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posted on 20 June 2016

Could Central Bankers Be Gold And Silver's BIGGEST Allies?

from Money Metals Exchange

Dan Norcini says central bankers are "scared to death of deflation" and none of their stimulus is working.

Welcome to this week's Market Wrap Podcast, I'm Mike Gleason.

Coming up we'll hear from Dan Norcini, who joins us to break down the markets like no else one can. Dan discusses some of the wild moves in the markets of late, the thing he focuses on the most when trying to predict what's ahead for gold and why he does not think the gold price is currently being manipulated. You will not want to miss an incredible interview with Dan Norcini, Trader Dan, coming up after this week's market update.

Well on Wednesday, Federal Reserve policymakers opted to keep interest rates unchanged. The decision came as no surprise in the wake of the recent disappointment in jobs numbers.

Precious metals markets rallied following the announcement. On Thursday, gold surged above $1,300 per ounce in early morning trading to hit new highs for the year. But by mid day, prices reversed to the downside and closed lower by 1%. But they have moved somewhat higher today.

The wild intra-day swing was widely attributed to events overseas. A pro-European Union member of the British parliament was killed by a mentally ill person, stoking rumors that next week's Brexit vote would be postponed. Others speculated that if the vote does take place as scheduled, voters would now be more sympathetic to the pro-EU side.

The bizarre series of events has conspiracy theorists wondering whether they're part of an orchestrated attempt to derail Britain's exit from the European Union and knock down gold prices just as they appeared to be breaking out on the charts.

One conspiracy fact that can't be doubted is that powerful globalists in Britain and beyond want to stop the Brexit. They are concerned that if Britain leaves the EU, other countries will follow suit. Globalists are also nervous about Donald Trump and his calls for an "America First" foreign policy that calls into question our ties with NATO and the United Nations.

Meanwhile, as Hillary Clinton tries to blaze a path to the White House, a prominent member of the last Clinton administration is calling on the Fed to provide more stimulus. Former Treasury Secretary Larry Summers specifically criticized the Janet Yellen Fed for setting its inflation sights of 2% too low.

Here's Steve Liesman of CNBC with more on what Summers is thinking:

Steve Liesman: Summers, who was considered, of course, for the top Fed spot. He warned, "The United States may be on a slow-motion trajectory towards a Japanese chronic low-flationary or even deflationary outcome." Now, to his prior prescriptions, he urged a surge in government spending. He now says the Fed should stop forecasting rate hikes, allow inflation to run above the 2% target, and aim to get to that inflation target, sooner. That could mean, or it suggests, more stimulus now. The Fed has had to reverse itself repeatedly over the past year. A year ago, the average Fed member had forecasted a funds rate of 1.6% for 2016. That's dropped. Now it's below 1% for 2017. It's fallen from near 3% to now below 2%.

As the Fed continues to backtrack on interest rates, perhaps the higher inflation levels that Summers so badly wants will soon become reality. This year has brought upward pressure on energy prices, healthcare costs, and housing - though not so much on wages. Gold and silver markets seem to be anticipating higher rates of inflation with their strong advances this year.

In the near term, the gold market faces resistance from some very motivated sellers in the futures market just above the $1,300 level. They certainly showed their resolve on Thursday by knocking down prices mid day. As of this Friday morning recording, gold prices come in at $1,290 an ounce, still good for a weekly gain of 1.2%.

The silver market also suffered a sharp reversal on Thursday, with prices closing down 2% on the day. For the week, silver is unchanged now, with prices trading at $17.39 per ounce.

The other white metals, platinum and palladium, haven't been able to rally much at all this month and are trading lower on the week. Platinum prices currently come in at $971 an ounce, off 2.3% this week, while palladium looks lower by 2.6% to trade at $533.

Looking ahead to next week, investors should brace for more volatility surrounding the Brexit decision. A "yes" vote is likely to boost precious metals, while a "no" vote could be cause for celebration in the equity and euro markets.

As the U.S. election approaches, we could also begin to see some unusual outbreaks of volatility, particularly if the polls show a tight race between Hillary Clinton and Donald Trump. Wall Street and the banking establishment are comfortable with Hillary because she's very well known to them and very predictable. Trump may be perceived by financial markets as the riskier choice.

However, it's worth noting that both candidates have gone on record favoring more spending overall and a continuation of the Fed's interest rate suppression policies. That's a political recipe for a weaker dollar versus hard assets, including precious metals.

Well now for more on the what's ahead for the markets amidst all of the chaos, let's get right to this week's exclusive interview.

Mike Gleason: It is my privilege now to welcome in Dan Norcini. Dan is a professional off the floor Commodities Trader bringing more than twenty years of experience in the markets. Dan's editorial contributions and supporting technical analysis charts cover a broad range of trade-able entities including the precious metals in foreign exchange markets, as well as the broader commodity world. He is a frequent contributor to both Reuters and Dow Jones as a marketing analyst and can be found as a source in the Wall Street Journal's commodity section from time to time, as well as CBS's Market Watch. You can follow his fabulously detailed work at TraderDan.com.

Dan, welcome back it's great to have you on again, how are you sir?

Dan Norcini: I'm doing well Mike, thanks. It's always a pleasure to be with you, looking forward to our chat here today.

Mike Gleason: Well we're seeing some pretty interesting market action here this week, specifically the Fed decision on Wednesday certainly seemed to light a fire under the metals market initially but now we're seeing them pull back a bit as we're talking here on Thursday afternoon. So what do you make of the action this week Dan?

Dan Norcini: It reminds me of a scene in the original Planet of the Apes. It's a madhouse; that's what I make of the action Mike. We've got a very, very high degree of uncertainty now in the markets; a lot of elevated concerns. You've got the VIX, the Volatility Index is at elevated levels. The Gold Volatility Index is kicked up. We're seeing some pretty big price swings in the interest rate market - the long bond, the ten-year. We're seeing some big movements in the oil market. The crude oil market has been particularly hitting hard this week, as well. We have a lot of uncertainty tied to two things, Mike. Mainly, Central Bank comments and activity, or actions, and of course the upcoming Brexit vote.

One thing that I'm noticing lately is that investors and traders tend to look for some sort of - what's the word I'm looking for? Comfort might be too strong of a word - but a little bit of confirmation from Central Bankers when they're making comments on the economy. They like to see a little bit of certainty, where they feel like the Central Bankers have a pretty good handle on what's going on so they can initiate a correct monetary policy response. But what they're getting this week is unnerving them. They're looking at Janet Yellen's testimony that we got out here on Wednesday, yesterday. We've got the subsequent statement that came out there. Then, of course, we have the Bank of Japan overnight here.

And the words that are coming out of these Central Bankers are not giving a lot of comfort to anybody. As a matter of fact, they're creating more nervousness and uncertainty because the general feeling is that the Central Bankers are unsure of what's coming next. Their policy that they've done to generate this inflation toward 2%, which is what they're all looking for, it's not working. What's amazing to me, Mike, is that every single time that you get a statement, coming out of one of these Central Bank meetings recently, they still talk about this 2% inflation goal. They still talk about achieving it, but every time they mention it, it gets kicked down further down the road. First it was the latter part of 2016. Then it moved into 2017. Well, heck, now we're talking about maybe late 2017, 2018 before we get to a 2% inflation rate. You get that thing repeated often enough and it creates a lot of nervousness among investors because they feel like Central Banks don't even know what's going on.

Of course, now you have the uncertainty with the upcoming Brexit vote. That's adding even more fuel to the fire of uncertainty. And of course you're getting a lot of volatility now as traders either try to move to the sidelines ahead of this vote, or position themselves in the direction they think the markets might go depending on the outcome of that vote. Quite honestly, nobody has a lot of conviction about anything right now. And that's why you're just seeing these big price swings.

Mike Gleason: Yeah, and I certainly want to dive deeper into that with you. The world is watching quite intently, and following the pending decision over in Europe next Thursday; the Brexit vote, they're calling it as the Brits vote on a referendum to leave the EU, which may or may not happen now based on the news today of a member of Parliament being shot and killed. We'll have to wait and see if they postpone the vote now. But nonetheless, I want to get your thoughts on both scenarios, here. What is likely to happen in the markets -- I'm talking specifically about the dollar and metals -- if they vote to leave the EU. What is likely to happen if they vote to stay?

Dan Norcini: Well to answer that Mike -- I'm going to preface this by saying in all honesty I don't really know. I don't think anybody else does, really. It was interesting trying to read some comments from Gilt Traders -- hedge funds that were traded in Gilts, British debt. There's such confusion among those traders, as well. They don't know what direction those bonds, those Gilts, are going to move after the election, ahead of the election. Nobody really knows for sure, but I can kind of tell you from a perspective of having watched a lot of these events unfold over the years. Typically, what we tend to get in markets is we sort of anticipate the results ahead of the actual event. And what I mean by that is, you have these scenarios pop up where you call, "Buy the rumor, sell the fact." What oftentimes happens in a market is, as you lead into an event, traders begin to anticipate the outcome of the event. In this case, like the Brexit vote. What we've seen recently was that the most of the public opinion polls, at least the ones that I've been able to find, are showing an increase in the decision to leave the EU, and a movement of the undecideds more toward the "leave" camp. So in other words, people are beginning to think that there's a larger probability of the vote moving in favor of Britain leaving the EU.

So they begin to anticipate that in the market, so you start to see that with stock markets moving lower. You see equity selling. You see the interest rate markets, the bond markets, the note markets, they tend to move higher pushing the interest rates down. In the case of gold, you've seen it move higher. You've seen the crude oil market be pressured because of the potential for market chaos. And so you see that working in the markets. Now in times past, that would kind of be a trend. It might be a short-lived trend, Mike. It might go for about a week ahead of the vote. And then oftentimes, once the actual event occurs, traders have kind of already baked it into the cake. They've already factored it in. Oftentimes, you see the markets reverse when the vote actually comes out, or the event actually takes place and it actually (does) what they expected it would do.

A lot of people sit there and scratch their head like, "Hey, why is this market selling off? Britain decided to leave the EU." They're not selling off because they decided to leave the EU. They're selling off because they've already expected them to leave the EU. So a lot of times that's what you'll get, Mike. But in this case, honestly, I don't know. We had it today, for instance. We had the equity markets moving down sharply today on the Bank of Japan decision overnight. We had the bond markets - big, big rally in the long end of the curve pushed the bonds up 2 points at one time. Obviously, gold was up; it had a big surge higher today. It was up almost to $1,320 of resistance level on the chart, and all of a sudden we saw it all reverse. That's the kind of action that oftentimes you see on the day of an actual event taking place, not ahead of the event.

So I guess what I'm saying is this: if we could see a pattern where for instance, gold marks is higher, ahead of the vote. The stocks sell off. The bonds move higher like we were seeing earlier this morning. And then we go into the actual event next week, and we get a vote in favor of leaving, I could what happened here later in the session today, I could actually see that taking place. I could actually see stock markets moving higher. I could see gold being pressured. I could see the bond market reversing course, and interest rates moving slightly higher as traders basically book profits on the move. But it all depends on what we're going to get leading into that actual vote. So that's basically what my take is, at the moment. I don't really know more than anybody else, but I generally like to see some sort of pattern emerge before the vote, or before the event. And today the pattern just kind of went kaput, so now we've got to wait and see whether the recent pattern is going to re-establish itself tomorrow and in the early part of next week. And then perhaps we can answer that question a little bit better.

Mike Gleason: We do seem to see a little bit of a sea-change happening right now towards negative interest rates worldwide. They U. S. obviously has backed off on a lot of the interest rate hikes that they had planned for 2016. I also want to ask, is it possible that the U.S. is going to raise interest rates while the rest of the world is looking at a zero or negative interest rate? And that seems to also be buoying gold here, a little bit, over the last several weeks. What are your thought on this movement towards negative interest rates and the fact that it does seem to be getting more traction among pretty much all the Central Banks?

Dan Norcini: Oh yeah, absolutely. That is one of the main drivers, right now behind the move higher in the gold price recently, Mike. Then you throw the Brexit fear on top of that. That's sort of an added bonus, in my view. The main thing goes back to that interest rate environment. I'm a big proponent of tracking the interest rates probably even more closely than the currency markets, and even more closely than even the equity market because, to me, any big development that's going to impact not only the U.S. - the domestic economy - but also the global economy, is going to first be reflected in what's going on in the interest rate market. In my view, the guys that trade, whether it's Gilts, bonds, or treasuries, they're some of the savviest players around the world. They have a better sense of what things are going to be doing. Now they don't always get it right especially in this environment of uncertainty, but you can't ignore what they're doing in those interest rate markets. You have to really pay attention to them.

Quite frankly, with what's been happening here in the U.S., we've been getting a flattening of the yield curve. That's something that really has me sitting up and taking notice because at the earlier part - when we first started talking about hiking interest rates - let's go back into last year, Mike. When the speculation was whether the Fed was going to hike that 25 basis points at their December meeting. We were all sitting around like, "Are they going to do it or are they not going to do it?" They finally made it. They pulled the trigger. At that point, it seemed like the perspective on interest rates shifted here in the U.S. The market began to anticipate higher rates, began to anticipate - at one point, 4 interest rate hikes this year 2016. You saw that shift take place in the price action in the treasuries - in the 30-year and in the 10-year. What was interesting, the yield curve began, right after that rate hike, it began to start to flatten.

And just for the sake of the listeners, when I talk about a yield curve flattening, what I mean is that long-term rates tend to inch closer to short-term rates. Generally speaking, in a normal curve, the farther out you go in maturity - 2-year, 5-year, 10-year, 20-year, 30-year - the further you go out in the yield curve, the higher the interest rate is. That's in order to recompense, or reimburse, people who are buying that debt for the inflation risk that the potential is there, which erodes their real rate of return on a debt instrument like that. So you want to compensate them, and you pay them generally a higher rate of interest the further they go out the curve, because there's so much more uncertainty. We don't know what's coming down the road that far out.

Well, when you see the curve begin to reverse, when you see it begin to flatten, when the further you go out along the yield curve, the amount of money you're getting paid - the yield - actually begins to decrease. It gets smaller, relative to yield you could get on the short end of the curve, like if it's a 2-year. That's a sign that you really have to pay attention to as an investor or trader because as the yield curve flattens, the first thing that tends to get hit is financial stocks because that's the margin that banks make when they do loans. They borrow money short-term. They lend it long-term. And the spread between what they borrowed the money for, and what they lend it out for - that's their profit.

As that yield curve gets smaller, it gets flatter. As it contracts, the profitability of the financial institutions, the banks, begins to decrease. Well there's never been a time in my history that I've seen in the markets, where you've had a strong stock market and bank stocks selling off. You just don't see that. As bank stocks, generally as they go under pressure, they tend to pressure the entire market. Well, what we're seeing now with the yield curve beginning to flatten even further, and contract, is that generally speaking it's a signal that economic growth is going to slow. Of course, that reduces bank profitability, etc. etc. but the main thing for us traders, is that as that yield curve continues to flatten, it suggests that more and more people are beginning to come around to the idea that you're not going to get an interest rate hike in that environment because the economy is simply not growing. It's not expanding at a pace fast enough to generate any sort of upside inflationary pressures. The fear is slow-growth. And as that thing begins to flatten even further, then it starts to take on a life of its own, Mike. It begins to feed itself into a viscous circle.

Mike Gleason: How is this likely to impact the gold market, Dan?

Dan Norcini: What it does is: as this yield curve flattens out, you begin to get a situation where there really is no opportunity cost to buy gold. In other words, you're not competing against anything like you normally would in the past, like an interest rate-bearing instrument. For instance, when interest rates are rising and the economy looks pretty good, and people aren't generally concerned too much, gold doesn't pay any rate of return. It doesn't pay any interest. It has to make a capital gain; it has to appreciate for the buyer to make money on it. Whereas you can buy a government bond - a debt instrument - and you can get a rate of return. You can get maybe 3% or 4% or whatever, in a normal environment. Gold has competition from government bonds and relatively safe debt instruments.

Normally, that's the situation that you see in a healthy economy. Now as the yield curve flattens, and these rates that you mentioned go negative, there's really no incentive to go out and buy those things because they're not paying you any rate of return. For instance, let's say you're a German bond investor and you go out and buy a 10-year German government bond. This week, that particular debt instrument - its yield dipped into negative territory for the first time in history. An investor is basically saying, "I'm going to tie my money up for 10 years. I'm going to buy a German bond, and I'm not going to make a dime off of it. I'm not going to make anything off of this for the next 10 years." Now why would you do that? The only reason you would even do it is because you're afraid that rates might even go more negative.

But in an environment like that, you don't have to worry about competition when it comes to gold because you don't have that normal interest rate being paid. And so that's why you saw gold really start to get a firm base of support underneath it when the shifting among Central Banks was more and more toward negative rates, and particularly when they lowered those rates even further, driving them in the negative territory. So again, that is, in my mind, the big driver for the recent move higher in gold. I think that's been one of the reasons you've seen such strong in-flows into that GLD and some of those other gold ETFs, simply because investors - particularly investors from overseas - they can buy this metal and basically say, "I'm going to take my chances with it, rather than a government bond because at least I can hope for some capital appreciation."

Mike Gleason: Yeah, and I know you follow the GLD quite a bit. You think it's maybe even a better indicator for what's ahead for the metal itself, versus say, the mining shares. Mining shares are doing very well this year, the last couple days notwithstanding here, where they've taken a little bit of a hit on the HUI. GLD inflows, what is that telling you. That continues to be very solid.

Dan Norcini: Yeah, and to me Mike I don't think we ever want to discount that the HUI, the gold ratio, or any of the other the gold stock indexes to the gold price. It always had somewhat of a predictive ability in the past. I don't think that's going to go away; however, it seems to me that the GLD has been pretty much ignoring, of late, any weakness in the mining shares. Now we haven't had that situation, Mike. Typically in the past, one of the things that - for instance when I began to look at gold and notice that it was beginning to move into a bear market a while back, several years ago - was you saw the mining shares have a strong sell-off. You had GLD also experiencing strong out-flows at the same time, so you had those two indicators - at least in my mind - showing that demand was falling off for gold among western based investors. Of course, the gold price then followed those two down.

Then when we get to reversal, then when the shares go up and the HUI is strong and you see in-flows going into GLD, typically you see the gold price follow it higher. So those are good positive indicators. Well now we've got this situation where we're seeing some temporary weakness. And it's been very, very volatile in the mining shares but we've seen days in which the mining shares have sold off rather abruptly. The gold price has stayed relatively firm, but GLD has actually seen an in-flow where they reported increase in holding, so we've seen this divergence between GLD actually. The in-flow is going into it, and some of the action in the gold shares. And in all honesty, in trying to sort this out and see which one lately has more predictive ability, it seems to me that the GLD has been a little bit better because it has not broken down. As a matter of fact, we got another increase in there yesterday. We were over 900 tons, now, that are reported in GLD. That's the first time we've had a 900 ton level since October 2013, so we're talking about a 28, 29, 30-month high in GLD holdings.

That shows a very, very strong demand from western based investment funds, investors in general. And so my view on that, Mike, is I'm tending to put - at this time, right now - I'm tending to put more stock in what goes on with GLD than I am even in the gold shares. I've been a pretty big proponent of what goes on with those gold shares in the past when it comes to gold. I'm of the view, right now, that even if the shares were to sell-off abruptly or weaken, as long as the GLD holds relatively firm with those reported holdings, I'm going to tend to discount what's going on even in the shares at this point. I think the GLD is a better indicator, right now at least.

Mike Gleason: Switching gears here a bit, now we happen to believe there is a strong case for there being manipulation in the metals markets, but we understand you don't necessarily see it the same way. I know you've had some back-and-forth battles with folks in the gold community here on this. I want to give you an opportunity to share your views on the matter, because it's important for folks to hear both sides of this. So why do you disagree with the notion of a manipulation in the metals markets, Dan?

Dan Norcini: Well let me kind of back up and answer that question by saying this, Mike. To me, it kind of goes back to what was taking place in the U.S. dollar. In my earlier days of writing for the gold community, I was a proponent of the manipulation. I actually adhered to that view; I subscribed to it, and I actually was writing quite a bit about it. And the reason I was, at that time, was because there was such strong, strong weakness in the dollar. If you pull up the U.S. dollar index back when gold was surging, you had the U.S. dollar index flirting with the 72-level, which was a level that it looked like if it was going to break down through there - I mean there was like an abyss beneath that on the chart. There just wasn't much in the way of downside support. I think, at that time, the proponents of the "gold is being manipulated by the bullion bank at the behest of the Fed or the Treasury Department," I think they had a good case. I really do, simply because we look at gold sort of as the anti-dollar.

When the dollar was weak, it was basically a vote of no confidence in the U.S. It was a vote of no confidence in the Fed. It was certainly a vote of no confidence, in general, that the Fed had any sense of what they were doing in regards to monetary policy, and trying to manage the U.S. economy. And so I could understand, at that time, why it would be in the interest of the Feds - the central government - I could understand why it would be an interest to them to slow down the decline in the gold price. After all, the dollar is still the global reserve currency whether people like it or not. If the global reserve currency is on the verge of collapsing, you're going to see gold rally pretty sharply. And that's a vote of no confidence in the entire system at that point. So I could see why you want to keep the gold price under wraps and not let it get out of control.

However, when I shifted my view on that was when basically the dollar embarked on a bull market, and the gold price embarked on a bear market. And at that point, in my view, there was no longer any need to come in there and manipulate the gold price, because the dollar was strong again. Basically, when the dollar was rallying it was a vote of confidence in the U.S. It was a vote of confidence in the Feds' policy, etc. etc. And so there was no reason for the Fed, from my view, for them to come in there and beat the gold price down. After all, why would they want to beat it down? The dollar was strong. The stock market was strong. The bond markets were stable. There wasn't any particular reason for them to come in there and push the gold price down, particularly when you had the rest of the commodity world was selling off, Mike. That's the thing that really got me, more or less, firmly convinced.

The guys who were advocating the manipulation theory simply need to look at the markets and adjust that view to reflect what's actually going on in the market. My view is that, look, markets are in a constant state of flux. What held true six months ago may not necessarily be true today. What is true today may not be true six months from now, as far as markets and sentiment. I think those who are making the gold manipulation claim simply are not staying abreast of how sentiment is changing in the markets at times.

So here is the case, if you turn around and look at the commodity complex in general. You can look at the CRB Index. You can look at the Goldman Sachs Commodity Index, the Dow Jones UBS Commodity Index. Pick any one you want. You see those commodity indexes; they began a steep decline. They were selling off commodities, in general, under pressure. We saw corn, everything. You pick the commodity, it was basically moving lower in that environment. Silver was going down. Everything was going down. Copper was going down. Crude oil was going down. Well in an environment like that, why would gold be rallying? There was no particular reason, in my view, for gold to be rallying. After all, the entirety of the commodity complex is moving lower because there was that deflationary spiral that was taking place. For gold to move down alongside of that made perfect sense to me, particularly when the dollar was rallying and going in the other direction. It was going higher.

In the past, when the dollar has gone down, gold has gone higher. When the dollar has gone up, gold has gone down so I didn't see anything abnormal with that. So that was where my view was. I'm still at that point right now. I'm at the point where I don't believe the gold price is being manipulated at this time, simply because the dollar remains pretty strong. You look at the dollar. You look at where it is on the USDX. You compare it to where it was years back. The dollar is sitting around 95 on USDX. It was down to 72, so I don't see any particular reason why they would have to push the gold price down at this time.

Now here's another thing, Mike. Every Central Banker out there - I don't care if whether it's the ECB. I don't care whether it's the Bank of Japan. I don't care whether it's the Bank of England, the Bank of Canada, the Bank of Australia, or the U. S. Federal Reserve. Every single one of them dreads deflation. They're scared to death of deflation. They're doing everything they can to push prices higher. They're trying to generate a 2% annual rate of inflation. They cannot get it. That's what the problem is right now. And the reason that they're scared of deflation, and they're not worried about inflation, is because they can control inflation in their mind. They believe it's very easy for them simply to jack up short-term interest rates, and they can squash any sort of incipient inflationary pressures. And I think they're right in that regard.

However, when it comes to deflation, we're seeing they're relatively powerless. What more can they do? They've cut rates. They've gone into negative territory. They've unleashed massive amounts of stimulus, whether it's buying government bonds, whether it's even buying stocks, if it's buying corporate bonds like the ECB is engaged in. And quite frankly, none of it is working right now. So if you're a Central Banker and you want inflation. You want to see prices moving higher. You don't want a deflationary spiral, well then the last thing you want to see is the gold price going down. As a matter of fact, you want just the opposite. You want gold prices to go higher. You want silver prices to go higher. You want copper prices to go higher. You want oil prices to go higher. Because at a certain point if those prices continue to drop, they fall to a point where you start to impact jobs. Mines shut down. Drilling rigs shut down. Farmers don't plant as much of a particular crop because the prices are too low. Sugar cane, you don't get as much of that planted. In other words, there's real-world impacts from low prices.

Now all these Central Bankers are worried about jobs. They're all worried about payrolls. They want to see jobs increasing. How in the world are you going to get jobs to increase if the price of everything is falling in a deflationary spiral, and companies are laying off workers instead of hiring workers? So at a certain point, the benefit of low prices gets lost, and then it gets overwhelmed by the negative side of those low prices because you have a job loss. So I think what the Fed was doing - I think what the Central Banks were trying to do - is they want to generate inflation. They want to see prices slightly higher. They want to see oil prices higher. They want to see all these prices higher, including the gold price, to the point where they're signaling no deflation.

Mike Gleason: Thanks for explaining that. One reason why we always like having you on is that you're not beholden to the notion that you had before. You have the ability to change with the markets, and the markets ultimately are going to dictate your thoughts and your analysis. And we certainly appreciate that ability to be impartial.

Well before we wrap things up here, Dan, give us an idea of what the charts look like for gold and silver. As a trader, what are you looking for there - support levels, resistance, and so-forth? Let's start with gold.

Dan Norcini: Okay. Gold, today. We've had a really strange day in gold, Mike. You and I were talking about this briefly before we even got to the interview. We soared today. I mean, we were at almost $1,320 - strong, strong up-move on the heels of the Bank of Japan's lack of a new policy response. I'm telling you, it was all systems go. The HUI was strong; everything was looking good. And that was in spite of the fact that the dollar was up pretty sharply at one point too. We were up at almost 95.50 in the USDX. The yen was soaring. The bonds were soaring. So you had a really strong safe haven bid coming into gold, along with the yen and the bond. All of a sudden, about mid-morning in the trading session, I saw the mining stocks begin to move lower. As a matter of fact, they really didn't respond at all strongly, it seemed like, after about the first hour, hour and a half of trading.

Then I noticed, even at the COMEX, gold prices started moving down. Once they broke down below 1300, you got to see some nervous selling there, on the part of some of the longs that had just bought in, because basically anybody who just bought in near the high was immediately saddled with a pretty good loss in there, so you had some stop-loss selling that took place.

From that, to what I can see, the move lower off the high in gold corresponded to exactly the point where we had a reversal higher in the British pound, Mike. When you're looking at markets, and you're trying to figure out what's driving what - as I mentioned not that long ago - things shift so quickly in markets. Events happen, sentiments shift, and particularly right now where there's so much uncertainty and there's so little conviction on the part of both bulls and bears. Nobody is really 100% grounded in their views to the point where they're determined to dig in and hold their ground. As a matter of fact, they're pretty fluid. They're jumpy.

And so what happened was, the British pound was being sold off pretty heavily along with the euro today - again based on fears of the upcoming Brexit vote. Well, it seemed like the British pound suddenly called a bid, and it just reversed course. It moved higher. It was about mid-morning. It reversed higher. As soon as it reversed higher, the euro reversed higher. As those two currencies reversed higher, gold dropped. That's when it fell down below $1,300. So you could definitely see a correspondence taking place between what was happening with the euro and the British pound, and what was going on in the gold price.

So you did get some backing away from that resistance level, $1,320. The one thing we can say is that we now have a definite resistance level that we can look at for gold. It's right around $1,320. It's interesting, Mike. I think I mentioned this earlier. The last time we had 900 tons of gold in the GLD was in October of 2013. That same day, very early October - I think it was the 1st or 2nd of October, 2013 - the gold price was at $1,320, exact day. Here you are with the GLD at 900 tons, gold goes to $1,320 roughly - $1,318.90. For all practical purposes, it went to the same price, however it didn't hold. It backed off. You've got some resistance there.

For whatever reason that the British pound rallied, and the euro rallied, I don't know. I honestly don't know what it is yet. I'm trying to figure it out and sometimes these things are just basically the selling dries up, the algorithms sniff out, they drop-off in the volume and they simply reverse course, and they just started buying. More likely than not, that's exactly what happened. The selling volume dried up and everything reversed, and of course that spilled over and impacted gold. For gold to get the rally generated to the up-side now that we've got a resistance level, we've got $1,320.

Mike, if we're going to get a significant break-out on the gold chart, we're going to have to see - first and foremost, before anything else happens - we're going to have to see gold put in a weekly close, not just a close during the day - a weekly close above $1,300. Preferably, higher than $1,300.10. We need to have some sort of a good strong close - somewhere $1,304, $1,305. That would look really good on the chart. The reason being is because if you pull up a weekly chart and you look at it, gold has not been able to get a close above that level on the week. It just simply can't stay up there. It moves up and then it sells off. It hasn't been able to hold that ground up there.

So if you can get a weekly close, what that tells you is that the sellers that have been very active there, they've been driven back. They weren't able to absorb the amount of bids that came in and they were driven back. At that point, I would look for those sellers to move back to this area where the high was made today - starting around $1,318, but preferably right around $1,320. That's where I would look for them to show up the next time. Then we'll have to see what happens. To me, if gold goes through $1,320 and it closes above $1,320, particularly on a weekly basis, I think you can make a pretty good case that you're going to see gold approach $1,400. I think there'll be a lot of pent up momentum in there, from chart-watchers in particular and technicians will look at that, and I think that's going to start fanning some thoughts that you can maybe even put a 14 handle on it. I don't know. We'll just have to see first if we can get above $1,320 on a weekly close for that to happen.

The downside in gold - to me, it still seems well-supported. $1,280 has been a pretty good level for gold buyers who come in. It hasn't broken down significantly below that level now for some time. The last couple days, two or three days, it found buyers. Every time it's gone down to that level. I would be surprised if you broke below $1,280, especially with the upcoming vote. I just can't see why longs would bail out inside, and shorts would get aggressive at this level, and take it below $1,280, simply with all the uncertainty in the market ahead of that vote.

The only thing I can see that might cause a shift in that, Mike, is if we got a big shift in the public opinion polls. All of a sudden, it looked like the "Let's stay in the EU," vote was going to win the day next Thursday, then I could see that being pressured below $1,280 at that point. Those are the two levels I'm watching in gold.

Mike Gleason: And how about silver? What do you see for the white metal?

Dan Norcini: Silver is kind of tricky. The reason I say it's tricky is you never know what you're going to get with it. Is it a precious metal today? Is it an industrial metal tomorrow? What is it? Sometimes silver is sort of schizophrenic like that. It'll track with copper. It'll ignore what gold is doing. Other days, it ignores copper completely and follows gold around pretty much like it's tied to the hip. Well recently, it's been pretty much following gold around. It's been moving higher. The thing about it is, Mike, if you look at a daily chart of silver, silver has not been able to get a close - and this is the key - it's not so much what these markets do during the day, the what we call the intraday movement. Those are important, but it's really the close that we watch as traders to see how that's going to go. This thing has not been able to close above $17.75 in over a month, going all the way back to April 29. So we're talking about going on 6 or 7 weeks where silver has not been able to close above $17.75. Today, it was up there. It was at $17.78 for a high. It blew right through $17.75; it looked really good on the chart early in the day, and then of course it just faded completely. It made a poor close. What else can I say? It doesn't look good on the chart right now.

The question I have as a trader - and what I brought up earlier - is that weakness in silver that we saw today, particularly in regard to gold, because it definitely under-performed gold today. It was a much poorer performer than gold. Was it tracking copper today? Was it tracking what was going on in the crude oil market, basically because commodities were being sold? The soybean market was lower. You had a general weakness in the commodity sector. Platinum prices were lower today. So it seems to me silver was tracking more like an industrial metal today. Well I said all that, I guess, to say this: if we're going to see silver do anything more to the up-side, we're going to have to, for starters see this thing manage to close above $17.75. Until it closes above that level, it's not going to go anywhere. It'll bounce around; it'll swing around, but it's got to get above $17.75 because that's where you're going to force the shorts out that are in this market. There's a lot of shorts in there. They're selling it up against that level. They're selling from $17.75 to $18.00. There's very active selling up there. If you push this thing through $17.75, and the sellers cannot push it back below there on the close, they're in trouble and they know it, and they're going to cover. And so you'll see it pop higher at that point. That's the level I'm watching on the up-side.

The down-side, so far Mike, it seems like we've got pretty decent support in silver around a $17.20 level. Anywhere from $17.20 down to about $17.10, it seems like we've had some buyers emerge. We might test that because we've got some weakness in the metal right now in the afternoon. It's possible we could test it overnight and see how it holds. An ideal situation for those who are bullish silver, would be for it to go down to about $17.10 - between $17.20 and $17.10 and then pop right off of that and bounce higher in much the same fashion that it bounced away from the resistance level overhead. So in other words, we know where the resistance is. That's pretty formidable. We want to see it do the same sort of thing on the down-side, except we want to see the support level being very, very firm and very, very solid. And that will tell us exactly where the barriers are, where the lines of defense are drawn, where each side has dug in. And that way, if we get a violation of one of those levels, then we'll have a better sense of where this metal is going to go.

Right now, it's kind of a stale-mate between call it $18.00 on the top and roughly $17.00 on the bottom. It's sort of stuck in that range right now and neither side can get a clear advantage at this time. So let's watch and see what we get overnight. Let's see particularly what we get next week, as we get even closer to this upcoming Brexit vote. I think that's going to tell us a lot.

Mike Gleason: We certainly could be due for some real fireworks here. It's going to be interesting stuff to watch. We'll be watching closely. We certainly appreciate your wonderful insights as always. Thanks for taking the time to speak with us and help us make sense of all these crazy markets. I know it's very interesting times, especially to be a trader like yourself. There's a lot going on. And we appreciate you taking time out of your busy day to discuss things with us. I hope you have a great weekend, my friend, and look forward to catching up with you before long.

Dan Norcini: Well thank you, Mike. It was a pleasure to be here. I think it was the Chinese proverb said, "May you live in interesting times." Well, we are certainly in interesting times. We are in some very, very volatile times in these markets.

Mike Gleason: Yes, very well put indeed. Well that will do it for this week. Thanks again to Dan Norcini. If you want to follow the fabulous market commentary and technical information that Dan puts out, just go to TraderDan.com.

Check back next Friday for our next Weekly Market Wrap Podcast. Until then, this has been Mike Gleason with Money Metals Exchange. Thanks for listening and have a great weekend everybody.

About the Author:

Mike Gleason

Mike Gleason is a Director with Money Metals Exchange, a national precious metals dealer with over 50,000 customers. Gleason is a hard money advocate and a strong proponent of personal liberty, limited government and the Austrian School of Economics. A graduate of the University of Florida, Gleason has extensive experience in management, sales and logistics as well as precious metals investing. He also puts his longtime broadcasting background to good use, hosting a weekly precious metals podcast since 2011, a program listened to by tens of thousands each week.

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