Gold Supported by Physical Demand
Commentary for Wed March 1, 2017 – Gold closed down $3.90 today at $1250.00. And the stock market loved what President Trump had to say last night – up 300 points today and setting a new record. This of course pressured gold because his speech was surprisingly mild and in line with what one would expect for a State of the Union address. So the dollar gained strength – the Dollar Index closed yesterday at 101.36 and today is trading around 101.62. This stronger dollar is reinforced with this headline from MarketWatch – ISM manufacturing index climbs to best level in more than two years. And this encourages the FOMC regarding higher interest rates.
Still gold’s loss yesterday was not that much considering ($4.90) and today’s follow through weakness was interesting. You would think that a roaring DOW would really rain on the price of gold but there remains an underlying strength to this market. Yes, gold sold off this morning touching the $1236.00 level but it quickly recovered again showing that traders are buying weakness. This pattern of “bargain hunting” has been in place for some time now and it is hard to figure – the only reasonable notion centers around real physical interest in gold around the world. A trend which has not unfortunately visited the US. The folks who are seriously buying gold bullion across our counter are mostly hard-core players who have been interested in gold for decades and will not be dissuaded regardless of what the FOMC does with interest rates.
Finally this underlying support is supported by the most recent ETF numbers – all Exchange Traded Funds are higher this week led by gold up another 550,000 ounces.
Is gold priced correctly given on the short-term we are in a solid uptrend or can we expect this market to further sell off perhaps testing lower support because of the March interest rate apparition? Good question – even with today’s close at $1250.00 there is solid support at the $1240.00 level and gold has been above $1200.00 for most of the last year – that makes for a pretty solid floor or base number.
And considering we are already discounted more than 30% and recent interest from both India and China has been less than stellar I would say gold is more than still in the hunt – we are still in the bargain territory in the longer term.
You might think that this conclusion is self-serving being in the business. And you would be right but actually large bullion houses make a living regardless of market direction. It is better of course in bull phases – these are happier times. But proper hedging allows well run companies to profit when market’s decrease in value too. Not as happy but the lights still stay on.
So all in all I like gold’s price range at the present considering also that we have been in a generally “unhappy” market for 5 years now. It is also interesting that when Trump was elected President many believed he would become the poster boy of the safe-haven crowd. Not an impossible outcome but as yet this remains to be seen. The bigger question for the interested gold bullion buyer today is whether this “possible dream” theme can be done without blowing the already massive federal deficit through the roof and creating an inflation wave similar to what we saw in the 1970’s. Keep in mind that the PCE (Personal Consumption Expenditures) released today shows that inflation has already reached 4 year highs.
Silver closed up $0.02 at $18.49. 
Platinum closed down $12.10 at $1018.90 and palladium closed up $7.30 at $779.00. Recent good publicity has highlighted palladium in China’s growing car industry. This is true but with platinum trading at $232.00 less than gold don’t overlook platinum investment especially if you believe Trump has the answer to growing the economy.
This is our usual ETF information – Gold Exchange Traded Funds: Total as of (2-22-17) was 65,188,349. That number this week (3-1-17) was 65,742,332 ounces so over the last week we gained 553,983 ounces of gold.
The all-time record high for all gold ETF’s was 85,112,855 ounces in 2013. The record high for Gold ETF’s in 2017 was 65,742,332 and the record low for 2017 was 62,348,156.
All Silver Exchange Traded Funds: Total as of (2-22-17) was 647,080,186. That number this week (3-1-2017) was 647,575,331 ounces so over the last week we gained 495,145 ounces of silver.
All Platinum Exchange Traded Funds: Total as of (2-22-17) was 2,367,436. That number this week (3-1-2017) was 2,374,634 ounces so over the last week we gained 7,198 ounces of platinum.
All Palladium Exchange Traded Funds: Total as of (2-22-17) was 1,542,201. That number this week (3-1-2017) was 1,543,551 ounces so over the last week we gained 1,350 ounces of palladium.
The walk in cash trade was semi-busy – that means we all had time to ponder lunch. The phones were steady but nothing to write home about. I think everyone expected more fireworks over the Trump speech and it did not happen.
The GoldDealer.com Unscientific Activity Scale is a “4” for Wednesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Thursday – 3) (last Friday – 3) (Monday – 4) (Tuesday – 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 increasing – it would indicate things are busier – decreasing numbers over a longer period would indicate volume is moving lower.
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