Commentary for Friday, Jan 16, 2015 – Gold closed on the Comex today up $12.20 at $1276.90 which looks like a 4 month high.
Gold traded flat overnight in Hong Kong and London but moved into higher area on the opening of the domestic market. This is probably due to a combination of follow through action created after the big Swiss National Bank surprise yesterday and the continued tension from Europe over possible European Union quantitative easing plans.
The EU will meet next week and many believe President Mario Draghi will further define some sort of bond buying program supported by the central banks. This could lead to further euro devaluation and so supports safe-haven buying of gold in Europe.
This from CNBC – “U.S. consumer prices recorded their biggest decline in six years in December and underlying inflation pressures were benign, which could bolster the case for delaying the first interest rate increase from the Federal Reserve. The Labor Department said on Friday its Consumer Price Index fell 0.4 percent last month, the largest drop since December 2008, after sliding 0.3 percent in November. In the 12 months through December, CPI increased 0.8 percent. It was the weakest year-on-year reading since October 2009, and followed a 1.3 percent rise in November. Last month’s readings were in line with expectations.”
I would not read too much into falling consumer prices – this is the result of falling oil.
If the Fed delays its expected interest rate hike – it would be bullish for gold.
Gold’s Moving Averages are interesting and positive: The 50 Day Moving Average ($1199.00) – the 100 Day Moving Average ($1211.00) and the 200 Day Moving Average ($1253.00).
Silver closed up $0.67 at $17.74 so we finished a hectic week up $1.36.
Platinum closed up $8.00 at $1270.00 and palladium was off $12.00 at $754.00.
Precious Metal Closes & Dollar Strength – Jan 12 – 16
Gold Silver Gold to Silver Ratio Dollar
Mon $1232.70 $16.53 74.57 92.04
Tues $1234.30 $17.12 72.10 92.24
Wed $1234.40 $16.95 72.83 92.12
Thurs $1264.70 $17.07 74.08 92.12
Fri $1276.90 $17.74 71.98 92.73
Platinum Palladium Rhodium Oil
Mon $1240.00 $814.00 $1210.00 45.73
Tues $1247.00 $815.00 $1200.00 44.17
Wed $1238.00 $776.00 $1190.00 48.97
Thurs $1262.00 $766.00 $1180.00 46.62
Fri $1270.00 $754.00 $1180.00 47.95
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 – 4 believe gold will be higher next week – 4 think gold will be lower and 3 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: 54 people thought the price of gold would increase next week – 29 believe the price of gold will decrease next week and 17 think prices will remain the same.
So what to expect from gold on the short term? Even with today’s firmer price I would still be suspicious – but thankful that the hoped for bottom around $1200.00 has been defended. I think the majority of higher prices seen since the November low around $1150.00 have been the result of safe-haven buying – spurred by continued trouble in Europe and possible debt default by minor EU countries. That run certainly improved gold’s technical picture short term but the profit taking in late December should create some doubt about the end of the bear market.
It’s also interesting that gold attempted a break above $1240.00 twice and failed before the announcement by the Swiss National Bank on Thursday. This latest news regarding the relationship between the Swiss Franc and the euro caused a significant rally – pushing prices above the important $1250.00 mark – putting the bulls in charge on the shorter term.
And there are a number of unanswered questions which hold sway over short term prices in gold. Will oil hold recent higher ground? Will the European Union quantify their suggested bond buying program which will lead to an expansion of euro money supply and hopefully restore financial order within the EU?
For now the answers to these questions are murky. You could see higher prices if Europe continues to wobble but gold might be ripe for another round of profit taking.
There is also the stock market to consider. Things here have been steady – to the consternation of the short contingent. But even if stocks in general do not move lower all the publicity about higher stocks has moved on. No buzz in the stock market is good for gold because it frees up speculative money looking for the next momentum play.
In the longer term the one year gold chart should be watched carefully. There is massive overhead resistance between $1300.00 and $1350.00. But if this latest run remains in tack a break above these numbers would signal gold has regained its mojo. Its safe haven status will be restored and investors worldwide will continue buying as insurance against another round of European monetary easing.
If this most recent strength cannot push into higher territory all of the most recent gains in gold are just another tempest in a tea pot. If this scenario is true we remain range bound between $1200.00 and $1400.00 – clearly defined on the 5 year gold chart going back to July of 2013.
One thing is sure – 2015 will prove very interesting.
This from FX Empire – “As if the Eurozone didn’t have enough to deal with the situation in Greece is becoming more of a headache as the ECB takes a hardline stance with the country, threatening to cut off funding in the hopes that it will never happen. Elections on Jan. 25 hinge on whether Greek voters are willing to accept a strings-attached successor to the country’s international bailout package. Amid anti-austerity promises by the Syriza party, which leads in polls, the ECB is signaling a willingness to withdraw 30 billion euros of finance even if it tips Greece into a crisis that ultimately sees it leave the single currency.
Problems stemming from the Eurozone not only are weighing on the Fed decision but are heavily stressing the pound as contagion from across the channel and the UK biggest trading partner are turning the economy downwards. The pound fell towards an 18-month low after data showed British inflation at its lowest since 2000. That bolstered expectations the Bank of England will keep rates low for longer. The Great British Pound fell to $1.5077, not far from an 18-month low of $1.5034 struck last week, after data showed UK inflation fell to an annual 0.5 percent in December from 1 percent in November. Economists had expected inflation to fall to 0.7 percent. The GBP is trading at 1.5166 at this writing.
The stress out of Europe is sending traders to the safety of the yen. Compounded by low inflation due to the drop in oil prices, markets are getting a bit worried as the safe haven yen and gold benefit. The central bank isn’t currently inclined to expand already-record easing at a meeting next week, reflecting its view that the economy remains in a virtuous cycle and inflation expectations are steady, the unidentified official said. The plunge in the price of oil makes it increasingly uncertain whether the Bank of Japan will reach its 2 percent inflation target in the coming fiscal year.”
The above quote and yesterday’s action by the Swiss National Bank are typical of why Europe may open further the safe-haven buying in gold. Don’t expect a rush – not with the Dollar Index trading over 92.00 but this toxic EU stew will support gold and provide yet another reason that gold may have bottomed in the $1200.00 range.
This latest “higher plateau” in gold is much higher than I have expected – my fallback position being $1050.00 to $1150.00 but with a break above the tough $1250.00 mark yesterday we will just have to reassess and be more positive.
It was not that long ago that trouble within the European Union – falling oil and possible default in Greece were not even a consideration. But then the Bank of Japan lead the way in weakening the yen due to a more than 10 year bout with deflation. The Russian/Ukraine problem lead the way into a dysfunctional EU as countries battle imposed sanctions and banks fail to follow the English/US/Japan playbook of quantitative easing.
Now – most see no way around the EU printing press. This poses an interesting question for 2015. Will the Federal Reserve raise interest rates anyway and risk further fracturing of the European Union?
We have a crap shoot of the first order and it’s difficult to say how this will develop.
It’s even possible the US economy will overheat. How is that for another idea that dropped out of the sky? There is still some lingering worry that real job growth is not getting traction and our recovery might stall. But what happens if the now underrated inflation decides to make a big comeback in 2015? It is possible – if for no other reason other than it’s unexpected. And we should be worried about the unexpected after inflating our balance sheet to something over $4 trillion dollars since the financial collapse of 2008.
There is enough financial turmoil to at least support current gold prices. And as long as the usual suspects (China and India) continue to buy gold we could get more traction and attract new speculative money since we have broken out into new higher ground. I don’t want to get too excited here but new speculative money might set up a pile-on scenario which could change the technical dynamic of gold and return it to its proper place as a safe haven investment.
The walk-in cash trade was again very busy and so were the phones. There were a few heavy silver bullion sellers but for the most part we saw consistent buying. This figures – the public loves a little buzz to the upside.
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