First, the Draghi speech late Friday – the European Central Bank (ECB) will keep printing money as the ECB President avoided talk of the higher euro derailing EU progress. So now he and Janet Yellen are using the same play book – no changes, yet.
Second, the dollar’s move to the downside is helped by more Trump talk – this time claiming he will scrap NAFTA. The dollar is also hurt by the devastation caused by Hurricane Harvey.
Also add an excellent point brought up by Gary Wager (Kitco) – Janet Yellen’s term as Federal Open Market Committee (FOMC) chief comes to an end this coming February and Trump will most likely replace her with Gary Cohn an ex-president of Goldman Sachs.
This is a big deal in that Yellen’s last speech was long on regulation changes which she claims make the banking system safer. The Trump administration posited “less regulation” since he was elected. In the longer term replacing the more conservative Yellen with perhaps the less conservative Cohn might increase the chances of another financial 2008 like crisis.
So a weaker dollar is pushing gold to 10-month highs.
Also keep in mind the technical picture has encouraged the bulls for months and this scenario feeds on itself. Gold has been moving higher in price since early July ($1,210.00) over dovish FOMC comments concerning interest rates. The expected September rate hike never happened and now some wonder if the supposed December rate hike will also disappear if the US economic numbers appear sluggish.
So there are lots of things going on – but remember traders ponder whether gold can hold above $1,300.00 in light of the current FOMC interest rate intensions and their claim that they will begin to unwind their more than four trillion dollar balance sheet in September.
So there is definitely excitement in the air but this is just the opening act. Gold must show continued strength above $1,300.00 and then push above significant overhead resistance at $1,400.00 which goes back to February of 2014.
Can this happen? Sure with a loose monetary policy still in place gold will make everyone honest. But it’s important not to miss the shorter term point – gold at current levels is cheap – it has already shown the ability to hold pricing in the $1,100.00 through $1,300.00 price range – a discount to old highs of something like 30%.
So in my mind waiting for lower prices does not make much sense if you are considering adding to your holdings. And selling at this point also makes no sense – you have already waited out the bottom and a “core” holding is an absolute necessity in these “modern” banking times.
This from Zaner (Chicago) – “While December gold exhibited a massive two-sided trading range on Friday, it did manage the highest closing values since June 7th and that adds to an already impressive July and August rally. The rally over the last two months has been consistently fed by a rise in open interest but we suggest that the gold market has yet to register a classic short term overbought technical condition.
From a fundamental perspective, there continues to be a long list of geopolitical, macroeconomic and currency related issues that should keep gold and silver well bid. However, a number of the geopolitical/macroeconomic anxiety issues have seen a slowing of headline developments lately but most of those situations have not been fully resolved.
Not surprisingly, the US dollar has resumed and extended its downward track with a fresh downside breakout this morning and the dollar at times has fallen down to the lowest level since May 16th of 2016 (on the weekly charts). In retrospect the Fed and the ECB are not as hawkish as the trade anticipated in the first half of August and therefore the threat of rising interest rates and a recovery in the Dollar is very low. In the weeks ahead, it is now likely that the possibility of a US government shutdown (off its debt ceiling) will more than replace the uncertainty of the North Korean flap.
The world’s largest gold ETF saw their holdings rise by 5.91 tonnes on Friday and reach their highest level since July 24th. While the most recent COT positioning report showed a moderately large spec and fund long and the trade added 26,228 contracts in the last reporting week, the gold market might not be excessively bought out until the net spec and fund long reaches above 300,000 contracts. Given the prospect of fresh trade accusations from the US toward China following the US goods and trade balance (deficit) release later today, it is possible that scheduled data today will offer up fresh buying of gold and silver. All things considered, there are enough bull forces to leave the bull camp with the edge to start the new trading week.
The Commitments of Traders Futures and Options report as of August 22nd for Gold showed Non-Commercial and Non-reportable combined traders held a net long position of 226,584 contracts. This represents an increase of 26,228 contracts in the net long position held by these traders. The Commitments of Traders Futures and Options report as of August 22nd for Silver showed Non-Commercial and Non-reportable combined traders held a net long position of 55,189 contracts. This represents an increase of 6,963 contracts in the net long position held by these traders.”
Silver closed up $0.39 at $17.43.
Platinum closed up $10.50 at $986.50 and palladium closed up $3.15 at $936.60.
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 – 3) (last Thursday – 2) (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.