Gold Continues to Settle Lower – No Buzz
Commentary for Monday July 25, 2016 (www.golddealer.com) Gold closed down $3.80 at $1319.30 today on the Comex. So the price of gold continues soft in the face of a strong dollar. The Dollar Index seems happy above 97.00 and the price of crude oil steady but deflated around $44.00 so my original guess as to a short-term pricing holds – look for a test of $1300.00.
Keep in mind however gold has been north of the $1300.00 mark for a month – showing solid resilience. Today’s price action was typical – the domestic market opened around $1317.00 and quickly traded lower touching $1312.00 and then reversed itself and moved back to $1319.00. So this market is still testing both higher and lower levels looking for clues.
Central Banks worldwide are in a consideration mode – but in the end they will continue a loose monetary policy because there are few other options. What else are they going to do – raise rates simply because a near zero interest rate environment has continued too long?
Inflation is not a problem but business growth has been disappointing even with trillions of dollars in fiat money being produced out of thin air. Smarter people than me have raised the idea that government interference in the business cycle has its limitations – but even with mixed results central banks of the world are now tinkering with negative interest rates – an idea that would have been considered preposterous at the beginning of this financial mess in 2008.
Gold has given up all the gains made this past month but is up around $200.00 this past year so it’s not like the bulls have decided to throw in the towel. But they have lost the buzz which was common when many thought a test of the $1400.00 level was in the cards not too long ago.
Adding to this now rather flat technical picture Reuters claims the Asian paper market is much stronger because the Brexit situation is settling down and Asian gold demand is “underwhelming”. They also suggest that because the price of gold is off of recent highs selling will diminish and perhaps cheaper prices will bring in a round of bargain hunting.
So you can see that gold presents a rather mixed picture at least for the short-term. It is considerably off its depressing lows – solid evidence that the nature of gold investment is changing. But with investors returning to overseas and domestic stocks and a hike in US interest rates likely – gold remains off balance. For now it will take fresh news to break this stalemate and something outside the box to resume the bullish trend which began last December.
Silver closed down $0.04 at $19.62.
Platinum closed up $2.00 at $1088.00 and palladium closed up $4.00 at $688.00.
This from FXEmpire – 3 Top Things You Should Know for the Upcoming Week
FOMC Meeting – Although the U.S. Federal Reserve is keen to leave interest rates on hold on Wednesday’s meeting, economic data released in the previous weeks shows improvement of US economy, pressures US policy makers for an interest rate hike in September.
Therefore, Federal Reserve estimation for a rate hike in September increased as the next move of policy makers should stabilize inflation rate. The question for a rate hike remains whether the Fed will have a single hike until the end of the year or a possible two rate hike before the end of 2016. Investors in search for hints of the Fed plans. Analysts track the 30-Day Fed Fund futures prices trading at CME. The meeting will take place on Tuesday-Wednesday, 26-27 of July.
BOJ Interest Rate Decision – The BOJ meeting on Friday might be a clarification for Shinzo Abe monetary policy plans. Abe won elections on July 10th and as promised before, he will continue his Abenomics stimulus program. No change in interest rate is expected as current rate in Japan is in negative territory. There are speculations that the fiscal BOJ stimulus program will be increased from 130$ billion to 390$ billion.
Europe Stress Testing – Europe stress banking test results will be published on Friday. The data could spread light on Italy and European commission debt solution.
The Italian debt is currently 360 billion Euros and the data release on Friday might bring to settlement of both sides. On Thursday, ECB president Mario Draghi announced that ECB keeps stimulus program unchanged. However, Draghi hinted the possibility of arrangement to Italian banks in order to improve their ability to lend funds.
The walk-in cash business and phones were average for the summer – a typically slower business cycle for the physical trade. The combination of a flat to lower gold price, less financial tension, investors looking for “yield” and the two day black-out period before the FOMC this week means we are on auto-pilot – for now.
The GoldDealer.com Unscientific Activity Scale is a “4” for Monday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Tuesday – 4) (last Wednesday – 7) (last Thursday 4) (last Friday – 4).
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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