Gold Sees Traction in Early Trading but Moves Lower on the Close
Commentary for Thursday, July 23, 2015 (www.golddealer.com) – Gold closed down $2.20 at $1089.50 on the Comex today in what looks like a market intent upon testing recent lows.
I actually thought we would get a break after looking at the Hong Kong and London market trade overnight – for a short time they traded above $1100.00. This small enthusiasm settled down however into domestic trading which turned into choppy but at least not panicked trading. Gold held up fairly well considering but in the end sold off on the close.
Better than expected jobless claims was a negative for gold, perhaps further encouraging the Federal Reserve to raise interest rates this year – applicants applying for unemployment the lowest since 1973 according to MarketWatch.
The Dollar Index is relatively flat – previous close being 97.45 and today’s range being 96.89 through 97.51 – we are currently trading at 97.10 – so we are generally off recent highs which will support higher gold prices on the short term somewhat – but everyone knows that Fed interest rate will push the dollar higher and this is not good for gold in the short term – so this too is a negative for gold.
Technically gold is struggling so the short paper players are holding everyone at bay – but because of recent weakness I thought today would produce a much larger short-covering rally as they covered their short positions and booked profits.
Unfortunately this was not the case so expect further testing of the breach seen last Sunday in the overseas market.
I think it’s important to keep an eye on price swings – they are significant but not crushing especially when you consider all the negative gold fanfare. These past 14 days we have traded between a high of $1172.90 and today’s low of $1089.50. That amounts to a spread of $83.40 – watch this number carefully in assessment. We have been approaching the lower end of the big gold sell-off for years and so weakness also loses intensity and impact.
This testing to the downside does have a positive side however if gold manages to stay on its feet. Most savvy traders agree that the gold market is week but not that weak – in other words it will be relatively bullish if gold survives this latest test.
For those really interested in physical gold and silver ownership we are presented with another opportunity to average down. And make no mistake about it – the real physical market remains hot at these lower levels – we have been selling everything but the kitchen sink since Monday.
This early morning Coin World post is typical – “The United States Mint plans to resume sales to its authorized purchasers July 27 of American Eagle silver bullion coins, three weeks after sales were suspended so depleted inventory could be replenished. The resumption of sales will be on an allocation basis, according to U.S. Mint officials. Insatiable investment demand forced the July 7 suspension of silver American Eagle sales while the West Point Mint continued production. Sales went beyond the Mint’s ability to produce the coins to meet demand.”
This from Chris Gaffney (EverBank World Markets) – “Here in the US we had a surprisingly strong piece of housing data released. Sales of previously owned US homes climbed to an eight year high in June, climbing 3.2% to 5.49 million. Another piece of data showed the median price of an existing home rose 6.5% from June of last year, another good piece of news for US investors who are looking to housing to help boost what is currently a lackluster recovery. The housing recovery may give the Fed more ‘cover’ to raise interest rates off of the near zero levels during the second half of the year.
This good piece of news for the housing sector helped the US dollar recover across the board, with Kiwi and the pound sterling the only currencies which looked to gain vs the greenback. The Pound Sterling was one of the best currencies vs. the US$ yesterday after minutes of the BOE last meeting suggested a rate increase is back in the cards. The minutes of the meeting held July 8th showed a ‘number’ of policymakers viewed the decision on the timing of a rate increase ‘becoming more finely balanced’. The minutes showed that many of the members felt inflationary pressures were on the rise which could give additional motivation to move rates higher in the coming months.”
Silver closed down $0.04 at $14.68. Across the counter sales remain steady.
Platinum closed up $1.00 at $982.00 and palladium was off $9.00 at $617.00.
This from Nicholson and Harvey – Gold turns lower as U.S. data takes pressure off dollar – NEW YORK/LONDON, July 23 (Reuters) – Gold turned lower on Thursday, dipping back below $1,100 an ounce as a steeper-than-forecast drop in U.S. jobless claims helped the dollar recover from earlier lows, though prices remained under pressure after this week’s plunge.
Gold posted its deepest one-day loss in nearly two years on Monday, pushing prices through key chart levels and setting it up for further weakness. Low prices tempted some buyers back to the market on Wednesday, but gains remained muted.
Spot gold was down 0.3 percent at $1,089.34 an ounce at 2:53 p.m. EDT (1853 GMT), off a high of $1,105.60. U.S. gold futures for August delivery settled up 0.2 percent at $1,094.10.
“The markets are all focusing on a September rate hike, so assuming that is when it occurs, you have to think that gold is going to remain under downward pressure up until that point,” Citi analyst David Wilson said.
Gold has been undermined this year by expectations that the U.S. Federal Reserve is on track to raise interest rates for the first time in nearly a decade, boosting the cost of holding non-yielding bullion and lifting the dollar.
“If you’re thinking about the Federal Reserve hiking rates in September maybe December, in real terms that could be a larger impact than you may have thought,” said Bart Melek, head of commodity strategy for TD Securities in Toronto, noting there is not enough inflation to attract buying of gold.
Technical analysts, who study past price patterns to estimate the future direction of trading, say once its current bounce from Monday’s slump is over, the next target for gold below its Wednesday low near $1,087 an ounce is $1,044, its 2010 low.
“The bounce in gold is nothing but a technical trade, as most major momentum indicators are showing that the recent selloff is overdone,” AvaTrade’s chief market analyst Naeem Aslam said.
Investors continue to cut their exposure to gold. Holdings in the biggest gold-backed exchange-traded fund, SPDR Gold Shares, shrank for a fifth day on Wednesday to their lowest since 2008.
Some demand emerged for physical metal, however. A retreat in the dollar, which fell 0.5 percent against a currency basket, encouraged some buying in China overnight, dealers said, while weak gold prices spurred buying of bullion coins in the United States where Mint sales jumped to a 2013 high.”
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 7/16 (228,539) – Friday 7/17 (226,979) – Monday 7/20 (214,782) – Tuesday 7/21 (196,180) – Wednesday 7/22 (183,792). These numbers remain in the higher end of the range.
Ken Edwards will be out of the office this week so if you need something special ask either Harry or Alex.
The walk in cash trade today was steady and the phones were busy all day. Sorry for the wait on some products but there is a steady increase in availability of most products. Sometimes it just takes the marketplace a while to gear up – when the market is slow dealers and public become complacent about availability – when demand increases dramatically a good lesson to learn is that most of the precious metal markets are relatively thin when you consider possible demand.
Now take this one step further and consider what availability would be like if the public were really frightened about its financial prospects.
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 – 8) (Monday – 8) (Tuesday – 8) (Wednesday – 7). 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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