Commentary for Monday, June 9, 2014 (www.golddealer.com) – Gold closed up $1.40 today at $1253.50 in another round of lackluster trading. The range remains tight (last week gold was up $7.00 and silver was up $0.31) so record equity markets create substantial headwind for the precious metals.
Still the physical markets are not without support – gold reports from Singapore indicate strong physical demand with claims of a 100% increase in Singapore sales the first half of 2014 versus 2013 – the reason cited for increased activity being lower prices.
Silver closed up $0.08 at $19.04. Premiums on Silver Eagle Monster Boxes remain defensive – which should tell you dealers are lowering prices to see if they can create more general interest. Our new 100 oz Perth silver bars are creating solid interest across the counter.
Platinum closed up $1.00 at $1454.00 and palladium closed down $3.00 at $841.00. South African strike mediators continue to talk but progress appears slow.
Quiet trading continues into Monday as gold moved within a $4.00 range beginning in Hong Kong overnight – moving into London and closing in the domestic trade. Most commentators blame lack of fresh news but I find this very narrow range a bit of a red flag considering measures the ECB will employ relative to a continued easing money policy in Europe.
Still this very quiet time might only be typical of summer months.
Here in a nutshell is the bearish case against gold short-term – Richard Debbie Carlson (Kitco) – Baker, editor, Eureka Miner Report, said considering that gold is only up marginally versus last week’s settlement, it is “startling given a new ECB announcement mid-week and (Friday’s) nonfarm payroll report. Mario Draghi’s dovish comments and ECB interest rate reduction moved gold higher and the somewhat better-than-expected jobs report moved gold lower – on balance a small dollar gain returning gold back to the $1,250-level.”
Meanwhile Standard & Poor’s 500 stock index futures scratched out another round of new record highs after the data.
Several gold-market watchers said the continued strength of the equities market has driven interest out of gold. That could weigh on the metal next week as the major planned news events are done and next week’s U.S. economic calendar is light.
“In an environment of rising U.S. real yields, fresh highs in the S&P500 and a stronger U.S. dollar we still view the gold price outlook as bearish,” said Michael Lewis, analyst at Deutsche Bank.
Adam Klopfeinstein, market strategist with Archer Financial Services, said he can’t get bullish on gold until equities start to weaken.
“I don’t see how the market holds here… The flight-to-quality and the inflation people are throwing in the towel. The stock market is taking them away. Bond yields were falling, but I think that’s done. Gold is going to stay weak as long as stocks hold up. But I think stocks are in their last bit of gains… Once stocks correct gold may go higher,” Klopfeinstein said.
Ira Epstein, of the Ira Epstein division of the Linn Group, said it’s hard to be bullish on gold until late June/early July, based historical price patterns.
“That doesn’t mean that serious bounce can’t and don’t occur. They do if you study the chart, but overall prices tend to work lower into late June,” he said.
Since gold could not take out resistance at $1,260 this week, technical-chart analysts said bears may try to break through this week’s support around $1,240 in attempt to push to the major chart support around $1,225 from January.
Epstein said he is also keeping an eye on the outside day up gold posted Thursday. An outside day up is a technical chart move where the market action takes out the previous day’s low and high and closes higher on the day. That could mean further gains near-term.
“I have a trading rule that I formed over the years that I like. Simply put, when you have an outside day up, the low of that day should not be taken out within the next two trading sessions. If taken out I label that a ‘bull trap’ and expect prices to work lower,” he said.
On Friday August gold held above Thursday’s low of $1,241.20, which makes Monday’s price action worth watching.
Ira Epstein is a savvy trader that has been around since the 1970’s so I pay attention to his commentary. And like most everyone else the failure of gold to show strength after the Draghi announcement is concerning but the real culprit here is the successful stock market.
We are making new highs all over the place and money is still cheap – so while some lament current stock prices I don’t see much downside even with high multiples. This alone is enough to pressure gold lower – but how low? As long as money remains cheap – which supports stocks it also supports the cost of owning physical bullion.
So we may be looking at a push – and if you consider gold is selling at significant discount from old highs – and not much has changed in the fiat paper world – the downside for gold may not be as great as naysayers would have you believe. Also keep in mind that the physical gold market is relatively small – more of a niche market place really – this should provide important insight to longer term players.
The walk in cash trade today was only slow to moderate and the downstairs continues to be somewhat noisy as we install 2 new systems. The phones were mostly quiet.
The GoldDealer.com Activity Scale is a “4” for Monday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Tuesday – 6) (last Wednesday – 6) (last Thursday – 8) (last Friday – 6). The scale (1 through 10) is a reliable way to understand our volume numbers.
Live pricing on the site moves all bullion products up or down during the day. The Bullion Products link on the home page now includes our Bid (blue) and Ask (green) prices. Premium quotes vary with product and look like this “spot plus $15.00” or “spot plus $50.00” and bullion products list them under the live prices on their respective landing pages.
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