Gold Closes Higher on Safe Haven Buying as Stocks Stumble

Gold Closes Higher on Safe Haven Buying as Stocks Stumble

Commentary for Friday, Jan 15, 2016 (www.golddealer.com) – Gold closed up $17.60 today on the Comex at $1091.50. Even with all the fanfare the price of gold has been on the choppy side – even with today’s advance we are down $8.00 on the week after an advance of $39.00 last week so while any good news is welcomed I would still like to see interest above $1100.00 before getting excited again.

Gold was strong because the price of oil remains unstable dipping under $30.00 ($29.51). This rattles world economies – world stock markets skid – the DOW moves lower by 500 points (Wall Street will be drinking tonight) and all this drags the dollar lower. I think our stock market is officially in a bearish stage – this might have spillover power in the metals.

The Dollar Index closed yesterday at 99.07 – today we have traded between 98.38 and 99.12 – as of this writing we are 98.50 with a negative bias. So this weaker dollar helps the price of gold move higher and reinforces further safe-haven buying.

The idea is that falling oil prices are evidence of a slow world economy which hurts the price of stocks. One might argue however that falling oil is a function of oversupply in particular by the Saudis who now produce 10 million barrels a day. I heard one knowledgeable commentator today say that if the Saudis produced 8 million barrels a day the price of crude oil would reverse.

Their motivation may touch on many sectors – they don't like US shale production for obvious reasons and would like to cobble that business model – shale production is something around $65.00 a barrel. There is also talk that lower oil prices hurt the Russians (that has implications for the palladium market) and ISIS. And finally, as hard as this is to believe the Saudis may just need the money. At any rate batten down the hatches until crude oil does get on its feet.

So the NASDAQ is down 10% in January and it’s the worst month since 2008 – stocks are under great pressure but does this necessarily equate to consistently higher gold prices? The last time the DOW was in free-fall was the beginning of the 2008 recession and the price of gold was stuck between $800.00 and $1000.00. As everyone finally got the picture that banks were failing and Wall Street had cut up the mortgage market gold virtually doubled in three years.

Today’s red ink on Wall Street is a good time to consider whether such a thing could happen again. Surprisingly I don’t think it’s possible – today the liquidity factor is much larger because of world quantitative easing. You might make the case that such a fiat currency explosion might create an even bigger bang but I think this unlikely.

There will be some “safe-haven” buying just because it makes sense but there is no mortgage crisis or even fear in the financial market so the best gold will do is move to the higher end of current trading range and wait – something it has been very good at doing for some time now. What it’s waiting for is simple – a real financial crisis which might overpower the existing system.

This next Monday (Jan 18 th) is Martin Luther King Day – we will be closed and so will the post office and commodity markets.

Silver closed up $0.15 at $13.88. This market is finding a “sweet-spot” at these lower levels – investor interest in silver bullion is volatile but there are more buyers entering the marketplace at less than $14.00 and the release of 2016 American Silver Eagle Monster Boxes is always good for business. It’s amazing how popular this product has been – even with higher premiums.

Platinum closed down $9.00 at $825.00 and palladium closed down $4.00 at $487.00. Platinum is now trading for $266.00 less than gold – I believe that is a new recent discount high. Demand is solid because the stuff is cheap – dealer supplies are thin and manufactures are quoting delivery times into March.

I want you to read the latest from Peter Schiff – take it with a grain of salt but before you hang up on me let’s make an important point about gold. The reason gold sometimes lacks credibility in either an up or down market is because real believers are “passionate”. To a devotee price direction is not important – they are only interested in how many ounces they can comfortably accumulate and so their commentary is always bullish.

That’s a double edge sword because the “middle of the road” reader (a large category today) needs to be convinced that gold still has gravitas. That is not necessary when prices are moving higher – but we have been in a “steady to lower” price environment for years. Not to belabor the point but fanatics about gold and silver bullion are good for the trade – they are the pillars in an otherwise wavering price market which can change with the wind.

Today’s action is a good point – nothing happening yesterday – stock steady – traders ignore China – smooth sailing. Today the stock market is a mess – red ink all over the place and that feeling of unease is back. So before you dismiss Schiff as just another “passionate” exponent in the gold business consider this possibility – he might be right.

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 – 5 think gold will be lower and 0 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: 46 people thought the price of gold would increase next week – 41 believe the price of gold will decrease next week and 13 think prices will remain the same.

Precious Metal Closes & Dollar StrengthJan. 11 – Jan. 15

This from Sarah Benali (Kitco) – Fed To Bring Back QE, Gold To See 'Mother of all Rallies' – Peter Schiff 2016 Forecast – The bearish sentiment towards gold doesn’t affect this permabull, who thinks gold is setting itself up for the “mother of all rallies.”

In his 2016 forecast for gold and the U.S. Federal Reserve, Peter Schiff said the central bank is going to have to reverse course this year and drop interest rates again, maybe even introduce QE4 – a fourth round of quantitative easing.

And, according to the Euro Pacific chief, the moment the Fed raised rates was what he believes to have been the “buy signal” for gold.

“It had no choice but to raise rates because failure to do so would be perceived in a lack of confidence in the economy and the markets,” he said in a videocast Thursday. “The only thing that’s going to stop this correction from turning into a bear market is for the Fed to capitulate and admit that the economy is weaker than they thought, that they had made a mistake raising rates.”Peter Schiff

Schiff argued that this is not the beginning of a tightening cycle as markets perceive, but rather the end of it.

“That rate hike was the end of a tightening cycle that first began a couple of years ago with the ‘taper talk,’” he said.

By the time the Fed got around to raising rates, he continued, that was the end of the tightening cycle, which would imply gold prices would move higher.

“The next move by the Fed is going to be to launch a new easing cycle, which I think will take interest rates to negative territory…so, the rally in gold that began after the Fed hiked rates is going to continue and accelerate,” he said.

Gold prices initially reacted negatively to the first rate hike in almost a decade but has since been on the rise. February comex gold futures managed to start the new year on a positive note, breaching through the $1,100 an ounce level. Since then, the metal’s price has declined and was last quoted down $14.90 at $1,072.20.

“I think the bottom is in…gold is still an incredible buy,” he said, adding that the narrative that we will see an economic recovery and higher interest rates this year is “false.”

“Everybody believed that what the Fed did [in response to the financial crisis], worked…This entire narrative is a fantasy,” he said. “The Fed didn’t solve our problems, it exacerbated our problems.”

The walk-in cash business was got off to a slow start but by noon the place was packed – the phones were a bit on the erratic side. There were some bigger trades and they were mixed – some buyers some sellers. There have been some rather large CNT storage deals so the early money into gold and silver bullion may be coming around.

Questions about 2016 US Mint Silver and Gold Eagles – we should have 2016 US Gold Eagles and 2016 US Silver Eagles in stock next week – orders are being taken

The GoldDealer.com Unscientific Activity Scale is a “ 4” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 5) (Tuesday – 4) (Wednesday – 6) (Thursday – 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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