Commentary for Thursday Sept 5, 2013 – Gold closed down $16.80 at $1373.10 after beginning the day higher which makes for the second day of losses. The dollar has been stronger all week reacting to better economic news as world leaders including the Pope ask for reassessment of the Syrian problem and new claims for unemployment fell by 9000. Taper talks continue as the 10 year Treasury yield moves higher to 2.96%.
Silver was down $0.16 at $23.20 experiencing some profit taking and there is little in the way of shortages and we see few big sellers.
Platinum was down $12.00 at $1483.00 and palladium was off $11.00 at $686.00 with virtually no big action in the physical world. All in all the action was quiet due more to Rosh Hashanah (the Jewish New Year) than anything in the headlines.
The gold chart has me worried after being encouraged since July with positive technical data. I’m not a natural worrier about gold because the massive increase in the collective world’s money supply will sooner or later have consequences. But while waiting for the release of all that pent up money to begin making its rounds in the form of inflation everyone is watching the price model looking for an advantage. At any rate for months the wounded gold bull looked like it visited the vet but now the charts look once again like we will test recent support. Gold has performed remarkably well since its low of $1203.25 on June 28th. It crossed over its 50 day moving average ($1326.25) on July 23rd and continued higher moving above its 100 day moving average ($1370.50) on August 22nd and reaching a recent high ($1425.50) on August 28th. Now place this rise into the proper perspective meaning the hot spec money was gone so “real” supported higher prices came from bargain players in the physical Asian market, cheap money and the expectation of no interruption in quantitative easing.
The latest push into higher territory however was not for reasons supported by fiscal policy but the threat that President Obama would retaliate against the Assad regime for using gas on its citizens. And so short term doubt was introduced and the long players exited with a profit when the President seemed to equivocate and the English Parliament decided that any type of intervention in the Syrian civil war was a loser and decided instead on another round of chips and beer.
This entire Middle East mess has introduced confusion into the short term equation and so traders will move to the sidelines with a wait and see attitude. The gold chart went flat wavering on both sides of the important $1400.00 line until the most recent economic data pushed prices well below recent gains.
So it looks like we will be testing support levels instead of getting ready for a challenge of gold’s 200 day moving average. Gold moved below this important benchmark ($1669.75) in early February of this year and today the 200 day comes in around $1500.00 so recent highs above $1400.00 were shaping up nicely for a challenge until up jumped the devil.
Now throw the possibility of tapering into the mix, the almost $200.00 in short term paper profit since lows in June, the improving economic scene both here and in Europe and I feel a headwind.
Let’s wait and see because Syria is still a bombshell if things get out of hand but in any case expect turbulence in both gold and silver as this latest consolidation takes its course. Long term gold buyers should look for surprises in the defined range between $1200.00 and $1400.00.
Finally don’t lose track of the drag created on gold by interest rates which have been generally higher in anticipation of some sort of modification in the Fed’s QE program. But money is still cheap in the wider view and cheap is what both the US and Europe still need so be suspicious about firm proclamations about quantitative easing on the short term.
Both walk in and phone trade has been quiet today again probably because of the Jewish holiday. The CNI computers place my almost famous LA Physical Trade Business Number at a sluggish “2”. Like us on Facebook and follow us on Twitter @CNI_golddealer. Thanks for reading and enjoy your evening. These markets are volatile and involve risk: Please Read Before Investing
Written by California Numismatic Investments (www.golddealer.com).