Gold Ignores FOMC Release of Minutes
Commentary for Wednesday April 6, 2016 (www.golddealer.com) Gold closed down $7.30 on the Comex today at $1223.00 – this remains at the lower end of it current trading range but still above the gold’s important 50 day moving average ($1217.00).
Everyone parsed the words and thoughts coming from today’s release of the latest minutes from the Federal Open Market Committee. Everyone had expectations but in the end the news was simply more of the same – Janet Yellen perhaps not as dovish about further rate hikes but at the same time seemingly concerned about the larger picture.
The news did little to change the after-market price of gold so my bet is the FOMC remains in “neutral” – waiting and pondering a rate change sometime in 2016. Other members of the FOMC group are more hawkish – insisting that rate hikes are necessary so there is a confusion factor among the players. And this one interest rate decision – more than anything else today will push the price of gold higher or lower.
The price of crude oil jumped higher today – always a factor in pricing both the dollar and gold. The surprise draw-down number (usage) today pushed crude oil up 5%. We quickly moved from $36.50 to approaching $38.00 a barrel – whether this is sustainable remains to be seen but for the time being higher oil supports stock prices and infers that Europe will settle down.
The dollar moved lower supporting the price of gold – the Dollar Index closed yesterday at 94.62 and now is trading around 94.34 with a negative bias.
Gold’s overnight and domestic trading range represents about a $10.00 spread so trading remains quiet – which makes Peter Hug’s (Kitco) comments today worth remembering – Back And Forth – “The scenario remains consistent, as equity stabilization reverses the momentum in gold overnight. The global issues create a floor under gold, but new “news bytes” are required to maintain upside trajectory. Some initial support for gold at $1,220.00 but a possible drop to the $1,210.00 level is in play. The upside is bounded initially at $1,232.00 with the $1,238.00 level a more significant resistance level. Fed minutes are due out today and they will again be analyzed for any changes in nuance relative to the elephant in the room, interest rate policy. Fed officials continue to maintain hawkish tones but likely this is just more noise than substance. The downside risk has increased, not because of any macro reasons, but because quiet lackluster markets are easier to sell than buy.”
For now the price of gold is a trader’s market – they are making a living riding the price range between $1210.00 and $1270.00. Any “interest rate” related news will change prices accordingly as prices drift generally lower – these “ups” and “downs” are predictable and trading models work – so day traders can make sense out of a confusing market model – at least for now.
This surprising “risk-on” focus can be seen in better than expected Chinese economic numbers. This from FXEmpire – “Data released earlier in the Asian Forex session showed China’s service sector strengthened in March. The Caixin Services Purchasing Managers’ Index (PMI) for March rose to 52.2, up from February’s reading of 51.2. A reading above 50 indicates expansion.”
The FOMC information released today was “worried” over as usual because the gold market is information starved. I say this because the Fed policy is subject to revision – sure the “basic” mandates remain on the table but there is a great deal more to consider especially now that the US traction continues but the rest of the world seems “stuck”.
Inflation and employment – are always on the FOMC agenda but there are some who fear that the unusual dose of quantitative easing may not have done the trick.
The reasoning being – we have a recovery but not exactly what we were looking for – jobs are back but these are cheap jobs – the middle class is shrinking and there is a general unease among American citizens that our government is not up to the job. The poster child for the possible failure of QE is well illustrated in Japan, where even negative rates have not produced the desired employment or production. The observation by some (not me) is that there might be some kind of “limit” as to what can be expected from government tinkering with the money supply.
I actually take the other side of the trade – the government QE policy is a mandate because this Robin Hood system cannot work well without all that cash floating around. This in turn creates an occasional blow-up (the 2008 crash comes to mind) but in the end governments of the world unite under a policy that creates fiat money – but not too much. This in turn slowly robs the workers of the world a few cents at a time so as to not create revolution.
My probably too long point being that the fiat paper system is here to stay and in the end can be counted on to devalue currency relative to the price of gold.
But if you look at the relationship between the dollar and gold today you will see that gold went down in value as the amount of paper currency increased to unprecedented levels.
Dr. Doom (Nouriel Roubini) calls this wacky situation between the dollar and the price of gold an anomaly. Another anomaly or warning flag is the decreasing price of oil or the deflation seen worldwide even with all the QE being pumped into the system. Professor Roubini suggests that as the number of anomalies moves higher – the danger of financial fall-out increases.
We are just coin dealers working for a living but would suggest that these “out of line” price relationships are more important than ever – especially when the price of gold seems to indicate that all is well on the Western front. Be cynical in a world which creates huge amounts of fiat currency and worse – decides that because the initial rounds did not produce the desired results an even more powerful printing press is necessary.
Silver closed down $0.06 at $15.05.
Platinum closed down $7.00 at $942.00 and palladium also closed down $7.00 at $539.00. Platinum is now trading for $281.00 less than gold – amazing and still very cheap – trades of gold bullion for platinum bullion continue to make sense – especially if you are “rebalancing”.
Also worth noting is that the platinum exchange traded funds continue to accumulate at these knock-down prices – this past week moving higher by more than 10,000 ounces.
This is our usual ETF information – Gold Exchange Traded Funds: Total as of (3-30-16) was 57,825,287. That number this week (4-6-16) was 57,960,591 ounces so over the last week we gained 135,304 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 2016 was 58,153,201 and the record low for 2016 was 47,568,082.
All Silver Exchange Traded Funds: Total as of (3-30-16) was 625,294,897. That number this week (4-6-16) was 630,459,181 ounces so over the last week we gained 5,164,284 ounces of silver.
All Platinum Exchange Traded Funds: Total as of (3-30-16) was 2,348,904. That number this week (4-6-16) was 2,359,676 ounces so over the last week we gained 10,772 ounces of platinum.
All Palladium Exchange Traded Funds: Total as of (3-30-16) was 2,297,524. That number this week (4-6-16) was 2,293,583 ounces so over the last week we dropped 3,941 ounces of palladium.
The walk-in cash business was on the quiet side today and so were the phones.
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