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Gold Closes Virtually Unchanged

Commentary for Monday March 7, 2016 (www.golddealer.com) – Gold finally managed to close down $0.80 on the Comex today at $1265.20.

Gold moved in both directions today as trading opened higher – at one time moving above $1272.00 but then reversing direction and trading as low as $1260.00 before again reversing to push higher into the almost unchanged range.

The Dollar Index traded from 97.04 through 97.70 finally selling off into the 97.14 range – so gold pretty much moved opposite the dollar but honestly I’m surprised that gold did not do better considering the index moved from 97.60 to 97.15 (losing a half point) latter in the day – a change which had almost no effect on the price of gold.

Gold closed Friday at $1266.00 into the weekend and closed today at $1265.20 – hardly a testament to the “things are falling apart” gold scenario which has been sold in the media today.

But there are reasons to remain optimistic – from a technical and psychological standpoint. In a way it’s good to make a fuss over gold holding in the “unchanged range” – staying power is what everyone wants to see today. And technically the gold bulls are in charge – short term at least.

And the gold and silver bullion held by the Exchange Traded Funds continues to move higher by a substantial number. China’s reported gold holdings were up 300,000 ounces in February to 57.50 million ounces – this “news” should be taken with a grain of salt – I have also read reports that generally China is behind her normal buying curve which might be interpreted as either positive or negative depending on whether you are pitching or batting.

What really makes for a better case relative to the price of gold is the price of crude oil – it has been on a tear to the upside. The price has moved from less than $34.00 to more than $37.00 this past week which is an amazing turnaround not only in price but in market psychology. This calms world stock markets and allows already shaky economies to fight another day.

Generally speaking gold should be weaker during this charade but it continues to hang in there which adds to the commentary that gold is climbing that proverbial “wall of worry” and this latest push above the important $1200.00 level is the real deal.

I’m not so sure – although I like the renewed action. Gold is no longer languishing on the back burner – we are up more than $100.00 this past month and trading at the higher end of the range. But there is plenty of room for the long players to take profits so expect the market mood to swing back and forth depending on which way the wind is blowing.

This is not a throw-away comment – look at the 30 day chart in gold. We have been moving between $1200.00 and $1260.00 since early February – the tighter range being between $1220.00 and $1240.00. This is good as long as gold has positive momentum however the chart looks a bit flat to me. The longer it remains flat or hovering at the higher end the more traders will begin to wonder if we are running out of gas because there is plenty of overhead resistance between here and the big $1400.00 mark.

Even new strength in crude oil could be a bogie – the last time it pushed into substantially higher ground it did not end well for the long play. And because Europe and other world markets continue to languish the European Union big shots are busy with new meetings to contemplate their next move. Most traders believe the EU will magnify the talk of further QE and again push negative rates. This will make the euro weaker relative to the dollar. So like I have been saying – “Step up to the table – a new shooter is coming out – place your bets.”

Silver closed down $0.01 at $15.62. While I’m disappointed in the physical silver bullion activity at these higher levels there is something going on that might prove promising. Silver traded as high today as $15.82 – this is important because if silver takes out $15.80 it will be the last of the declining tops – so stay tuned (you have been adding a few ounces to your holdings at these blow off prices haven’t you?).

Platinum closed up $16.00 at $1001.00 and palladium closed up $14.00 at $577.00. Platinum is trading at a $265.00 discount to gold and this number is moving lower as investors take advantage of these knock down prices.

This from Tyler Durden (ZeroHedge) – It’s Official: Canada Has Sold All Of Its Gold Reserves – One month ago, when looking at the latest Canadian official international reserves, we noticed something strange: Canada had sold nearly half of its gold reserves in one month. According to the February data, total Canadian gold reserves stood at 1.7 tonnes. That was just 0.1 per cent of the country’s total reserves, which also include foreign currency deposits and bonds. As we noted, the decision to sell came from Finance Minister Bill Morneau’s office.

“Canada’s gold reserves belong to the Government of Canada, and are held under the name of the Minister of Finance,” explained a spokesperson for the Bank of Canada on Wednesday. “Decisions relative to gold holdings are taken by the Minister of Finance.”

Reached by Global News on Wednesday evening, a spokesperson for the finance department said the sale “was done in the normal course of business for the government. The decision to sell the gold was not tied to a specific gold price, and sales are being conducted over a long period and in a controlled manner.”

This latest sell-off is indeed part of a much longer-term pattern of moving away from gold as a government-held asset. According to economist Ian Lee of the Sprott School of Business at Carleton University, Ottawa has no real reason to keep its gold reserves other than adhering to tradition.

“Under the old system, (gold) backed up currencies,” Lee explained. “The U.S. dollar was tied to gold. One ounce was worth US$35. Then in 1971, for lots of reasons I won’t get into, Richard Nixon took the United States off the gold standard.”

Gold and dollars were interchangeable until that point, he said, but in the modern financial world, the metal is no longer considered a form of currency.  “It is a precious metal, like silver … they can be sold like any asset.”

The amount of gold the Canadian government holds has therefore been falling steadily since the mid-1960s, when over 1,000 tonnes were kept tucked away. Half of those reserves were sold by 1985, and then almost all the rest were sold through the 1990s up to 2002.

By last year, Canada’s reserves were down to just three tonnes, and the latest sales have now halved that. At the current market rate, the value of 1.7 tonnes of gold comes in at just under CAD$100 million, barely a drop in the bucket when you consider the broader scope of federal finances.

According to Lee, there may soon come a time when Canada’s gold reserves are entirely a thing of the past. There are better assets to focus on, he argued, calling the government’s decision to dump gold “wise and astute.”

Lee was right, because fast forward one month when earlier today Canada’s Department of Finance released its latest official international reserves and as of this moment it’s official – Canada has fully “broken away with tradition” and has exactly zero gold left.

This is what it said: The Government of Canada sold 21,851 ounces of gold coins for settlement in February. On February 29, gold holdings stood at 77 ounces. The valuation is based on the February 29, 2016, London p.m. fix of US$1,234.90 per ounce.

And now, Canada can focus on buying “better assets.” As to whether “the government’s decision to dump gold was wise and astute”, we’ll check back on that at some point in the near future.

Why a government would sell their gold reserves is confounding to me but the Canadian sale reminded me of England in 1999 – Gordon Brown – later to become Prime Minister sold half of England’s gold reserves at the absolute bottom of the market ($282.00). The sale contrary to common wisdom actually caused the price of gold to rise in value and Gordon became a laughing stock – this brilliant financial move was dubbed Brown’s Bottom.

This from Neils Christensen (Kitco) – Gold Could Rally Next Week on Currency Devaluation Fears – Analysts – Little U.S. economic data next week will mean the gold market will focus on international events with the European Central Bank (ECB) monetary policy meeting in the spotlight.

After two weeks of negative closes, gold is back in the green, with solid gains as hit a 13-month high Friday. Early Friday, April Comex gold futures rallied to a session high of $1,280.70 an ounce and managed to hold on to most of those gains, settling the session at $1,270.7 an ounce  up on the week.

Gold managed to make the new highs despite the latest nonfarm payrolls report, which showed that 242,000 jobs were created in February, well above expectations for gains of 195,000.

However, economists dismissed the surprising strength in the headline number, noting that the details of the report, particularly wage growth, which fell 0.1% last month. Other economists note that most of the gains in employment growth were made as a result of more part-time jobs.

With gold breaking out of its consolidation period, momentum is expected to continue next week as a strong majority of retail and market analysts remain bullish in the near-term, according to the Kitco News Wall Street vs Main Street gold survey. This week, 1,254 people participated in Kitco’s online survey, of which 1,047 participants, or 83%, said they are bullish on gold next week. At the same time, 10 out of 19 market professionals, or 53% said they expect to see higher prices.

The next push is expected to come later in the week when the ECB is expected to announce more easing measures to try to stimulate its faltering economy and boost falling inflation pressures.

Although looser monetary policy measures will be negative for the euro, analysts said that as much as the U.S. dollar will benefit, so will gold prices.

Richard Baker, editor of the Eureka Miners Market Report, said that next week could be a major test for gold as January 215 ECB meeting marked high point for the yellow metal last year. Despite some similarities, he added that he is confidence gold will continue to move higher.

“Last year’s January reaction to the ECB announcement turned the gold market bearish; this year may be bullish lift given continued fears of Brexit in June,” he said.

Ronald-Peter Stoeferle, fund manager at Incrementum AG, notes that gold demand in other currencies is helping gold rally. He noted that currency devaluation concerns in Europe has caused gold to rally more than 18% so far this year against the euro. At the same time concerns that Britain could exit the European Union has driven gold up almost 24% against the British pound.

Adam Button, currency strategist at Forexlive.com, agreed that gold could benefit alongside the U.S. dollar next week following the ECB meeting. He added that gold still has a lot more potential than the greenback as the Federal Reserve does not have enough evidence to hike rates following its March 16 monetary policy meeting.

Button said that he could see gold continue it rally for the next two weeks ahead of the U.S. central bank meeting.

“Gold should have sold off on the employment news and it didn’t,” he said. “Something that can rally on bad news is not going to stop rallying.”

Stoeferle agreed that gold’s week-end rally is more proof that it is in a new bull market; however, he also warned that the market is in overbought territory and could be due for a correction, especially as there will be little U.S. data to drive markets.

Ken Morrison, editor of the Morrison OnThe Markets, described gold’s price action as “nothing short of astonishing,” but also warned that extreme level of bullish sentiment leaves the market vulnerable to a correction.

The walk-in cash business was active today – there was plenty of “both ways” action. The phones were steady and new customer accounts are again moving higher.

The Baird Rhodium 1 oz bar continues to attract attention. The price is so cheap there are now delivery delays as long as two weeks from the manufacturer!

A few comments by customers about rhodium – are the delays in rhodium delivery a manufacturing or raw material problem? This delay is the result of an unexpected surge is buying which began perhaps a month ago and came out of the blue.

Before that time orders were no big deal – 10 or 20 bars were average. Then came a few orders which were 10 times that size and it has overwhelmed the manufacturer. Another important point – most manufactures, especially in Europe do not alter their production much – if we call with a large order they say – this will take time.

From the mint’s viewpoint there is little immediacy – if we order and it happens to be a traditional European holiday they take the vacation and the orders can wait. This is normally not an American attitude – increased orders equals more working hours but in Europe this is not the case. The European mints will eventually fill all orders – after a nice breakfast and a healthy stroll around the grounds.

By the way – if you are new to the metals don’t be in a hurry. The process of protecting yourself financially with real gold or silver bullion has been around for a long time and can be abused when prices move higher. Avoid pressure from telemarketers who are on commission – and especially avoid promises of quick profits – a sure sign that the dealer will be the only one who makes money. Be careful if the dealer calls you all the time with the “latest and greatest”. Take your time in the process – sleep on the idea – and make an informed decision.

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