Commentary for Thursday, April 9, 2015 ( www.golddealer.com) – Gold closed down $9.50 at $1193.60 on the Comex today and once again dollar strength and a deteriorating technical picture has created a grimace face on the bulls for now.
Like I pointed out yesterday the moving averages also tell a tale of decreasing momentum and a shifting technical picture. Today’s close of $1193.60 is under all three of gold’s important moving averages – 50 DMA ($1204.00) – 100 DMA ($1212.00) and the 200 DMA ($1231.00).
Like it or not the price of gold is still all about dollar strength. The Dollar Index on the day has moved between 98.04 and 99.01 – now trading at 98.95. Now consider the weekly chart and you will see we have moved from slightly above 96.00 to around 99.00. Finally open up an even wider chart view and you will see that on the short term the dollar could get even stronger. Between February and March the Dollar Index topped the 100.00 mark so technically there is no reason why we might not revisit that level. When you consider these stronger dollar numbers it is a wonder that gold has not been hurt more badly.
And there is plenty of squawking from multi-nationals when the dollar is too strong because a mighty buck will eventually hurt stocks and our own economy. So any Federal rate hike in response to an improving economy seems unnecessary at a time when inflation is dead.
Still many believe the Fed will raise interest rates this year and the gold market is now obsessed with this negative possibility. But let’s not jump out the window yet – my years of watching prices have produced a few gems like this: beware the “majority think” crowd.
Sometimes they get it right but I am always suspicious when everyone agrees the price of gold is either “up” or “down”. Since mid-March gold has made the bulls smile, moving from $1150.00 to $1210.00. Since that recent top the slugging has been brutal – the long trade blinked, profits were taken and the positive technical picture – well it was not so positive when gold showed virtually no pizazz above $1200.00.
So it may be kismet that gold is moving lower – after all there is that interest rate thing everyone can’t stop talking about but then there is also the inability of the short paper trade to judge the real physical demand in China and India and they are also just as confused as everyone else as to what the Federal Reserve will finally decide relative to that interest rate bogey.
But look for a short-covering rally soon – a bounce to higher ground on virtually any pretext just because that is the way this market works when the short trade becomes fearful of losing profits.
Silver closed down $0.28 at $16.16 and I figured the physical across the counter trade would pick up in this area – it has not. But there are also no big sellers.
Platinum was down $10.00 at $1157.00 and palladium was up $7.00 at $762.00. The physical platinum bullion trade continues steady – what’s not to like as platinum continues to trade at a $36.00 discount to gold bullion.
This is our usual Thursday Chicago Mercantile Exchange reports for the last 5 trading days – so we are looking at the trading volume numbers for the June Gold contract: Thursday 4/02 (259,900) – Friday 4/03 (259,437) – Monday 4/06 (264,177) – Tuesday 4/07 (264,589) – Wednesday 4/08 (263,938). These numbers remains consistently high so there is plenty of action in both directions.
This from Holly Ellyatt (CNBC) – Greek default: Is it a question of “when” not “if”? – Although Greece is to make a multimillion-euro debt repayment due to the International Monetary Fund (IMF) Thursday, there are fears that as the country drowns in debt and repayments, default could be just a matter of time.
A Greek government official confirmed to Reuters that the country is to pay back some 450 million euros ($484.5 million) to the IMF later Thursday.
To help pay its way, the country sold over a billion euros worth of six-month treasury bills Wednesday, albeit at a yield of 2.97 percent. The auction was one of two short-term bond sales taking place this month to roll over the maturity of six-month bills on April 14 and April 17, but the country faces bigger debt repayments in the coming weeks.
In early May, 1.4 billion euros worth of T-bills mature, it has another 779 million euro debt repayment due to the IMF on May 12 and later on July 20, it has to pay 3.5 billion euros to the European Central Bank (ECB) when a Greek bond held by the central bank holds matures.
“In my own view, Greece is going to default almost certainly – the only issue is when — and I think a large portion of the markets agree with that position,” Mark Melatos, senior lecturer at the School of Economics, University of Sydney, told CNBC Thursday.
“It’s not going to assist with the immediate problem that Greece has some pretty large bills coming due that need to be repaid.”
Greece has been the recipient of two international bailouts since 2010 worth a combined 240 billion euros. In February, its second bailout program was extended by the IMF, European Commission and ECB by four months to give it more time to make drastic reforms in return for a final tranche of aid. Those reforms are yet to be finalised, however, and the aid worth 7.9 billion euros remains under lock and key.
Against this backdrop, Greece has one of the highest debt burdens in the world – some 175 percent of its gross domestic product — and the highest unemployment rate in Europe, with 26 percent of adults without a job.
Russian ‘Largesse’ – There is hope that a meeting of the Eurogroup of finance ministers on April 24 might yield some progress over the country’s bailout program as the June deadline for its completion nears but, in the meantime, Greece has looked elsewhere for support.
Greece’s Prime Minister Alexis Tsipras started a two-day visit to Russia Wednesday to meet with President Vladimir Putin, a visit that prompted rumors that Greece could ask Russia for financial aid, despite the controversy that would cause in Europe which has imposed sanctions on Russia for its annexation of Crimea and role in the conflict in Ukraine.
Following the first day of meetings between the leaders, a more pragmatic offer of a deal tied to energy cooperation seemed to appear. A Greek government official told Reuters Wednesday that Russia was considering giving Greece funds based on future profits that the country would earn from shipping Russian gas to Europe as part of an extension of the Turkish Stream gas pipeline project.
Economics lecturer Melatos believed that Russia would not want to go one step further by risking giving Greece direct aid. “If you’re in Russia’s shoes at this point, particularly given the economic concerns that Russia itself faces, I don’t think you’d want to be running any risks trying to bail out Greece at this time. Russia is constrained too in this situation….It’s not really in a position to be handing out largesse at this point in time.”
With the Russia-Greece meeting widely seen as an attempt by Athens to prove that it still has friends elsewhere, close to home its bailout program and the ongoing questions over its completion continue to dominate market talk.
Market analysts like Michael Hewson, chief markets analyst at CMC Markets, have become weary of the ongoing saga over Greece, with talks with its creditors seemingly no nearer to a conclusion than they were back in February, when the bailout program was extended.
“Yesterday’s talks between Greece and the Eurogroup (EWG) ended with the EWG issuing the Greeks with an ultimatum to present acceptable proposals for fiscal, pension and labour market reform in the next six days, whatever that means,” Hewson said in a note.
“Given that we’ve been here so many times before, ultimatums generally only work when there is a threat of a significant sanction at the end of the deadline, and short of throwing Greece out of the euro it would seem that any sanction is likely to be limited, particularly if Greece continues to muddle through.”
This from Mark Hulbert – CHAPEL HILL, N.C. (MarketWatch) – the gold market is still resting on a shaky foundation of sentiment. You may recall that this is the same conclusion I reached a month ago. And, just as contrarian analysis concluded then, gold has not since mounted a rally. Though there has been a lot of volatility – including an $18 rise on Monday and a $7 decline on Tuesday – gold today is barely changed from where it stood in early March.
And, yet, the average short-term gold timer monitored by the Hulbert Financial Digest is more bullish today than then. As a result, contrarian analysis is even less bullish on gold today than it was a month ago.
The average gold timer’s recommended gold exposure level (as represented by the Hulbert Gold Newsletter Sentiment Index, or HGNSI), for example, currently stands at 12.5%. On the occasion of my month-ago column, in contrast, the HGNSI stood at 0%.
This means that the gold arena still isn’t exhibiting the thorough-going skepticism and despair that typically accompanies a so-called tradeable bottom. Consider the three occasions over the past two years in which the HGNSI did drop to levels below minus 40%. As you can see from the chart at the top of this column, they were:
July 2013. The HGNSI early that month dropped to minus 56.7%, indicating that the average short-term gold timer was allocating more than half of his gold-trading portfolio to going short. Over the next two months, gold rose by 19%.
September 2014. Late that month, the HGNSI fell to minus 46.9%. Bullion rose by 5% over the next couple of weeks.
December 2014. The HGNSI also fell to minus 46.9% at the late-December lows. Bullion rallied by 11% over the ensuing four weeks.
In contrast, notice that when gold dipped down to the mid-$1,100s in mid-March, the HGNSI fell only to minus 31.3%. And it didn’t stay there long, quickly jumping at the first signs of a gold rally. That indicates a relative eagerness to believe that gold will soon rebound in a big way, which is not encouraging from a contrarian perspective.
Contrarians would be more confident in gold’s ability to rally if there were instead a robust “wall of worry” for the market to climb. To build that wall, gold timers would have to become markedly more bearish than they have in recent weeks, and then be less eager to believe in gold at the first sign of a rally. In the meantime, the picture the sentiment data are painting is more akin to the “slope of hope” than a “wall of worry” — and the market more often than not falls down a slope than climbs it.
The walk-in cash trade was even on the quiet side today and the phones were not much fun either – although our site traffic took a big jump to the upside so people are watching.
The GoldDealer.com Unscientific Activity Scale is a “ 4” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Friday – 3) (Monday – 4) (Tuesday – 4) (Wednesday – 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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