $875.00 and palladium was up $2.00 at $492.00. Platinum bullion sales and trading of gold bullion for platinum continues to pick up. Platinum is trading for $246.00 less than gold but has gained $57.00 in the last three days of trading.
The walk-in cash business was quiet again today and so were the phones. This is not to say there is nothing happening but considering the big push to the upside in the paper market and the supposed melt down in China the latest stack of receipts in front of our Controller Ed Hom is embarrassing.
The GoldDealer.com Unscientific Activity Scale is a “ 3” for Tuesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 5) (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 generally increasing – it would indicate things are busier – decreasing numbers over a longer period would indicate volume is moving lower.
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