Gold Sees More Momentum Buying and a Fading Close

Gold Sees More Momentum Buying and a Fading Close

Commentary for Tuesday, May 5, 2015 ( www.golddealer.com) – Gold closed up $6.40 at $1193.20 in a second day of higher prices after Friday’s sell-off – but this play is unconvincing.

So what has changed in the gold marketplace between yesterday and today? A rhetorical question perhaps but there have been a few minor bumps – the short market players coming off a Friday push to the downside have now further trimmed their sails.

This back and forth covering is typical action of late so let’s look elsewhere – like the possibility that higher oil will create some inflation headwinds.

In the last 5 days WTI crude has moved from $57.00 to $61.00. It was not too long ago that the gurus claimed oil was finished at $40.00 a barrel and it was out of the spotlight – today commentators are once again talking about higher oil prices and consequences. But this too may not be that important at least for now given recent volatility.

The ISM Non-Manufacturing Index came out this morning – rising to 57.8% in April. The March reading was 56.2%. This better news for the economy might encourage the Federal Reserve to raise rates in September so this possibility continues to be a drag on gold prices.

This latest strength could be the result of physical buying because of recent dips in the price of gold. This is a better place to start – and like I said yesterday the ethnic cash trade has been strong this past week.

There is also something to learn here – some groups buy gold on weakness – always as opposed to the typical domestic trade which stops buying on weakness and waits for lower prices.

The stock market was skittish today – perhaps a trend that will eventually support the price of gold but for now I would not take this too seriously.

And the Dollar Index sold off moving from 96.00 to 95.00 – this certainly encouraged today’s further strength but in the bigger picture I wonder because 95.00 seems to be coming up often these days meaning the index is turning flat.

Also note this confusion factor relative to the dollar and the euro – Chuck Butler (Everbank) – “But if you listen to German Finance Minister, Wolfgang Schäuble, who said that the "Greek Gov't's talks with creditors are more constructive, but he's skeptical about euro-are deal by May 11th", you would be out making the water and perishable purchases. Recall, that May 11th is the first day of payments that the Greeks need to make (I detailed these a couple of weeks ago). So, through all this, the euro finds it difficult to get on terra firma as long as this Greek drama continues. As I told you yesterday, the euro's rise in April was all about bad U.S. Data, which the Fed tells us was just "transitory", so until the markets see the proof that it was or wasn't, the euro struggles because of Greece.”

Let me quote yesterday’s newsletter – “ Finally keep your eye on gold’s 50 day Moving Average ($1191.00) – today’s close ($1186.80) is moving in the right direction meaning if gold closes at or above this important average, it is a good sign this downward momentum is subsiding. For now however the bears are still in charge and we are looking at a great deal of overhead resistance around $1200.00.”

So back to today’s close of $1193.20 – decent follow through but if you look at the overnight action London began moving higher and the domestic market carried the ball but slowed down and reversed at $1200.00 before moving lower on the close. It’s good that we moved above gold’s 50 Day Moving Average ($1191.00) indicating gold has found new footing.

In the end however don’t place too much faith in this latest run – it faded too soon and so looks like a momentum extension from yesterday’s excitement.

There is another dynamic to the physical market today which is disconcerting. Given the second day of higher prices the buzz across our counter should have been apparent. Normally such a move sparks activity – the phones light up and the buzz is created. This time around was very quiet – but it’s nice to see everyone is still paying attention.

Yesterday’s admonition concerned gold’s 50 Day Moving Average – today – watch carefully that $1200.00 overhead resistance and don’t bump your head in the process.

Silver closed up $0.14 at $16.55.

Platinum closed down $2.00 at $1148.00 and palladium was higher by $12.00 at $795.00.

SINGAPORE ( Reuters) – “Doubts still persist over the robustness of the U.S. economy as recent data has been mixed.

Markets are awaiting U.S. nonfarm payrolls data on Friday for stronger cues about the economy and when the Fed will begin hiking rates.

Strong data could prompt the Fed to raise interest rates soon, a move seen by investors as denting demand for bullion, which doesn't pay any interest. Speculation over the timing of a rate hike has kept markets on edge.

Chicago Fed President Charles Evans on Monday provided no clarity on the issue. He said rate hikes could begin this year, although with inflation uncomfortably low and the unemployment rate still too high, the Fed should hold off on raising rates until early next year.”

The walk-in cash trade was quiet today and so were the phones – any follow through action from yesterday is decidedly absent.

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 – 4) (last Thursday – 4) (last Friday – 3) (Monday – 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.

When buying or selling you will receive an email confirmation. This includes a PDF File to confirm your invoice or purchase order and includes forms of payment and bank wire instructions. When doing business please check to see if your current email has been entered into the new system and check to see if your computer will accept our email (no spam).

We always appreciate you keeping us up to date when moving or changing your email.

We believe our four flat screens downstairs with live independent pricing (BullionDesk.com) are unique in the United States. The walk-in cash trade can see in an instant the current prices of all bullion products and a daily graph illustrates the range of the markets on any given day.

Yes – you can visit the store with cash and walk away with your product. Or you can bring product to the store and walk away with cash. We will even wire funds into your account that same day for a small service fee ($25.00) if you are in a hurry.

In addition to our freshly ground coffee we offer complimentary cold bottled water, Cokes and Snapple. We also provide fresh fruit in a transparent attempt to disguise our regular junk food habits as we sneak down the block for the best donuts in the world (Randy’s).

Like us on Facebook and follow us on Twitter @CNI_golddealer. Sal is now in charge of our Facebook page and he is a self-proclaimed expert on gold conspiracy theory. He would be happy to respond to even the most ridiculous conspiracy assertion on our Facebook page so why not join the fun?

Thanks for reading – we appreciate your business and enjoy your evening!

Disclaimer – The content in this newsletter and on the GoldDealer.com website is provided for informational purposes only and our employees are not registered financial advisers. The precious metals and rare coin market is random and highly volatile so it may not be suitable for some individuals. We suggest before deciding on a course of action that you talk with an independent financial professional. While due care has been exercised in development and dissemination of our web site, the Almost Famous Gold Newsletter, or other promotional material, there is no guarantee of correctness so this corporation and its employees shall be held harmless in all cases. GoldDealer.com (California Numismatic Investments, Inc.) and its employees do not render legal, tax, or investment advice.

Leave a Reply