Commentary for Monday, April 10, 2017 (www.golddealer.com)
By Ken Edwards and Richard Schwary of California Numismatic Investments Inc ......
Gold closed down $3.40 at $1,253.90 USD today in directionless trading. The overnight London and Hong Kong markets were sleepy – there was a selloff in early domestic trading which looked at $1,245.00 but traders once again bought the weakness.
What can be said about today’s gold price is that nothing of trading interest last week further developed over the weekend. Kind of convoluted but that is the case – the meeting between China and Trump – the US reroutes warships toward the Korean peninsula – further developments over the Syrian missile strike – all had the potential to push gold prices higher.
This goes to show how stable gold’s price has become in the $1200.00 to $1250.00 range. And even with political higher drama and acts of war gold remains placid. There were plenty of things happening last week and the top to bottom difference in the price of gold was $6.10. And while today’s action was boring we are still within $10.00 of gold’s 2017 high.
The theme for months now has been pretty simple – weakness for now is a long trader’s friend. The bulls continue to buy the dips – which is curious if you think about it. Why? They could just close their profit positions and move to the sidelines. The technical advantage has been in the bull’s corner now since early March – we have moved from $1200.00 to $1260.00 in less than 30 days. This is a handsome profit – with so many uncertainties why take the risk?
Most would claim that today’s consistent price support is the result of increased political tension worldwide and it’s hard to argue against because it’s true.
But there may be other factors at play which are “outside the box” but worth considering over your morning coffee. First, I mentioned last week the physical demand could be better than most believe – the latest gold consumption numbers out of India are worrisome – down more than 20% these past two years – but these numbers are internal – they come from the jewelers which are at the center of India’s black market in gold. Perhaps this dip is not exactly as advertised in that her smuggling trade has been alive and well for a least a few centuries.
Second, some traders might suspect that higher prices for gold are right around the corner. This is a bit more controversial in that higher interest rates are almost guaranteed. But there is some decent commentary floating around that suggests the price of gold may not swoon as the Federal Open Market Committee (FOMC) moves to raise interest rates.
Now I don’t see how this could happen but let me assure you that if it did – the price of gold would make new highs in what might be the surprise of the century.
The more typical way of seeing things these days comes from Reuters – “There appears to have been some profit taking after that move above the 200-day moving average on Friday,” Mitsubishi analyst Jonathan Butler said. “Friday’s U.S. unemployment reading, which fell to a 10-year low, would appear to confirm that the United States is approaching full employment,” he said. “This has increased the probability of a June rate rise... (and) clearly weighed on gold.”
Silver closed down $0.23 at $17.92.
Platinum closed down $22.60 at $940.00 and palladium closed down $13.70 at $790.00. Platinum is trading at a whopping $313.00 less than gold and the latest April numbers concerning car sales in China and Japan are strong – up 50%. Above ground supplies however have keep prices on the defensive. Still platinum remains in deficit numbers and South African mining struggles with costs. The ratio of gold to platinum is also compelling – the yearly production of gold is 2,800 tonnes – platinum comes in significantly less at 250 tonnes. In my mind platinum bullion continues to be undervalued and really unappreciated.
The GoldDealer.com Unscientific Activity Scale is a “3” for Monday. The CNI Activity Scale takes into consideration volume and the hedge book: (last Tuesday – 4) (last Wednesday – 2) (last Thursday – 5) (last Friday – 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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