Commentary for Thursday, Fed 5, 2015 – Gold on the Comex closed down $1.80 in quiet trading at $1262.00 and was somewhat weaker overnight in Hong Kong and London markets.
But gold still seems to be treading water – holding the important $1260.00 waiting for more defined news either from Europe or the Federal Reserve relative to interest rates.
Like I have been saying – watch oil. The 1 week WTI crude chart topped at $52.00 a barrel and as of this writing is happy at $50.47. This is good for stocks – good for economy – good for Europe and helps stabilize gold.
The Dollar Index today topped at 52.00 and now is trading at 50.47 so any fear that Friday’s jobs number will create a gold downdraft has been offset by a weaker dollar on the short term.
A solid showing on the official jobs number tomorrow will weaken gold short term – especially because it has been trading in a narrow range since mid-January ($1260.00 – $1300.00). And gold’s failure to muscle up above $1300.00 is still on everyone’s mind – so a strong job’s number might just be enough push to put the bears back in charge.
But again like I said the ” interest rate boogie man” has replaced the ” quantitative easing boogie man“. The Federal Reserve might raise interest rates this summer but the number will be token-like because they fear any European backlash.
In the meantime keep your eye on the Gold 200 Day Moving Average ($1226.00). Any dip below this number will send traders running.
Some interesting talk out of India – a rumor that the government may lower the current 10% tariff on legal gold imports. This important tariff creates a gold headwind and pushes gold imports into their black-market. I’m convinced they get the same amount of gold across their border – one way or the other – but with the tariff in place gold does not get the publicity which is always good in a defensive market.
At any rate the tariff might be lowered to between 6% and 8% because lower oil prices have improved her trade imbalance. India has always been a large importer of physical gold – she imported 152 tons in November and 40 tons in December.
Silver closed down $0.19 at $17.18.
Platinum was up $11.00 at $1251.00 and palladium was up $5.00 at $795.00.
This from FX Empire is interesting – The European Central Bank announced that it would no longer accept Greek government bonds as collateral. The waiver allowed marketable debt instruments to be used in Eurosystem monetary policy operations despite the fact that they did not fulfill minimum credit rating requirements. “The Governing Council decision is based on the fact that it is currently not possible to assume a successful conclusion of the program review and is in line with existing Eurosystem rules,” the ECB said in a statement. The announcement came as officials raised pressure on the new Greek government to come to terms with its international creditors on the country’s bailout program.
The ECB said the decision does not bear consequences for the counterparty status of Greek financial institutions in monetary policy operations. “Liquidity needs of Eurosystem counterparties, for counterparties that do not have sufficient alternative collateral, can be satisfied by the relevant national central bank, by means of emergency liquidity assistance (ELA) within the existing Eurosystem rules,” it said.
For me the above is perplexing after all the “feel good” recent news regarding Greece. Yesterday even the Germans were hinting at relaxing the Greece debt burden giving the new government in Greece more time to get their economic house in order. This news alone should have been good for a $20.00 rise in the price of gold – but the market remained soft. This would indicate to me that traders expect good news Friday on the jobs front and so the safe-haven status of gold is once again less important.
This from Reuters – “”For the (gold) market to really care about what is happening in the euro zone we need to be closer to an exit of Greece than we have been in the past,” Julius Baer analyst Carsten Menke said.
“You need to have a pretty dire assessment of the future and see the situation in the eurozone deteriorate to attract back those long-term investors who have exited gold in the past two years.”
China’s move on Wednesday to cut the reserve requirement for banks in an effort to add more liquidity to fight off an economic slowdown and looming deflation could however support demand for gold in the short term.
The metal has in the past benefited during periods of ultra-low interest rates and further monetary easing, which encourage investors to put money into non-interest-bearing assets.
But while major economies such as China and Europe continue to pump more money into their systems, the United States is moving towards a tightening cycle.
And investors will watch Friday’s U.S. non-farm payrolls for more clues on when U.S. interest rates would rise this year, the first hike in nearly a decade. A Reuters’ poll of analysts had forecast a 230,000 increase in U.S. jobs in January, slowing slightly from 252,000 in December but still robust.”
The walk-in cash trade was very quiet today and so were the phones. Since gold failed to hold the $1300.00 level the public is running hot and cold. This is typical of slow markets – the result of narrow trading ranges. Everyone decides to leave early and make popcorn.
The GoldDealer.com Unscientific Activity Scale is a “ 3 ” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Friday – 4 ) (Monday – 3 ) (Tuesday – 2 ) (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”.
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