Commentary for Thursday, April 2, 2015 – Gold closed down $7.20 on the Comex today at $1200.90 as traders square up the books and moved to the sidelines going into the Easter weekend. They will remain in hiding until Monday because yesterday’s pop to the upside was large enough to make a quick trip to the bank possible and in the process experience some peace and quiet.
This Friday is Good Friday so trading will be subdued as the commodity markets are closed but the Post Office and banks remain open.
While I was disappointed we did not see any follow through or momentum play confirming Wednesday’s move above $1200.00 a weaker dollar and a troubled Middle East should continue to support gold next week. No big fireworks here but I don’t expect much of a sell-off either – remember China and India are still very interested.
The Dollar Index closed yesterday at 98.12 and today’s range has been 97.33 through 98.28 – trading now at 97.43 so we are heading a bit lower on the daily curve. No one is really a gold bull at this point – traders fear the possible rise in interest rates by the Federal Reserve and while the technical picture for gold on the short term is much improved the wider view still presents challenges.
Still this is the time when some overlook cheaper prices as gold has still failed to create significant buzz with investors. Like I have been saying – at some point equilibrium will be reached as gold balances the fiat spending binge with the benefits provided with increased liquidity. We may be seeing this scenario unfold today as some commentators claim higher interest rates are simply not good for the system – it’s still too fragile.
My point being that cheaper prices always help the choir – those who have developed a long term approach and systematic buying plan. It’s not fancy but it works pretty well and the ultimate investor benefit has yet to be seen because the government has not paid the price for the $4 trillion dollar expansion of its balance sheet.
So in this “quiet” time let’s be happy the economy is improving for some and Europe might be seeing some economic traction due to its recent quantitative easing program.
LONDON, April 2 ( Reuters) – Gold fell below $1,200 an ounce on Thursday, as the impact of a weak dollar was offset by a positive round of U.S. economic data offering hopes the labour market continues to expand even as growth has stalled, ahead of Friday’s crucial nonfarm report.
Spot gold fell 0.6 percent to $1,196.35 an ounce by 1441 GMT. After a 2.4-percent slide in March, the metal climbed 1.8 percent on Wednesday, the biggest single-day rally since Jan. 30.
U.S. gold for June delivery slipped $11.60 an ounce to $1,196.60.
The metal reversed initial gains after data showed the number of Americans filing new claims for unemployment benefits unexpectedly fell last week, while February’s U.S. trade deficit narrowed to its lowest point since October 2009.
The dollar remained however under pressure on views that U.S. economic growth slowed sharply in the first quarter. Investors turned their attention to Friday’s U.S. nonfarm payrolls, which economists polled by Reuters forecast to show an increase of 245,000 in March after a 295,000 rise in February.
“There is a lot of book squaring ahead of the long Easter weekend, we can definitely see liquidity already thinning this afternoon and there is a lot of uncertainty about tomorrow’s nonfarm payrolls number,” MKS SA head of tradng Afshin Nabavi said.
Trading activity is expected to thin on Friday, when most U.S. markets will be closed for the Easter holiday, while some European markets will close from Friday through to Monday, reopening on Tuesday.
“The precious metal could face higher volatility as we approach towards the Friday’s U.S. nonfarm payroll number,” AvaTrade chief market analyst Naeem Aslam said. “(But) we may actually see a weak number, which could push the dollar lower.”
“Having said that, we do need the gold price to stay above the $1,170 level in order for the uptrend to continue … if we do break (that) … all (bullish) bets are off and we could be heading towards the $1,138 mark.”
A weaker nonfarm report could push back expectations for a U.S. interest rate hike, which some analysts predicted could come as early as June.
Gold hit $1,219.40 last week, its highest level since March 2, at the end of a seven-day run-up on expectations that the U.S. central bank would go slow in raising interest rates.
Any hike by the Fed, which has kept rates near zero since 2008 to stimulate the U.S. economy, could reduce demand for assets perceived as safer such as gold.
Silver followed gold lower down $0.36 at $16.68.
Platinum closed down $11.00 at $1154.00 and palladium was off $2.00 at $746.00.
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 3/26 (217,348) – Friday 3/27 (251,907) – Monday 3/30 (261,720) – Tuesday 3/31 (262,620) – Wednesday 4/01 (262,398).
The walk-in cash trade was quiet today and so were the phones.
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 – 6) (Monday – 3) (Tuesday – 5) (Wednesday – 6). 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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