Gold Moves Higher on China Woes
Commentary for Tuesday, Sept 1, 2015 (www.golddealer.com) – Gold closed up $7.00 today on the Comex at $1138.60. After yesterday’s rather timid close, the action today looks like follow-through and safe haven buying from last Friday’s big $21.00 jump.
Let’s continue to look at the Dollar Index – this past week the dollar has been stronger – today the Dollar Index range has been 95.19 through 95.93 and while late trading has turned choppy its generally higher – as of this writing trading at 95.36.
Again crude oil has bounced considerably higher these last 5 trading days moving from less than $40.00 a barrel to something over $48.00 settling somewhat today at $45.14 but the rebound in oil has been substantial. Higher oil supports gold for the present.
And watch gold’s moving averages – compare today’s close ($1138.60) against the 50 DMA ($1130.00) the 100 DMA ($1162.00) and the 200 DMA ($1187.00). You can see we have moved above the 50 DMA but are not closing in on the 100 and 200 DMA. To me this is an improving negative picture – not much more.
China once again managed to rattle the world’s paper market including the DOW which was off more than 350 points on the close. Actually this still developing stock picture is a culmination of a few factors including profit taking but no doubt about it the Chinese data had everyone reaching for either aspirin or a stiff drink.
The Chinese PMI (Purchasing Managers Index) came in at 49.7% in August which was the lowest in 3 years. And again it’s not just this data but today the released ISM Manufacturing Index in the US came in at 51.1 down from 52.17. Still in positive territory but slowing – the Chinese data is also moving lower which has folks nervous.
Is this just another hiccup or a precursor to further declines? Of course no one knows for sure but you can see by the price of gold that it has everyone’s undivided attention.
Silver closed up $0.03 at $14.60.00. Delivery from the world’s major mints is picking up – this metric will continue to improve. Still this is a fluid situation – what is available early in the morning will change completely by noon. It is not that the world is running out of silver (at least for now) but that the manufacturing process itself was caught off guard by lower price demand.
Platinum closed down $3.00 at $1007.00 and palladium closed down $21.00 at $579.00.
You can see by the following posts by Neils Christensen and Sara Benali that precious metals commentary is back which places dollar strength and the upcoming Federal Reserve on the front burner. There are of course detractors in the precious metals ranks which believe that interest rates will not be raised anytime soon, but I am not one of them.
And like I have said before this coming event will not be one of the Horses of the Apocalypse – it will be just another factor weighing on the price of gold in the shorter term. I actually believe the worst of gold’s decline is behind us and so everyone should get used to smaller and smaller relative declines as gold continues to look for that watershed bottom.
This from Clara Denina (Reuters) – Gold up as dollar, shares fall on China worries; Fed hike in focus – LONDON, Sept 1 (Reuters) – Gold rose on Tuesday as the dollar and global equities dropped on fresh signs of economic weakness in China and uncertainty over the timing of the Federal Reserve’s first interest rate increase in nearly a decade.
Activity in China’s factory sector shrank at its fastest rate in at least three years in August as domestic and export orders tumbled, increasing investor concern that the world’s second-largest economy could be lurching towards a hard landing.
Spot gold was up 0.6 percent at $1,140.51 an ounce by 1203 GMT, while U.S. gold for December delivery was up 0.7 percent at $1,140.30.
The metal posted its biggest weekly drop in five last week, weighed by a steady dollar and strong U.S. economic data, supporting the case for a rate rise as early as this month.
Gold, which is on track for a 4 percent fall this year, would suffer from higher interest rates because they would increase the opportunity cost of holding the metal. Conversely, a delayed rate increase would relieve some selling pressure, if only temporarily.
“As long as the Chinese growth anxieties are there, the Fed will have to find some other remedy for their itching to raise the interest rate,” said Naeem Aslam, chief market analyst at AvaTrade. “All in all, in the short term we could see another leg up for gold, but nothing mammoth.”
The dollar fell 0.3 percent against a basket of leading currencies, largely because investors prefer low-yielding currencies such as the euro and the Japanese yen for better returns.
Doubts over whether the Federal Reserve will raise rates at its Sept. 16-17 policy meeting have resurfaced in light of persisting market turbulence in recent weeks.
But comments from the U.S. central bank’s Vice Chairman, Stanley Fischer, last week suggested that a September rate hike remains an option.
Later on Tuesday investors will turn their attention to a survey of U.S. manufacturing activity, but the biggest focus of the week is the August non-farm payrolls report on Friday.
“The importance of this week’s employment report is somewhat elevated given the lack of clearer signals from the recent Jackson Hole symposium – comments from Vice Chairman Fischer seemed to focus on trying to keep the Fed’s options open,” UBS said in a note.
In other metals, spot palladium was down 1.9 percent at $587.50 an ounce and platinum was down 0.7 percent at $999.75. Silver was down 0.4 percent at $14.54.
This from Neils Christensen (Kitco) – U.S. Dollar Just Taking a Breather, Fed Still On Pace To Raise Rates – CIBC – It doesn’t matter when the Federal Reserve hikes rates, either in September or December, what matters is that higher interest rates are on their way, say economists at CIBC World Markets in the bank’s latest monthly currency outlook. The bank is still extremely bullish on the U.S. dollar as they expect to see a new rally in the near-term. “The US dollar’s taken a breather recently, but the rodeo’s not over. Dollar bulls are ready to make another appearance with Fed monetary policy set to tighten before the end of the year,” they say. The Canadian bank explains that they don’t think the recent global uncertainty will stop the U.S. central bank from tightening its monetary policy. “The U.S. is more insulated from the issues plaguing other economies, given its large and healthy domestic market and the solid gains seen in employment recently. Even the recent pull back in equities looks less dramatic in the context of the multi-year run-up that preceded it,” they say.
This from Sarah Benali (Kitco) – RBC’s Gero: Gold Pressured, Waiting On Friday’s Jobs Report – Gold can’t seem to catch a break Monday morning as markets focus their attention somewhere else, says one veteran strategist. “Weaker crude, weaker copper and economic worries from China and euro zone seem to overshadow the landscape,” says George Gero, precious-metals strategist with RBC Capital Markets Global Futures. “That’s why gold is not seeing bids although stocks are weaker again today.” One of the key events the market is waiting for this week is the U.S. employment report on Friday. Gero notes that with the bank holiday in England today, markets are trading thin and metals are just waiting on headline news to move the market. According to Gero, metals markets need better technicals, higher closes, higher open interest, and higher volume in order to attract asset allocators.
The walk in cash trade was not as busy as the Activity Scale might suggest which points to more “bigger deals” and less “smaller deals”. The phones were also either hot or not – but one thing is sure – there are not many sellers at this point and for now silver bullion is getting all the attention.
The GoldDealer.com Unscientific Activity Scale is a “9” for Tuesday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Wednesday – 9) (last Thursday – 8) (last Friday – 9) (Monday – 8). 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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