Gold Sells Off Within the Range – Market Remains Choppy

Gold Sells Off Within the Range – Market Remains Choppy

Commentary for Thursday, June 11, 2015 ( www.golddealer.com) – Gold closed down $6.20 at $1179.90 on the Comex today giving up much of yesterday’s gain and once again confirming that narrow trading range between $1170.00 and $1190.00.

And traders are already starting to talk about next week’s meeting of the Federal Reserve. So expect some tension early in the week depending on personal bias. They are all over the street however as to what the Federal Reserve will actually do – raise rates – sure probably this year – keep rates the same – perhaps but what would Europe think?

But this meeting (Tuesday/Wednesday) holds lots of sway so everyone will be watching. My opinion remains the same – they will talk a good game but won’t do anything until late this year.

OK – you can come out from under the covers – the short-covering rally is over. The Dollar Index was a bit stronger today moving from 94.71 to 95.22 with a positive bias – yesterday’s close was 94.61. The dollar looks happy around the 95.00 level and the Europeans claim their currencies have already factored in our coming rate hike. I don’t know about that – most countries out there are paddling pretty good just to keep their houses in order.

And US stocks are stronger than lye soap – difficult for the gold trade to get too excited with all the positive stock press. And the money is flowing like water for new IPO’s – need a billion or so for an exploratory project – no problem. Hedge funds deploy funds in short order especially if that capital promises a staggering return in a developing market. This sounds a bit too promising to me and even if you can’t pronounce bubble my inflation specter should get traction.

This from MarketWatch – “U.S. stocks moved higher on Thursday, adding to big gains made a day earlier, as retail sales provided more evidence of a strengthening economy.

Sales at U.S. retailers rose for the third consecutive month, suggesting the warmer weather induced consumers to spend more after a weak winter. Higher consumption is seen as driver of overall economic growth and would give more ammunition for the Federal Reserve to raise interest rates this year.”

Notice the interest rate threat – it’s all over the place. Like I have been saying lately I really don’t expect much in the way of fireworks relative to the price of gold when the Fed moves. There will be some weakness but if the Fed throws a quarter point into the pot and gold does not break significantly lower it would actually turn into a bullish indicator.

China’s numbers look solid despite rumors about everything from real estate speculation to bank fraud. What a manufacturing machine – amazing really and remember they really like gold bullion. So does India – not news of course but I do want to make a point. Our walk-in cash physical gold bar trade goes crazy when gold gets defensive ($1150.00) and disappears when gold gets proud ($1210.00). This ethnic trade is an established relationship we have enjoyed for years and during that time we have never bought back any product. Never – this stuff is being deployed into very deep pockets I would assume within the LA community.

Silver closed unchanged at $15.95. That makes for an unchanged closing price for the past four consecutive days! Silver usually creates action if it is going up or it is going down – when there is little (or no) change everyone loses interest. If you are looking for something cheap in silver bullion but also fun consider the 5 ounce America the Beautiful Series – many only trade for about $0.50 more per ounce than US Silver Eagles and their mintages are much smaller. Buying these for the right price can be hit or miss so call Ken Edwards for stock as some examples already trade for 4 times their melt value and there are still many undervalued issues.

Platinum closed down $10.00 at $1105.00 and palladium closed unchanged at $742.00. Platinum is now trading at $74.00 less than gold – I keep waiting for people waving cash to come crashing through our back door but it has not happened as yet.

Platinum, palladium and rhodium have all been on the defensive despite positive fundamentals. Use of platinum as a catalyst in cars has moved from 3.14 million ounces in 2013 to a predicted 3.695 million ounces in 2015 and supply is usually pretty flat. What has fallen so much is investment demand. In 2013 platinum investment was an estimated 871,000 ounces. In 2015 expectations for investment are 88,000 ounces according to Johnson-Matthey.

This from Jan Harvey – LONDON, June 11 (Reuters) – Gold prices fell on Thursday, snapping three days of gains, as global stocks rallied and the dollar extended gains after strong U.S. economic data.

U.S. retail sales increased 1.2 percent in May, topping the 1.1 percent growth expected by economists.

Separately, U.S. import prices rose in May after 10 months of declines, while weekly jobless claims rose slightly more than expected but remained in territory consistent with a strengthening labour market.

Spot gold was down 0.5 percent at $1,179.91 an ounce at 1439 GMT, while U.S. gold futures for August delivery were down $7.00 an ounce at $1,179.50.

The metal hit a one-week high of $1,192.10 on Wednesday. It has held largely in a $50 range around $1,200 since mid-March.

"Strong U.S. data is a further sign that the U.S. economy is improving," Commerzbank analyst Daniel Briesemann said.

"If we get further good data and the dollar appreciates, we wouldn't rule out a fall to $1,100 over the next couple of months until the Fed starts raising interest rates.

Bullion prices remain under pressure in the longer term from expectations of a Federal Reserve rate rise this year, the first in nearly a decade. Rising U.S. rates lift the opportunity cost of holding non-yielding gold, and benefit the dollar.

"Expectations of what the Fed is going to say next week will probably be driving some positioning early next week," said Mitsubishi analyst Jonathan Butler.

Gold suffered from a stronger dollar, which rallied 0.6 percent against a basket of currencies after the U.S. numbers. Bets that the United States could be edging towards its first interest rate rise kept upward pressure on global bond yields and the dollar, which was also lifted by a weak euro.

European shares saw fresh gains on Thursday after their strongest day in over a month, helped by expectations that Greece could be close to a deal with its creditors. Wall Street also opened higher, boosted by the U.S. data signalling that a recovery in the U.S. economy was gathering steam.

Gold prices also faced pressure from outflows from gold-backed exchange-traded funds.

The world's biggest gold ETF, SPDR Gold Trust, said its holdings fell 0.2 percent to 704.23 tonnes on Wednesday, the lowest since September 2008.

Silver was unchanged at $15.97 an ounce, while platinum fell 0.7 percent to $1,103.20 an ounce and palladium was down 0.2 percent at $740.25 an ounce.

This from FX EmpireGerman 10-Year Bund Yields Jump Over 1% – “German 10-year Bund yields vaulted over 1% for the first time since September 2014 in the morning European trading session. As European economic growth and inflation continue to show traction, investors are selling European bonds and seeking higher yields elsewhere.

The Euro was a beneficiary. Before lunch, the EUR/USD was trading above 1.300, after hitting a high of 1.385. Yields on 10-year US treasuries are also rising in anticipation of a September rate hike. After losing some ground yesterday to the US dollar and Japanese Yen, the Euro remained up more than 2.5% in June over the USD, GBP and JPY at the day’s close. While the Euro has pushed the US dollar back this morning, the Yen continued its march higher led by Bank of Japan Governor Kurodo.

EUR/JPY – After months of hard fought gains by the Japanese yen, the yen rose to its highest level this year after Bank of Japan Governor Kuroda said he sees no further devaluation in the Japanese yen. He further suggested the market has already factored a US Federal Reserve interest rate increase in September into the price of the USD/JPY. Japan will continue with its quantitative easing program until it achieves a sustained core inflation rate in the 2% range. The April inflation rate was 0.3% versus 2.2% in March. The news knocked the Euro down from 140.67 to 138.53. The USD fell 1.25% against the yen, hitting a low of 122.46.

European Traction – A fresh batch of European data on industrial and manufacturing growth was released today. Germany started the week on strong footing by reporting April industrial production was up 1.4% over a year ago. Today, Sweden flew past analyst estimates on April industrial production announcing 2% growth over March, versus a forecast of 0.3%, and 1.5% on the year. New orders rose 4.4%, more than doubling over the previous month. The industrial sectors of France and Italy also were more productive than a year ago.

Separately, many European countries are reporting an increase in inflation. Eastern Europe led the way yesterday with Czechoslovakia and Hungary reporting year-on-year increases. Denmark and Norway followed today announcing slight upticks in inflation.

Ahead in the North American trading session, traders will be watching for the EIA data on energy supply and prices. Crude oil stocks have been on a steady decline for five weeks. Analysts are expecting supply to be down another 1 million barrels.”

I’m throwing the above comments on inflation in the pot to support my feeling that inflation will once again become a concern – sooner than most believe.

This is our usual Thursday Chicago Mercantile Exchange report covering the last 5 trading days – so we are looking at the trading volume numbers for the “August” Gold contract: Thursday 6/4 (268,631) – Friday 6/5 (270,055) – Monday 6/8 (269,770) – Tuesday 6/9 (267,985) – Wednesday 6/10 (267,443). These numbers remain on the higher side of normal.

The walk in trade was just average today but the phones were on the higher side of busy so there does seem to be an increase in interest and the public is placing orders not just kicking the tires.

The GoldDealer.com Unscientific Activity Scale is a “ 7” for Thursday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Friday – 5) (Monday – 4) (Tuesday – 4) (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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