Commentary for Tuesday, April 28, 2015 ( www.golddealer.com) – Gold closed up on the Comex today by $10.70 at $1214.00. This was the result of a declining dollar but the jump in prices seems tepid – almost not convincing after yesterday’s scramble to higher ground. The after-market was also a no-show meaning we flattened out at the close and stayed there – perhaps indicative of an insurance bet from a public which expects little action from the Federal Reserve meeting – results to be released after the market close this Wednesday.
Yesterday it was a suspicious short-covering rally and today I really thought the market would sell off – but the dollar intervened. The Dollar Index now trading around 96.17 has traded between 96.01 and 96.93 so we are decidedly weaker today – which is interesting because as of this writing the DOW has reasserted itself and European stocks are weaker.
At any rate all eyes are on the Federal Open Market Committee both today and tomorrow. Federal Reserve officials will do their usual officiating over what steps will now be taken to insure the economic recovery stays on track but at the same time the near zero interest rate environment does not cause collateral damage. Not an easy job because our cousins in Europe have their own QE game plan and the majority of US economists believe a rate increase is already a foregone conclusion. In fact most believe the Federal Reserve will have something on the table by this summer.
I think this interest rate move is already “old news” and gold will not sell off to the degree that most bears anticipate. It’s possible we could test recent old lows in the $1140.00/1150.00 seen late last year but a significant break below this point may not be in the cards because of real physical demand.
I also don’t think a Greek capitulation will make much difference in the price of gold. If Greece does default it will hardly be a surprise and besides anyone who is especially worried about this debt problem has already moved their money to a safer haven. Finally anyone willing to take the risk of buying Greek bonds at 23% is a gunslinger and completely fearless – even of government overreach or possible financial damage created in a zero interest rate environment.
So what’s in store for gold? Actually I think these markets will remain pretty boring – within already prescribed limits. If you consider the 6 month gold price chart it will tell the simple tale. As far as recent strength gold must assert itself above $1220.00 or no one will care.
And even if that happens the technical picture presents a big challenge for gold – there is a great deal of overhead resistance between $1220.00 and $1300.00. So even if you throw out the big run to higher ground we saw early in 2015 ($1300.00) gold seems range bound between $1140.00 and $1240.00. And I think it will take something bigger than a small interest rate this summer to change this well established price landscape.
Note the word “small” – the Federal Reserve is not proud at this point of this economic recovery. Even improved housing numbers (usually a biggie) are suspect as a commentator on CNBC pointed out this morning – perhaps as much a 40% of the money pouring into housing is speculative in nature and could lead to another big problem down the road. This would certainly stop the Federal Reserve in their interest rate tracks and believe me Janet Yellen and her troupe of merry men watch housing like the hawks they are – sitting on top of the largest monetary expansion in world history.
Silver closed up $0.19 at $16.58 and the physical demand across the counter is active but less than average all things considered. It is easy for us to regularly blow through 25,000 ounces of silver bullion in a short period of time – and usually Kenny is pushed during that time looking for more supply. Lately he has been worried more about lunch than silver bullion although the 25,000 ounce activity has been consistent.
Platinum closed up $5.00 at $1157.00 and palladium closed down $1.00 at $781.00.
This from Neils Christensen (Kitco) – Gold Specs Unchanged, Silver Net Longs Halved – CFTC – Trading activity in the gold market was virtually neutral as the Community Futures Trading Commission (CFTC) reported only a small change in speculative interest, Friday.
The disaggregated Commitment of Traders Report (COTR), for the week ending April 21, showed money-managed speculative long positions of Comex gold futures dropped for the second consecutive week. Gross long positions fell by 2,180 contracts to 108,259. At the same time, short-sellers also exited their positions, dropping their short bets by 2,256 contracts to 60,134. Gold’s net length now stands at 48,125 contracts.
During the survey period, the gold market was relatively stable as prices gained less than 1%; Comex June gold futures hovered around $1,200 an ounce. Analysts noted that gold was trading in a relatively tight range as investors are trying to gauge if, and when, the Federal Reserve will pull the trigger and raise interest rates.
With a relatively balanced marketplace, analysts’ opinions on the market are expectedly mixed.
Bart Melek, head of commodity strategy at TD Securities, said that the fact that more short-sellers exited their positions than long sellers is an indication that expectations are growing that weaker U.S. data will push the Fed tightening later in the year or even to 2016. He added this shift in expectations should be bullish for gold prices.
Analysts at UBS said that with Greece moving closer to defaulting on its debt obligations and no resolution with its European creditors, “shorts are likely to think twice before aggressively rebuilding positions.”
However, on the bearish side, Sam Laughlin, an analyst at MKS, said that some investors holding on to long positions could be impatient as the yellow metal has been unable to hold any gains above $1,200 an ounce.
“Further weakness leading into this weeks’ U.S. data releases could put pressure on a move through $1,175 as traders re-evaluate their long positioning, opening up $1,150,” he said.
Barclays analysts said that they expect to see a reduction in next week’s trade data as investors fled the gold market last week, eventually driving prices to a five-week low.
While gold was relatively neutral, the silver market turned significantly bearish as its net length was cut to its lowest point since November 2014. The disaggregated COTR showed money-managed speculative long positions of Comex silver futures dropped for the third consecutive week by 2,871 contracts to 42,437. At the same time short contracts rose by 8,925 contracts to 32,283. Silver’s net length now stands at 10,154 contracts.
During the survey period, Comex May silver prices fell less than 1%. Analysts at Commerzbank said the data shows that silver’s net length was halved compared to the previous week.
“Money managers have thus contributed to the fall in the price of silver in recent weeks and are also likely to be currently precluding any noticeable rise in prices,” they said.
The walk-in cash trade was steady today but not hurried and the phones were average to quiet. The public is not exactly jumping in at these higher prices but I am happy to report there has been a spike in tire kicking.
Our Activity Scale is relatively strong in the mid-range numbers but is trending lower – this would indicate that while prices are moving higher this latest good news may not be enough to create new customer orders. But here is where the anecdotal evidence gets confusing – you would think that an informal survey about what out reps are either buying or selling would reveal that recent business is more repeat business rather than signing up of new customers. But in fact this morning I asked the staff and all said that they are getting more new customers by far and the mix of these customers is also interesting – they are all over the place meaning a wide range of small customers to very large size ordering – even some whales.
I would not get too excited here because technically the metals are still at a big disadvantage relative to the exploding results we have recently seen in stocks. But this still developing picture may foretell better days as the public seems willing to take advantage of lower prices even though most commentators will not commit one way or the other relative to a bottom in gold.
The GoldDealer.com Unscientific Activity Scale is a “ 5” 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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