Commentary for Thursday, July 9, 2015 ( www.golddealer.com) – Gold closed down $2.50 on the Comex today in relatively flat trading. Actually I’m surprised we closed down at all – I figured with the increase in unemployment gold would trend higher, especially after yesterday’s $9.10 move to the upside.
But there were other factors which produced this choppy market. Mostly old news but the gold market always needs confirmation – especially when it comes to what the Fed will do with interest rates. The reason being that the short paper trade rules and no paper trader is in for the long haul – they just want to make a living using short momentum moves (either up or down).
This morning the notion that the latest Fed minutes from June indicate Yellen will continue to play the interest rate hand pat. And they were specific – they need “more evidence of strengthening” before rates will move higher.
And there are other headwinds like problems in China and Greece.
Some writers fear the interest rate increase in September. At one time this may have been justified but I think the increase will be small and the downside for gold will also be small.
Granted the technical picture remains negative but we have tested these lower levels in gold many times now and continue to bounce higher. The end result of a small interest rate increase may even be positive for the price of gold once the boogie man is out from under the bed.
The Dollar Index has also helped the bigger picture – now trading around 96.47 the index these past 5 days has been choppy to lower. It has ranged between slightly above 96.00 to 97.25 but began to weaken somewhat Tuesday, Wednesday and Thursday.
Still the feared interest rate hike rules the trading floor so for now more patience is needed. In the meantime remember that both gold and silver have successfully tested March lows in gold of $1148.00 and in silver $14.75 – this alone will help firm the metals waiting for longer term physical trends to either firm up prices or break any downside move the result of increased interest rates.
This from Reuters (Elvina Nawaguna) – U.S. jobless claims rise to highest level since February – “New applications for U.S. unemployment insurance benefits rose last week to their highest level since February, suggesting some slowdown in the labor market recovery.
Initial claims for state unemployment benefits rose 15,000 to a seasonally adjusted 297,000 for the week that ended July 4, the U.S. Department of Labor said on Thursday.
Even with the rise in claims, the latest report marks the 18th consecutive week of new filings below 300,000, which is considered consistent with a firming labor market.
The previous week’s claims were revised to 282,000, showing that 1,000 more people filed than initially reported.
Economists polled by Reuters had expected new applications to fall to 275,000 last week.
The four-week moving average of claims, which smoothes out week-to-week fluctuations and is therefore considered a better gauge of the labor market, rose 4,500 to 279,500 last week.
U.S. Treasuries erased some losses after the data, while the dollar trimmed gains against the euro and the yen. Stock index futures were unchanged.
The claims report covered the period which included the U.S. Independence Day holiday, but a Labor Department analyst said there was nothing unusual in the state level data last week. He did note that claims data tends to be volatile in July because of retooling by auto plants during that period.
Jesse Hurwitz, an economist at Barclays Capital, said that because of the holiday and auto plant shutdowns, he was inclined to look past the volatility in the report. “Trend readings of both initial and continuing claims remain low from a historical perspective, which we expect to continue,” he said.
Continued claims – the number of people still claiming jobless benefits after an initial week of aid – rose 69,000 to 2.334 million in the week ended June 27, the Labor Department said.
The labor market has been tightening, with the unemployment rate not too far from the 5.0 percent to 5.2 percent range that most Federal Reserve officials consider consistent with full employment. A government report last week showed employers adding 223,000 jobs in June, a slowdown from the prior month, and the U.S. unemployment rate sliding to 5.3 percent.”
Silver closed up $0.22 at $15.42. Like I have been saying physical demand has been strong both for gold and silver bullion. My morning survey of major metal dealers shows there is not much for immediate delivery – I’m not talking about a few hundred ounces. A large order ($100,000.00) would run into trouble anywhere, especially if you want to pay and walk with the material. This situation will not last – the US Mint will gear up again and there are secondary sources but I cite this lack of product only to show that it does not take much to get the physical market backed up.
Platinum closed down $14.00 at $1022.00 and palladium closed down $16.00. Platinum is now trading $137.00 less than gold.
This is our usual Thursday Chicago Mercantile Exchange report covering the last 5 trading days – so we are looking at the trading volume numbers for the “August” Gold contract: Thursday 7/2 (281,148) – Friday 7/3 (closed) – Monday 7/6 (278,897) – Tuesday 7/7 (279,397) – Wednesday 7/8 (270,287). These numbers remain in the higher end of the range.
The walk in cash trade was busy today – less busy however than yesterday. The phones have also been steady to busy.
The GoldDealer.com Unscientific Activity Scale is an “ 8” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (closed last Friday) (Monday – 7) (Tuesday – 9) (Wednesday – 8). 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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