Commentary for Friday, June 19, 2015 – Gold closed unchanged today on the Comex at $1201.50 and was very flat in overnight trading both in Hong Kong and London. A disappointing finish to a promising week so there was not much joy for the momentum players going into this weekend.
Actually I thought we would see more action today – a decent price consolidation above $1200.00 would have encouraged the physical trade but a settle at unchanged today means the cautionary flags are still up.
Gold was up $25.00 on the week and the IMF has called a new emergency meeting this coming Monday to further discuss the Greek debt problem. At this point Greece is holding fast to the notion that they will not make the 1.6 million euro payment due at the end of this month.
My bet is that things are not nearly as bad as some claim – they never are. You might find a Greek default (not likely) is just another yawn. And if there is a consequence the price of gold will be up but not significantly.
The China economic slowdown could have much greater consequences and that is not even being talked about in the physical gold community.
Let’s look at the Dollar Index (short and longer term) for a better picture of what is happening to the price of gold. On the daily movement it sold off at 95.50 and is now trading down at 94.26 after opening flat and moving higher.
But a better feeling of the weaker dollar can be seen in the weekly trade – as the Dollar Index approached 95.50 on Monday – began to weaken and moved to 93.50 before getting any traction. Again we are now at 94.26 so relative to the weekly trade we are 1.24 weaker which is big considering we are talking about a 5 day trading range. This has supported the price of gold and is responsible for much of move at or above the 1200.00 level.
The more interesting question is why the dollar remains so strong. I appreciate it’s the US economic recovery coupled with the “lesser of two evils” scenario. In other words considering the massive expansion of the US money supply the dollar should be weaker – but its safe-haven status cannot be denied – especially when it’s compared to other world currencies.
That’s one of the main reasons gold still struggles – holding dollars still make sense. And as long as the dollar remains strong the price of gold will remain capped.
But this scenario does have limited downside for the price of gold, especially because the price range between $1150.00 and $1200.00 has held up so well – going back to the summer of 2013. Even trade commentators are suggesting that gold may be bottoming in its current range.
Technically the price of gold has been under pressure since mid-May but at least turned flat around $1170.00 by the first week in June. Today however is the second trading day close above $1200.00 ($1201.50) so while I’m not overjoyed about today’s unchanged number we are technically improving.
This can be seen in gold’s three basic moving averages – 50 DMA ($1194.00) – 100 DMA ($1198.00) and the 200 DMA ($1206.00).
The close today is above the 50 DMA and 100 DMA so there has been a considerable momentum shift to the upside.
But we have been here before so the big question remains – can the price of gold move above the 200 DMA and continue higher with any convincing momentum? If it can we have a reasonable chance of making new recent highs in the $1230.00 to $1250.00 at which time paper traders will consider profit taking. If we cannot hold recent momentum gains we are stuck in the usual but tight trading range between say $1150.00 and $1200.00.
If you are a price pessimist this should tell you that negative gold commentary is becoming less in vogue within the US. You don’t have to sell gold on the worldwide stage – there are always plenty of buyers – it’s just a matter of price.
Finally watch the price of crude oil for signs that gold may have bottomed. If you look at the 30 day pricing chart of WTI Crude (Jul’15) you will see it has been fairly stable between $58.00 and $61.00 a barrel. But a look at the same chart this past year is more interesting. Last summer crude was trading around $100.00 a barrel and began to lose steam as new sources came on line. The price fell to around $50.00 by January of 2015 and at the time there was deflationary talk of $40.00 crude – very bad for the price of gold. But then the market stabilized between January and June with an upward bias. Any further price gains in crude would be considered bullish for gold and will add a few logs to the just stirring inflation fire.
Silver closed down $0.05 at $16.10 and Australian Silver Kangaroo 1 oz coins remain popular.
Platinum was up $4.00 at $1088.00 and palladium was down $12.00 at $706.00. Platinum bullion in my mind remains a bargain trading at a $115.00 discount to gold. Its price is the lowest we have seen in 6 years. The wider price comparison is also worth consideration – platinum saw a high in March of 2008 at $2250.00 and when gold peaked at $1880.00 in 2011 platinum traded at $1905.00. Finally there still is not much physical product available and the industrial comeback will once again place platinum front and center.
I thought this was interesting from Chuck Butler (EverBank) – “Gold researcher extraordinaire, Koos Jansen, wrote in his posting on www.bullionstar.com that “the Bank of England has recently released its annual report in which it’s disclosed the Gold held in custody for a range of customers was 5,134 metric tonnes on February 28, 2015, down 351 tonnes (6 %) from the previous year.” Koos Jansen then goes through all sorts of numbers as to who owns what, and so on, and comes to a number that he believes is pretty close to being accurate, and that is that there is an estimated 3,238 tonnes of floating supply of Gold in London. That’s good to know, given that China has been importing more than the World’s production the past few years.”
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 – 10 believe gold will be higher next week – 4 think gold will be lower and none believe 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: 44 people thought the price of gold would increase next week – 39 believe the price of gold will decrease next week and 17 think prices will remain the same.
Precious Metal Closes & Dollar Strength – June 15 – Jun 19
The walk in trade was busy all day – mostly buying typical of higher prices. The phone trade was also busy – those earlier in the week tire kickers decided to pull the trigger. There was also some excitement in the downstairs trade – really something we have not seen in sometime. It’s impossible to say if this will last but with a long and drawn out sideways market it’s easy to forget how excited the public used to be when taking delivery of bullion products.
The GoldDealer.com Unscientific Activity Scale is a “ 4” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 6) (Tuesday – 4) (Wednesday – 3) (Thursday – 4). 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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