Gold Closes the Week in the Green as the Technical Picture Improves
Commentary for Friday, Aug 21, 2015 (www.golddealer.com) – Gold closed up another $6.30 on the Comex today at $1159.60. This has been a solid week for gold moving from $1118.60 (Mon) through $1159.60 (Fri) or up $41.00. All of this drama created by currency problems in China, stock market jitters, some world safe-haven buying because of financial uncertainty, and the decision by the Federal Reserve this week not to immediately raise interest rates.
It’s nice to see that our old shiny friend is moving higher in price these days because as the technical picture improves gold receives more positive attention. But at this point in an unwinding market it is good to consider options – there is still that pesky interest rate hike to be considered (sometime).
We in this country have all enjoyed near zero interest rates since the financial crisis of 2008 began and while the Europeans were a little late to the party everyone including the English and Japanese seem to like the idea. And as everyone is learning putting on the brakes is not as easy as once supposed.
So the big question – Are we experiencing higher prices because the basic gold market was just too oversold or could there be more excitement in store? It’s almost a sure bet that more excitement is in store but the big question is when? And waiting for anything (especially relating to the price of gold) is not a strong suit with the American public.
The sad fact is that this continued sideways market perpetuates itself – it does not bring in all that fresh money needed to push prices consistently higher.
Don’t mistake that statement – there is some fresh gold spec money coming into the market but nothing of substance. And safe-haven buying is still more a matter of foreign currency protection – remember while the dollar has been strong many other world currencies are not happy. And so folks under a different banner see gold bullion differently – it actually protects their savings.
Still even this is not what it will take to push prices first about the moving averages – Gold 50 Day ($1138.00) – Gold 100 Day ($1167.00) and Gold 200 Day ($1189.00) and further create enough momentum to consider the heavy lifting seen on the 1 year gold chart.
Gold these past 12 months has created huge overhead resistance between $1150.00 and $1300.00. Moving above this important range really requires a number of attempts which might create a series of profit taking rounds. To believe we are going to overcome this challenge in this current euphoria is a stretch.
This does not mean gold lacks huge potential in this fiat fueled environment. If the world money supplies get out of hand or the collective stock markets fail we will rapidly see $2000.00 gold and higher as panic sets in – at that point you will name your own price.
But these catastrophic prime movers are unlikely – it is more probable that we will see more of the same – a continued back and forth price movement. Which brings me back to yesterday’s comment – look for some price correction in gold on the short term.
If you are a long term player this of course makes no difference because physical gold bullion is an insurance blanket. Price is relative – that is the kind of investor we see everyday. They are planning for the future and so sell very little. The big sellers we have recently seen are long-term players who have been active in the physical market for decades.
My point here is that this consistent physical bullion across our counter consists of a great deal of new – small to moderate size players who are just uncertain of what tomorrow will bring and so want some indisputable financial protection outside the normal financial channels. For now this is what keeps prices firm – to move above the current 1 year price channel in gold will take something else entirely.
Silver closed down $0.21 at $15.30. Even the physical across the counter trade today slowed down in everything except $1000 face 90% silver bags – don’t ask me why.
Platinum closed down $8.00 at $1026.00 and palladium closed down $19.00 at $604.00. The Platypus 1 oz bullion coin is now available in limited numbers – everything else remains hit or miss as the US and Canadian mints ponder production.
Our Patented Employee Survey– Gold’s Direction Next Week?
Of course it’s not really patented but we do have some fun along the way. This is what the GoldDealer.com employees think – 3 believe gold will be higher next week – 4 think gold will be lower and 3 think it will be unchanged.
Our Patented Customer Survey– Gold’s Direction Next Week?
Like the employees our customers were given three choices – up – down – unchanged. We limited the survey to a random sampling of 100 transactions – unscientific but worth considering because these people took action: 55 people thought the price of gold would increase next week – 31 believe the price of gold will decrease next week and 14 think prices will remain the same.
Precious Metal Closes & Dollar Strength – Aug. 7 – Aug. 21
This from Paul Gikes (Coin World) – American Eagle silver bullion coin sales cross 30-million mark from U.S. Mint – Coins still being rationed to authorized purchasers as Mint regulates supply – Through Aug. 18, the U.S. Mint recorded sales to its authorized purchasers of 30,597,500 American Eagle silver bullion coins. Sales of American Eagle silver bullion coins from the U.S. Mint continue to chug along as coins available are still being rationed to authorized purchasers.
Allocation of sales of the 1-ounce, .999 fine silver bullion coins has continued for several weeks as the Mint works to keep production at the West Point Mint ahead of demand and build inventory.
For the week beginning Aug. 17, the number of coins available for allocation was 1,187,500, according to Tom Jurkowsky, director of the Mint’s Office of Corporate Communications.
Sales figures posted on the Mint’s website indicate the authorized purchasers bought 1,102,800 of those coins on Aug. 17 and 18, leaving just 84,700 to be purchased before the next allocation on Aug. 24. Through Aug. 18, the Mint recorded total American Eagle silver bullion coin sales at 30,597,500 coins.
The Mint does not sell American Eagle bullion coins to the general public. The coins are sold through a network of authorized purchasers, who offer a two-way market for the coins. These qualified firms purchase the coins from the Mint for the closing spot price of silver per troy ounce on the London market, plus a premium of $2 per coin.
The firms may then add a further markup and directly sell the coins to other dealers and other purchasers. Currently, all American Eagle silver bullion coins are being struck at the West Point Mint. The bullion coins do not bear a Mint mark.”
This from Neils Christensen (Kitco) – U.S. Flash PMI Falls To 22 Month Low At 52.9 – The U.S. manufacturing sector is once again under pressure as it continues to hover just above contraction level, according to the latest flash Purchasing Managers Index data.
Friday, private research firm Markit said its August PMI estimate fell to a level of 52.9, compared to July’s final reading of 53.8. According to consensus reports, economists were expecting to see a reading at 53.9.
According to the report, this is the lowest manufacturing reading since October 2013.
“With the headline PMI swiftly losing ground after a modest rebound during July, the latest figure now points to the weakest overall pace of manufacturing growth for almost two years,” said Tim Moore, senior economist at Markit, said in the report.
A reading above 50.0 signals an improvement in business conditions, while readings below 50.0 signal deterioration.
Markit added that the rise in production volume was the weakest since weather related slowdowns last seen January 2014. According to survey participants, the strong U.S. dollar continues to hurt the manufacturing sector as it makes U.S. exports more expensive.
“According to survey respondents, the strong dollar continued to put pressure on export sales and competitiveness, while heightened global economic uncertainty appeared to have dampened client spending both at home and abroad. Alongside this, manufacturers of investment goods widely cited growth headwinds from the slump in capital spending across the energy sector,” said Moore.
On Wednesday, the minutes of the July Federal Open Market Committee (FOMC) meeting, showed that some committee members were concerned about the recent strength of the U.S. dollar.
“Some participants also discussed the risk that a possible divergence in interest rates in the United States and abroad might lead to further appreciation of the dollar, extending the downward pressure on commodity prices and the weakness in net exports,” the minutes said.
While Market’s survey is the first glimpse of state of the national manufacturing sector, the regional picture is slightly more mixed. Earlier in the week the New York Federal Reserve said that its manufacturing survey fell to its lowest level since 2009, falling to a reading of -14.9 down from July’s reading of 3.9. However, Thursday, the Philadelphia Federal Reserve said its manufacturing survey rose to 8.3, up from July’s reading of 5.7.
This from Chuck Butler (Everbank) – Here in the U.S. we just keep adding debt. I came across some data on debt yesterday, and pulled one thing from all the numbers the data contained. But first. Last year, when I spoke in Vancouver I told the audience then that including Government debt, Business debt, Mortgage debt, and Consumer debt, that the total in the U.S. had reached $60 Trillion dollars. This was just current debt, and doesn’t take into consideration the Unfunded Liabilities that Professor Lawrence Kotlikoff says are more than $200 Trillion dollars.
I then told them this so they could put the $60 Trillion dollars into perspective. If you were around in year 0, and had spent $80 Million dollars EVERY SINGLE DAY since then, you would not have spent $60 Trillion by now.
Now I give you this history, so I can tell you this. Household Debt (Consumer Debt) in 1989 was $888 per household. In 2013, the amount had risen to $5,791 per household. Crazy, eh? And since this has all happened in the past 20 years, I would have to say that people just don’t look at debt the way they used to. I remember how my mom had a Sears Roebuck credit card, that she would only use to buy us back to school clothes, (yes, we dressed like Eastern European orphans to go to school) and my dad would make certain that he paid it off in a couple of months. Only mortgage debt at our house and every now and then a new car loan. But that’s all changed – would you say “for the better?”
Red ink everywhere you look these days and little is made of it in the US or in Europe. This is the more logical reason gold must eventually rise in value. I bring this up from time to time because as the 2008 financial crisis fades into memory it’s easy to forget that we created trillions of dollars in liability which at some point either needs to be paid back or the weight of higher interest rates will create a drag on the economy with serious consequences.
The world is in the same spot – it’s fine to say that the Greek debt problems is “fixed” but what are the chances of paying the money back? The point being that world accumulated debt grows each day as world governments continue to print and distribute fiat paper money – this system creates a false sense of security because the plan to pay back all the money is always “improved” economic conditions and therefore “higher taxes” at some future date. What happens when the system, struggling under its own weight fails to work?
The walk in cash trade was just average and so were the phones – higher prices this week have created a great deal of action but no lines at the back door. It did create some “whale” action – something we have not seen in sometime.
After a few days of problems the phone company fixed our 800 numbers – at least this is what they claim. If you have any continued problems calling please email firstname.lastname@example.org.
The GoldDealer.com Unscientific Activity Scale is a “7” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 8) (Tuesday – 7) (Wednesday – 7) (Thursday – 8). 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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