Gold Lower on Profit Taking and Chart Consolidation
Commentary for Friday Feb 26, 2016 (golddealer1.reachlocal.net) – Gold closed down $18.40 at $1219.80 on the Comex today as the dollar gains strength and oil moves higher.
Gold was weaker today on follow-through profit taking and continued price consolidation. Keep in mind that the price of gold is higher by $90.00 over the past month so from a technical standpoint there is plenty of room for the long-trade to take profits and move to the sidelines.
The price of crude oil continues to climb ($33.83) which helps stocks and settles the feeling of “unease” in the world markets – this also creates a drag on the price of gold.
The Dollar Index closed yesterday at 97.45 and today has traded between 97.10 and 98.26 – currently we are at 98.10. This is a pretty dramatic rise created on better than expected US economic data – continued low inflation and perhaps revised expectations of what the Federal Reserve will do in March with interest rates.
This from Joseph Adinolfi (MarketWatch) – Data calm fears about impending recession – The dollar surged against its main rivals Friday after a raft of data was seen pushing back against the idea that the U.S. economy headed toward recession.
Recent economic reports might embolden those Federal Reserve policy makers who believe the group should be open to raising interest rates in March.
Currency traders appeared to focus on stronger-than-expected PCE core inflation, which showed inflation in the U.S. has doubled in the past 12 months, and a second reading on fourth-quarter growth, which was raised to 1%, from an initial reading of 0.7%.
The PCE report appeared to corroborate other signs of rising prices, including stronger than expected readings on the CPI and hourly wage growth released earlier this month.
Stubbornly low inflation has been a sticking point for U.S. policy makers. In minutes from the Fed’s January meeting, several policy makers said they’d need to see “direct evidence” inflation was rising toward the central bank’s target of just below 2%.
Jane Foley, senior currency strategist at Rabobank, said the data suggest that investors should reconsider their expectations for the number of Fed interest rate hikes expected this year.
“We have to question if the market was overdone in pricing out Fed interest rate hikes this year,” Foley said. The Fed futures market was recently pricing in a 55.5% chance that the Fed will keep interest rates on hold until next year.
Federal Reserve policy makers on opposite sides of the issue are spelled out their views earlier in this week. Kansas City Fed President Esther George, a leading hawk on the Fed’s rate-setting committee, said the central bank should “absolutely” consider raising interest rates in March.
On Thursday, St. Louis Fed President James Bullard, a recently converted dove, said raising interest rates would be “unwise.”
Separately, Zhou Xiaochuan, the governor of the People’s Bank of China, sought to reassure China’s trading partners that Beijing won’t drastically weaken the yuan and that Beijing has sufficient tools to support the economy. He spoke at a news conference ahead of Friday evening’s meeting of finance chiefs from the Group of 20 major economies.
Silver closed down $0.45 at $14.71.
Platinum closed down $13.00 at $914.00 and palladium closed down $3.00 at $480.00. Platinum is now trading for $305.00 less than gold and we are finally getting some traction on this discount number – we are beginning to ship a great deal of platinum bullion and stock is generally still good – we have US Platinum Eagles, the platinum Platypus, the Canadian Platinum Maple Leaf and platinum bars available.
Coin World claims this morning that the US Mint is considering a new palladium Eagle coin – this would be a first as the US has never minted coins in palladium. It seems to me this idea was considered in the past and abandoned but if the US Mint does decide to make a palladium bullion coin – something like the Silver Eagle it would be terrific because anything the US Mint does comes with the requisite advertising and promotion budget. I think that both platinum and palladium are mostly overlooked by today’s investor which is a shame – both metals are considerably scarcer than gold and both have virtually no reserves – an ideal combination for higher prices if demand picks up only a small amount.
This from Reuters – Gold fell on Friday, as the dollar and shares rose, but fund buying persisted as investors expected a G20 summit would produce little in the way of a coordinated stimulus program. Financial leaders from G20 nations gathered in Shanghai against a backdrop of worsening economic conditions and a lack of wider consensus on how to fix the problems.
“The increase in price this year has been supported by physical purchases, very strong in the funds and concerns are more global in nature, with increasing probability that there will be a recession in the U.S.,” Julius Baer analyst Warren Kreyzig said.
Concerns that a slowing global economy could eventually push the United States into recession eased on Friday as data showed U.S. economic growth slowed less than expected in the fourth quarter.
Despite Friday’s losses, gold seems to have rediscovered its role as a shelter for risk-averse investors. It has risen around 16 percent this year as share prices have tumbled and fears of a global economic slowdown increased. It hit a one-year high of $1,260.60 this month, further supported by the repricing of expectations for U.S. interest rate rises.
“We moderated our growth targets for the European Union and the U.S. considerably; we have lowered our rates expectations by the end of the year and we have reduced our S&P target for the end of the year. All of this is positive for gold,” Deutsche Bank commodity analyst Michael Hsueh said.
Gold funds accumulated their largest inflows since 2009 in the last week as financial market turmoil continued to unnerve investors, Bank of America Merrill Lynch said on Friday.
Assets of SPDR Gold Trust, the top bullion exchange-traded fund, rose to their highest since March 2015 on Wednesday. The increase in ETFs this year is the highest since 2010.
Bullion is also supported by strong technicals. Gold prices have developed a bullish technical formation called the ‘golden cross,’ where the 50-day moving average goes above the 200-day moving average.”
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 – 8 believe gold will be higher next week – 1 thinks gold will be lower and 1 thinks 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: 52 people thought the price of gold would increase next week – 40 believe the price of gold will decrease next week and 8 think prices will remain the same.
Precious Metal Closes & Dollar Strength – Feb.22 – Feb. 26
I read an interesting if misplaced commentary about using cash to buy gold bullion today as opposed to the old days. The thinking behind “buying for cash” being that some folks don’t want the government (or anyone else) to know what they are doing when it comes to gold bullion.
The genesis behind the article was that soon you would not be able to buy gold for cash because the government at some point will outlaw cash and confiscate your goodies.
This reasoning is silly – why would the government want to confiscate your gold? This is actually a rhetorical question. The proponents of gold confiscation use this core concept – and offer the following proof – the government has already confiscated gold in 1933 and will do it again as the dollar becomes worthless.
This reasoning is old, tired and useless – but for the sake of argument let’s assume it creates concern among some of our gold bullion brethren.
If this concern applies to you – don’t jump off the bridge just yet – realize that today’s thinking is not even close to that of the Roosevelt thirties. The American public is not near as patriotic today and would not take kindly to a government requiring them to turn over personal property (gold). My bet is that if something like this came up today most would claim crazy Uncle Joe took the family gold and we have not seen him in years.
In the article the author suggests you avoid the mainstream (bullion dealers) and visit a jewelry store to buy for cash – thus avoiding the greedy eye of Uncle Sam.
Well – the local jewelry store and in fact any other place you can buy “stuff” for “cash” are all subject to the same cash reporting requirements. You can’t for example walk into a car dealership or a jewelry story and put down more than 10,000.00 in cash (green) without filling out a Federal Form. And for the record these cash reporting rules have been on the books since the 1970’s so any commentary which claims the government is “all of a sudden” watching cash transactions is simply hokum.
If you have issue with this reporting law talk with your congressman but the fact is all merchants are subject to the same rules – this is America after all.
Finally your local bullion dealer is not an agent of the government – thankfully. Most are just hard working folks trying to earn an honest living. If you want to buy gold and pay fair prices talk with a professional bullion dealer. And leave the jewelry store people to do what they do – which is make the world a little nicer on your eyes.
If you want to know what is really going on with private gold transactions take some time and read the rules. They are simple and for the most part do not interfere with honest trade – and in the process you will learn there are many ways to buy and sell gold bullion which do not require extensive paperwork and many bullion products that have no reporting requirements.
Cash and bullion transactions are no mystery and represent no government conspiracy – read my commentary at www.golddealer.com under Reportable Bullion & Cash Transactions. Believe me the government has plenty of real problems on their hands – the last thing they want to do is scare the population into believing their fiat currency will be replaced by a gold standard.
The walk-in cash business was surprisingly busy today and so were the phones. Plenty of two way action and plenty of questions.
By the way – if you are new to the metals don’t be in a hurry. The process of protecting yourself financially with real gold or silver bullion has been around for a long time and can be abused when prices move higher. Avoid pressure from telemarketers who are on commission – and especially avoid promises of quick profits – a sure sign that the dealer will be the only one who makes money. Be careful if the dealer calls you all the time with the “latest and greatest”. Take your time in the process – sleep on the idea – and make an informed decision.
The GoldDealer.com Unscientific Activity Scale is a “4” for Friday. The CNI Activity Scale takes into consideration volume and the hedge book: (Monday – 5) (Tuesday – 7) (Wednesday – 6) (Thursday – 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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We believe our four flat screens downstairs with live independent pricing (BullionDesk.com) are unique in the United States. The walk-in cash trade can see in an instant the current prices of all bullion products and a daily graph illustrates the range of the markets on any given day.
Yes – you can visit the store with cash and walk away with your product. Or you can bring product to the store and walk away with cash. We will even wire funds into your account that same day for a small service fee ($25.00) if you are in a hurry.
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Thanks for reading, as always we appreciate your business and enjoy your weekend.
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