Commentary for Monday, Jan 25, 2016 (www.golddealer.com) – Gold closed up $9.00 on the Comex today at $1106.20 – which is good but without some follow-through momentum this pitch up remains part of the defensive picture. Normally – as the technical picture improves this place develops a great buzz – not today.
Gold has however caught a nice bid today – and it was active in the overnight market both in Hong Kong and London. This was because Europe continues to struggle with that red ink – but no worries Draghi to the rescue this week. The European Central Bank will once again assure everyone that quantitative easing is no problem. President Draghi has a substantial amount of money already in the oven but there is also another dynamic which Europe has become dependent on – talk. All he has to do is assure everyone that additional fiat currency is no problem and the worries settle down.
At any rate the red ink across Europe created some safe-haven buying in gold overnight and the generally weaker dollar made things sure. The last Dollar Index Close was 99.56 and the range so far today has been 99.24 through 99.55 – as of this writing we are around 99.33. So a somewhat weaker dollar has helped today’s pitch upward in gold.
All of the above however is refocused around crude oil. This continues to be the wild card in today’s price movement both in stock and gold. The US and world stock markets fear lower oil – today the DOW continues to struggle as crude oil sells off from the relatively happy level of $32.50 and we see prices moving lower in the $31.26 level.
Keep in mind that $30.00 oil would have been unthinkable just a year ago when everyone was claiming that oil had bottomed around $60.00. And the problem now is that few traders really believe that oil has bottomed – the best placed scenario today centers around “let’s hope this does not get worse”.
This “oil – stock – world economic dynamic” continues to support the price of gold. And this week the FOMC will once again look at the chicken bones. After the first rate hike of a ¼ point in late 2015 everyone expected further hikes in 2016.
But I think the inability of the world financial machine to gain traction which includes the EU, Russia and Japan will keep a lid on US interest rate hikes through at least the second quarter of this year. This will also support the price of gold at the higher end of its lower range (if that makes sense). In other words I don’t expect any large game changer here – just a defensive market in gold – but not substantially lower prices.
Considering how volatile stocks have been its surprising gold is not getting more play – especially because most feel higher interest rates are coming. This and the messy oil market are not good for stocks – but as yet gold has not been a beneficiary.
Gold has been trading above its 50 Day Moving Average ($1077.00) and is right at its 100 DMA (1106.00) which gets everyone’s attention but does not necessarily prompt action. For now the 200 DMA ($1133.00) is the one to watch – a move above that and all the lights will go on.
US Gross Domestic Product (GDP) for the 4th quarter will be announced later this week and eyes will be watching for signs of inflation and growth levels.
Silver closed up $0.20 at $14.24 and remains quiet in downstairs trading.
Platinum woke up today – moving $30.00 higher at $860.00 and palladium closed down $8.00 at $490.00. Platinum is still way too cheap – we have had Canadian Platinum Maple Leafs on order since before Christmas – delivery is slow (we knew this going in) but the Canadians aren’t even offering a delivery date. We have the platinum Platypus in stock and once in a while the American Platinum Eagle (not in current production). I keep bring this up but it’s important – no dealer has a great supply in the platinum bullion area. This to me is indicative of a market bottom with platinum trading at $246.00 less than gold.
The walk-in cash business was again slow and so were the phones. We all were talking about lunch at 9:30 in the morning and I asked Ed if he paid the phone bill this month – it is pretty quiet out there today.
The GoldDealer.com Unscientific Activity Scale is a “ 3” for Monday. The CNI Activity Scale takes into consideration volume and the hedge book: (Tuesday – 4) (Wednesday – 5) (Thursday – 4) (Friday – 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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