Contango Versus Backwardation

by Walter Pehowich

A good Wednesday morning to you all. CME Future prices have a story to tell in certain circumstances. Today’s topic: How the spot price can affect future prices.

Let’s examine the difference between a Contango market and a market in backwardation. First lets define the two and describe what I look for when the availability of physical metal gets tight:

  • Contango market: This is a condition where the forward prices exceed the spot price creating an upward curve in pricing.
    Example: December gold $1,100, February gold $1,101, April gold $1,102, June gold $1,103.
  • Backwardation market:This is the opposite condition where forward prices create a downward curve and spot prices exceed the forward prices.
    Example: December gold $1,100, February gold $1,099, April gold $1,098, June gold $1,097.

If the gold market is in a Contango, future price condition means that physical gold is attainable for the most part, and a backwardation will indicate a tightening of supply. The spot price in a backwardated market will have no limits and can trade in large differences to the future months until the metal becomes more available.

Current spot month open interest has a significant effect on the backwardation of the spot price as the days dwindle down to the end of the month, resulting in delivery issues on the exchange.
The old Wall Street guru always says: “There are four things to remember when you begin your career on Wall Street. When entertaining a client, never talk about food, politics or religion and most important, never go into a delivery month with a short position unless you have the metal to deliver.”

We will be watching these levels in the future and report to you any interesting scenarios.

Have a wonderful day.

Walter Pehowich is the executive vice president of precious metals investment services for Dillon Gage with over 38 years of experience in precious metals investment services. His career began in 1977 at Bache (which evolved to Prudential-Bache Securities and then Jefferies Investment Bank). While at Jefferies, he served as senior vice president with oversight of investment grade precious metal products. Pehowich holds a National Futures Association (NFA) Series 3 license, authorizing him to advise and sell alternative investments in commodities and futures markets.

How CME Futures Impact Precious Metals

by Walter Pehowich

Today I would like to share with you the other side of the Precious Metals market: the CME Future’s market and the Wall Street Gold Trader. On Friday we talked about who the retail investor is and their role in the marketplace. Now I will explain why you see a total disconnect from the price of gold and silver to the physical demand for metal.

Who is the Wall Street Gold Trader? A person who works for a bank, brokerage house, or hedge fund and most likely trades a proprietary book for his or her firm. They use technical levels, like 200- or 50-day moving average trading levels for gold and silver and have the latest electronic trading platform with the fastest news services available. He/she trades CME futures or options and also has a program that runs an algorithm book to complement their other tools and looks for momentum in the market and their trading activity creates volatility and increased open interest in the futures contracts.

Friday when the job number report came out we witnessed exactly what programming trading can do to the price of gold and silver. Let me explain. At 8:30, when the number was released, gold immediately took a bid and started to rally. The price of gold jumped 25 dollars in 15 minutes. The speed of this quick rally to the upside was initiated by some key news items. Algorithm applications look for specific wording that hits the tape and immediately executes a buy or sell order electronically. In the old days on the Comex floor, there was an open outcry pit. Brokers trading for themselves and for clients (i.e., banks, brokerage houses and hedge funds) quoted market prices back to the proprietary desks for orders to be executed. Market movement took time to react to the news. Today it’s a completely new ballgame. It is my opinion, it would be very difficult to move the price of gold that fast with open outcry. Well it’s different times now. With the speed of the electronic platforms, much larger orders can be executed with ease, where open outcry would take a lot longer.

So while trading futures or spot with an electronic platform you might feel that you have been reading the paper or getting a cup of coffee waiting for the train to arrive and next thing you know it’s at the next station up the line. And your response is how did I miss that?

This is why today there is a total disconnect between the price of gold and silver and the crazy interest in the physical market. The Wall Street trader is not too interested in the physical side of the market. He or she just wants to take advantage of news that could create instant market movement with hopes he or she can beat everyone to the punch. And the Wall Street trader will once again hope for the next opportunity to come by looking to gain an edge in the market place and taking a proprietary risk to generate quick profits in an instant with the electronic platforms and algorithms to help him along.

While the retail investor looking at stock market volatility, currency devaluations, government debt, congress out to lunch, causing them to reposition part of their portfolio is into hard assets like precious metals.

In the end, we still see long delays for delivery for all types of physical metal, but everyone is starting to catch up, and we all wait for the next bit of news that will generate interest in the precious metal markets again.

Have a wonderful Monday.

Walter Pehowich is the executive vice president of precious metals investment services for Dillon Gage with over 38 years of experience in precious metals investment services. His career began in 1977 at Bache (which evolved to Prudential-Bache Securities and then Jefferies Investment Bank). While at Jefferies, he served as senior vice president with oversight of investment grade precious metal products. Pehowich holds a National Futures Association (NFA) Series 3 license, authorizing him to advise and sell alternative investments in commodities and futures markets.

American Eagles Sales as of 10/1/15

The following chart includes the year to date totals from the U.S. Mint as of 5pm on October 1st and the amount of change since our last report on September 24, 2015

Gold
Coin Sales in oz. /#coins + from 9/24/15
One oz.
520,000
520,000
10,000
10,000
Half oz.
31,500
63,000
1,000
2,000
Quarter oz.
35,500
142,000
1,000
4,000
Tenth oz.
83,000
830,000
3,500
35,000
Total
670,000
1,555,000
15,500
51,000
Silver
Coin Sales in oz. /#coins + from 9/16/15
One oz.
36,054,500
36,054,500
1,000,000
1,000,000

Metals Generally Lower This Morning

By Peter Aan.

Metals are generally lower this morning, with Gold leading the way south, while Palladium tries to hang tough near yesterday’s close. Here’s what I see now:

Gold
Gold has penetrated that 1120.50 support level (December contract) that I discussed Wednesday. Now we are primed to move towards the more important level at the September low of 1097.70. If that level does not hold, we could see movement towards the critical low from August at 1073.70. That is the lowest gold price since early 2010. The big picture on Gold shows that we have been ratcheting down over recent years, with spurts of falling prices followed by rally attempts that fail to last more than 2-4 months. I continue to look for lower prices.

Silver
Silver seems to be taking a breath after the steep fall on Wednesday. I continue to look for movement towards the September low of 14.240 (December). After that we have the more important low made in late August at 13.950. You have to go back to 2009 to find prices lower than that.

Platinum
Platinum fell further yesterday, then rallied into last night’s session, but that rally could not be sustained. It seems likely that we will see new lows in this market, probably before the week is out.

Palladium
Palladium started a selloff on Wednesday, but buying pressure came in yesterday, lifting the market fairly close to recent highs. We are in the lower part of today’s range as I write this, so we could be making another attempt at lower prices. The first hint of a top formation would be a close below 651.00 (December), and a close below 644.00 would be a more significant signal. As I said on Wednesday, though, any pullback in a market this strong should be considered suspect.

Peter Aan joined Dillon Gage in 1983, and is currently a metals trader for our metals division. He is the author of numerous articles for Futures magazine and Stocks and Commodities magazine. He is the author of The Relative Strength Index: A Comprehensive Research Report and a co-author of Trading Tactics: A Livestock Futures Anthology, published by the Chicago Mercantile Exchange.

This Morning Sees Precious Metals Slide

By Peter Aan.

Sunday night’s openings in the metals were all close to Friday’s close, but none were able to build from there and all have slid to substantial losses. Here’s what I see now:

Gold
This morning we have seen Gold take out Thursday’s low. As I said on Friday, this is an important short-term level. Now that this has been penetrated (and a close below this level would be a stronger indication), we must now expect a test of another short-term support at 1120.50 (December contract). We are close to that level already, but a more important support level is at the September low of 1097.70.

Silver
Silver is weaker than Gold this morning, crashing through the recent low. Now we turn our attention to the September low of 14.240 (December). After that we have the more important low made in late August at 13.950. You have to go back to 2009 to find prices lower than that.

Platinum
Platinum remains the weakest of these four, and has plunged into new lows this morning, reaching the lowest level since January 2009. As I’ve written before, the mega-low in Platinum is the 761.80 from 2008. That was the culmination of a plunge from the lofty height of 2308.80 reached earlier that year. You have to go all the way back to 2004 to find a lower Platinum price. We are far above 761.80 now, but there’s no reason to expect anything but lower prices for now.

Palladium
Palladium, our strongest market of late, is also pulling back this morning. We have traded below Friday’s low, and a close below that level would certainly indicate the start of a correction. With the recent strength of this market, I would not be quick to call an end to this bull market.

Peter Aan joined Dillon Gage in 1983, and is currently a metals trader for our metals division. He is the author of numerous articles for Futures magazine and Stocks and Commodities magazine. He is the author of The Relative Strength Index: A Comprehensive Research Report and a co-author of Trading Tactics: A Livestock Futures Anthology, published by the Chicago Mercantile Exchange.

American Eagles Sales as of 9/24/15

The following chart includes the year to date totals from the U.S. Mint as of 5pm on September 24 and the amount of change since our last report on September 17, 2015

Gold
Coin Sales in oz. /#coins + from 9/16/15
One oz.
510,000
510,000
47,500
47,500
Half oz.
30,500
61,000
500
1,000
Quarter oz.
34,500
138,000
1,000
4,000
Tenth oz.
79,500
795,000
3,000
30,000
Total
654,500
1,504,000
63,500
47,000
Silver
Coin Sales in oz. /#coins + from 9/16/15
One oz.
35,054,500
35,054,500
750,000
750,000

VW Headlines Possibly Boosts Palladium

By Peter Aan.

Markets are interconnected in many ways that are not always immediately obvious. The accusations by the EPA that VW may have rigged the software on some diesel models is thought to benefit gasoline cars. These cars tend to use Palladium in their catalytic converters more than Platinum, leading to some dramatic moves this week. Here’s what I see this morning:

Gold
The 1120.50 level (December contract) was able to hold on Wednesday, and we saw very strong buying yesterday. There’s no follow through today, however, and we are starting the morning moderately lower. The key for today and Monday is for Thursday’s low of 1129.50 to hold. If it does, we could see the bulls regroup and rally towards the August high of 1169.80.

Silver
Silver also managed to rally yesterday, but with only a fraction of the strength we saw in Gold. We are a little lower as I write this. If we can manage a thrust through Thursday’s high of 15.180 (December) especially on a closing basis, we could see a test and penetration of the 9-18 high of 15.435.

Platinum
Palladium followed through solidly to the upside yesterday and this morning, and remains the strongest metal of this group by a good margin. I would consider any pullback here to be a correction in a bull market for the time being.

Palladium
Palladium followed through solidly to the upside yesterday and this morning, and remains the strongest metal of this group by a good margin. I would consider any pullback here to be a correction in a bull market for the time being.

Peter Aan joined Dillon Gage in 1983, and is currently a metals trader for our metals division. He is the author of numerous articles for Futures magazine and Stocks and Commodities magazine. He is the author of The Relative Strength Index: A Comprehensive Research Report and a co-author of Trading Tactics: A Livestock Futures Anthology, published by the Chicago Mercantile Exchange.

Palladium Is Today’s Star Performer

By Peter Aan.

We’re seeing moderate strength in Gold and Silver this morning, despite some bearish signs earlier this week. Palladium is the star performer today, busting through recent highs. Here’s what I see now:

Gold
Tuesday’s weak close was a bearish sign, but buying has lifted prices moderately this morning. The action so far today is inside of yesterday’s range, and that low of 1120.50 (December) is important to hold. If it is breached, it could mean a slide down to the September low of 1097.70.

Silver
We got a bearish close in Silver also on Tuesday, but it’s hanging tough this morning. Another selloff from this area could trigger a trip down to the September low of 14.240 (December).

Platinum
Platinum was the weakest market on Tuesday, collapsing through the lows from early August. This sends us back to the monthly charts, where we see that the next major support level in this market is the 2008 low of 761.80. This is not to say that it will reach that level, but to say that there is no support level on the charts above 761.80.

Palladium
Palladium is on fire this morning, taking us to the highest level since mid-July. This brings it to an overbought situation, but the truth is that overbought markets sometimes just get more overbought, especially when they have good momentum. Stepping back from the chart to look at the bigger picture, there is not significant resistance until you get to much higher levels such as the 803.00 high from May. It’s been a long slide for Palladium since then, and we seem determined to begin climbing back up that ladder.

Peter Aan joined Dillon Gage in 1983, and is currently a metals trader for our metals division. He is the author of numerous articles for Futures magazine and Stocks and Commodities magazine. He is the author of The Relative Strength Index: A Comprehensive Research Report and a co-author of Trading Tactics: A Livestock Futures Anthology, published by the Chicago Mercantile Exchange.

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Allows Retail Coin Dealers to Offer Interactive Customer Experience

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Continue reading →

Silver Only Metal to Hold This Morning – Thus Far

By Peter Aan.

All metals but Silver are moderately lower this morning. Here’s what I see now:

Gold
Gold has pulled back this morning, but all of the action since last night is within Friday’s range. The bulls would not like to see a close below Friday’s low of 1126.9 (December contract). Despite the rise last week, we are still not significantly overbought. I continue to see movement towards 1147.30.

Silver
Silver is hovering around Friday’s close as I write this, and we have an inside day so far. I continue to favor movement towards 15.770 (December).

Platinum
Platinum is moderately weak this morning, after a bullishly confirming close on Friday. I continue to look for more strength in this market. A close today under 972.60 would be a black cloud on the bulls’ horizon, however.

Palladium
The range of Friday and today (so far) have been within Thursday’s range. A breakout of Thursday’s high (618.30 basis December) and low (594.40) will clue us in to further movement. I still favor higher prices and a test of 625.80.

Peter Aan joined Dillon Gage in 1983, and is currently a metals trader for our metals division. He is the author of numerous articles for Futures magazine and Stocks and Commodities magazine. He is the author of The Relative Strength Index: A Comprehensive Research Report and a co-author of Trading Tactics: A Livestock Futures Anthology, published by the Chicago Mercantile Exchange.

Reaction to Fed Biggest Driver

By Peter Aan.

Over the last four decades of watching the markets, I have noticed how often the initial reaction to a news event or report is wrong, or at least overdone. Such it was with the Fed announcement yesterday, where the initial reaction in many markets was short lived, and the markets either turned south or moderated their initial gains. The equity markets are overrun with bears this morning, while the precious metals markets have seen the bulls return. Here’s what I see now:

Gold
The strength we saw on Wednesday morning, after having second thoughts yesterday, has followed through nicely this morning, and we are approaching the resistance at 1147.30 (December contract) that I wrote about. If we can penetrate that level, the next resistance is a more important one at 1169.80, the August high. We have plenty of momentum now to the upside, and the market is not overbought, so the easiest path is to head higher.

Silver
Silver easily took out the short-term resistance levels I wrote about previously. It is overbought, but the trend is undeniable. We now have the August high of 15.770 (December) in our sights.

Platinum
Platinum has only a fraction of the strength we are seeing in Gold and Silver, but still seems to by trying to put in a triple bottom as discussed on Wednesday. A further confirmation of this would be a close above Wednesday’s high of 976.7 (October). If the bulls are successful, watch for a test of the resistance levels in the 1024.00 to 1038.50 area.

Palladium
We got a strong close on Wednesday above the 605.00 level I discussed. Today’s strength may put the market back on track to work towards a test of the 625.80 (December) high from August.

Peter Aan joined Dillon Gage in 1983, and is currently a metals trader for our metals division. He is the author of numerous articles for Futures magazine and Stocks and Commodities magazine. He is the author of The Relative Strength Index: A Comprehensive Research Report and a co-author of Trading Tactics: A Livestock Futures Anthology, published by the Chicago Mercantile Exchange.

Gold Showing Strenghth

By Peter Aan.

Markets of all stripes are as nervous as a cat in a room full of rocking chairs as the Fed meets this week to ponder interest rates. The fireworks are expected to start Thursday at about 1:00 CST. Here’s what I see now:

Gold
Gold is showing substantial strength this morning, after failing to close below 1100.00 (December contract). If this strength does not dissipate during the trading day, we could see a close above Monday’s high of 1111.90, an early sign that the recent slump in prices has run its course. If we do start a new leg to the upside, the first resistance level that we will encounter is the 1147.30 level reached on September 1.

Silver
Silver is also strong, after a low volatility day yesterday. There is formidable resistance not far above us at the early-September highs in the 14.930 to 14.950 area. Beyond that—and the psychological 15.000 level–we have resistance at the August high of 15.770.

Platinum
Platinum is higher this morning, but with less enthusiasm that Gold and Silver. It’s possible that it may be trying to form a triple bottom with the July and August lows. On the other hand, we often see a market approach an obvious support or resistance, back away, and then turn right around and plow right through it. At any rate, a close above Tuesday’s high of 963.90 will be our first sign that a bottom may be forming.

Palladium
Tuesday saw Palladium flirting with a penetration of the August high of 605.00, but we are seeing some reluctance this morning. A close above 605.00 would be a strong signal in this market, which remains primarily a congested, sideways market.

Peter Aan joined Dillon Gage in 1983, and is currently a metals trader for our metals division. He is the author of numerous articles for Futures magazine and Stocks and Commodities magazine. He is the author of The Relative Strength Index: A Comprehensive Research Report and a co-author of Trading Tactics: A Livestock Futures Anthology, published by the Chicago Mercantile Exchange.

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Precious Metals Moderately Low

By Peter Aan.

All four markets are moderately lower this morning and succumbing to selling pressure as this commentary was being written. Here’s what I see:

Gold
Gold fell sharply Wednesday, breaking through the 1108.50 (December contract) that I discussed. Since then it has been catching its breath, with lower volatility. Today’s action so far is on the downside, and seems likely to take out Wednesday’s low of 1100.1. If we reach the sub-1100.00 level, especially on a closing basis, the road will be paved for a trip down to the July-August lows at the 1073.70 to 1079.20 area. Lower prices expected.

Silver
For the last 7 days or so, Silver has been about as trendless as a market can get. We are now in the lower part of that trading range. If it wants to go lower, a close below 14.425 to 14.440 (December) will be our first clue. Such a breakdown would clear the way for movement towards the August low of 13.950. The thing about a trendless market is that it doesn’t take much new buying or selling pressure to move it up or down.

Platinum
We took out the 980.10 level that I discussed on Wednesday, and this morning we have taken out the 970.30 support level, also discussed. If we close below that level we could see movement down to the July-August double bottom formed around 945.40.

Palladium
Palladium remains trendless, and has continued to avoid a close below 569.00 (December). If we get that penetration, we are set up to test the August low of 519.20.

Peter Aan joined Dillon Gage in 1983, and is currently a metals trader for our metals division. He is the author of numerous articles for Futures magazine and Stocks and Commodities magazine. He is the author of The Relative Strength Index: A Comprehensive Research Report and a co-author of Trading Tactics: A Livestock Futures Anthology, published by the Chicago Mercantile Exchange.

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Precious Metals Head Lower

By Peter Aan.

All four metals are lower this morning, but Gold is the only one that seems to have a sense of direction. Here’s what I see now:

Gold
Gold has worked lower, as expected, since my last commentary and has taken out the 1116.90 level I mentioned on an intraday basis. There is another minor support level at 1108.50 (December contract) that could come into play, but the bigger support is much lower, at the July-August lows at 1073.70 to 1079.20 area. Lower prices expected.

Silver
Silver gave us a close (barely) above the 14.745 level I discussed previously, but seems reluctant to follow through. This paves the way for higher prices, but a close below Tuesday’s low of 14.400 would signal yet another change of trend. Right now, it’s having trouble gathering momentum in either direction.

Platinum
Friday’s close was below the 995.60 area (October), signaling a change in trend. We then went lower, leading to a rally that seems to be failing this morning. We seem to be headed for a test and penetration of yesterday’s low of 980.10, which would lead to a test of the 970.30 low made in late August. However, step back from the chart a bit and you still see a range-bound market.

Palladium
Palladium has been in a tighter range than the other metals, trendless enough to avoid a close below the 569.00 (December) level I discussed last week. The weakness this morning hints that it may want to make another try at a breakout to the downside.

Peter Aan joined Dillon Gage in 1983, and is currently a metals trader for our metals division. He is the author of numerous articles for Futures magazine and Stocks and Commodities magazine. He is the author of The Relative Strength Index: A Comprehensive Research Report and a co-author of Trading Tactics: A Livestock Futures Anthology, published by the Chicago Mercantile Exchange.

Jobs Report Briefly Boosts Precious Metals

By Peter Aan.

The employment numbers that were released at 7:30 CST this morning showed fewer jobs added than expected, but other aspects of the report were more encouraging. The metals were buoyed for only a few minutes—initial reactions to reports are often short lived–but then they started to slip. Here’s what I see this morning:

Gold
Gold has worked lower since my last commentary, and has done a fair job of testing the recent low of 1116.90 (December contract). I continue to look for lower prices and a probable penetration of that 1116.90 support level.

Silver
Silver has worked reluctantly higher since Wednesday, but we have not yet had a close above the 14.745 level (December). Such a close would signal a move to the upside. Otherwise, I see this current bounce fading.

Platinum
Platinum has been range-bound, but the weakness this morning post-report puts it near the 995.60 (October) level I wrote about on Wednesday. If today’s close is below 995.60, I look for movement towards the late-August low of 970.30.

Palladium
Palladium has been non-committal since Wednesday, but is showing some weakness this morning. Once again, we need to avoid a close below 569.00 (December) to keep the bears away. Such a close should send us back down towards the recent low of 519.20. If we can continue to resist such a close, then we could see movement towards the resistance levels at 605.00-625.80.

Peter Aan joined Dillon Gage in 1983, and is currently a metals trader for our metals division. He is the author of numerous articles for Futures magazine and Stocks and Commodities magazine. He is the author of The Relative Strength Index: A Comprehensive Research Report and a co-author of Trading Tactics: A Livestock Futures Anthology, published by the Chicago Mercantile Exchange.

American Eagles Sales as of 9/3/15

The following chart includes the year to date totals from the U.S. Mint as of 5pm on September 3 and the amount of change since our last report on August 28, 2015

Gold
Coin Sales in oz. /#coins + from 8/27/15
One oz.
433,500
433,500
29,000
29,000
Half oz.
27,500
55,000
1,500
3,000
Quarter oz.
30,500
122,000
2,000
8,000
Tenth oz.
69,500
695,000
11,500
115,000
Total
561,000
1,305,500
40,500
120,000
Silver
Coin Sales in oz. /#coins + from 8/27/15
One oz.
32,495,000
32,495,000
1,000,000
1,000.000

Fireworks Possible This Friday

By Peter Aan.

Action is subdued this morning, but we should see the brief, monthly fireworks Friday morning (7:30 CST) as the employment numbers are released. Here’s what I see now:

Gold
Gold has rallied reluctantly since Monday, but is a little lower this morning. I still favor lower prices, with the caveat that a close above 1146.00 (December contract) will signal a move towards the recent high of 1169.80.

Silver
We have had relatively subdued action in Silver since my Monday commentary, and it is a little lower this morning. I still look for lower prices, but if it closes above Thursday’s high of 14.745 (December), a trend change to the upside is signaled.

Platinum
Monday morning’s selloff in Platinum didn’t have legs, and the market recovered somewhat. I still favor higher prices here, but a close below Monday’s low of 995.60 (October) will signal a change another change in trend, and movement towards the late-August low of 970.30.

Palladium
Palladium extended its run to the upside on Monday, but has pulled back. To keep this rally alive, we need to avoid a close below 569.0 (December), which is not far below where we are as I write this. Such a close should send us back down towards the recent low of 519.20. If we can resist such a close, then we should see movement towards the resistance levels at 605.00-625.80.

Peter Aan joined Dillon Gage in 1983, and is currently a metals trader for our metals division. He is the author of numerous articles for Futures magazine and Stocks and Commodities magazine. He is the author of The Relative Strength Index: A Comprehensive Research Report and a co-author of Trading Tactics: A Livestock Futures Anthology, published by the Chicago Mercantile Exchange.

Platinum Dips This Morning

By Peter Aan.

The action Sunday night and early Monday shows little of the volatility that we’ve seen in recent weeks, except for Platinum, which is sharply lower this morning. Here’s my take as we begin the week. Continue reading →

Extreme Volatility This Morning In Precious Metals

By Peter Aan.

Nothing is constant except change. As I was writing commentary on these four markets this morning, by the time I got to the fourth one, the markets had rallied to the point where I had to return to the top to rewrite! Here’s what I see…for the moment, anyway. Continue reading →

Precious Metals Continue Seeking the Upside

By Peter Aan.

As the equities markets fall victim to the China Syndrome, the precious metals markets continue to follow through to the upside.

Gold
Gold is solidly higher this morning, reaching the highest levels since July 20. A few more days of this type of action could bring us to an overbought indication on the Bollinger Bands, a condition we haven’t seen since mid-June. Again, this market has no chart resistance until you get to much higher levels, so higher prices seem likely.

Silver
New highs for this move were also made in Silver. I continue to look for movement towards the July 13 high of 15.900 (September) over the coming weeks. This market is overbought on the Bollinger Bands for the first time since mid-May, but this is the only bearish cloud on the horizon that I see.

Platinum
Platinum took out the 995.70 and 999.70 levels (October) I discussed earlier, further confirming its bullishness. We are approaching an overbought situation, but higher prices are still expected. Chart resistance is at much higher levels.

Palladium
Palladium worked higher, as expected, but still seems timid relative to the other metals. I continue to watch the resistance level at the August 3 high of 626.55 (September). Once past that, look for a test of the July 23 high of 641.50.

Peter Aan joined Dillon Gage in 1983, and is currently a metals trader for our metals division. He is the author of numerous articles for Futures magazine and Stocks and Commodities magazine. He is the author of The Relative Strength Index: A Comprehensive Research Report and a co-author of Trading Tactics: A Livestock Futures Anthology, published by the Chicago Mercantile Exchange.

Precious Metals Make Dramatic Upswing

By Peter Aan.

As I write this late Monday morning, the metals have made a dramatic move to the upside. Let’s look at the current technical picture.

Gold
The Intraday action in Gold has taken us to the highest level since July 21. As I said last week, a close today (or later this week) above 1104.90 will be a bullish sign. If the bulls do take charge, there is no significant resistance on the chart until much, much higher price levels.

Silver
Silver has the strongest chart of this group, reaching the highest levels since July 15. We now look to be on track to work towards an eventual test of the July 13 high of 15.900 (September)

Platinum
On Friday, Platinum closed above the 956.80 (October), setting the stage for higher prices. Today’s strong rally has me expecting a test and penetration of recent highs at 995.70 and 999.70. Like the Gold, significant resistance on the charts is much higher than these levels.

Palladium
Palladium is the most reluctant bull in this group, but it did manage to close above the 604.00 (September) level mentioned last week. Higher prices now look probable, and the first resistance level to watch is the August 3 high of 626.55. Once past that, look for a test of the July 23 high of 641.50.

Peter Aan joined Dillon Gage in 1983, and is currently a metals trader for our metals division. He is the author of numerous articles for Futures magazine and Stocks and Commodities magazine. He is the author of The Relative Strength Index: A Comprehensive Research Report and a co-author of Trading Tactics: A Livestock Futures Anthology, published by the Chicago Mercantile Exchange.

Employment Numbers Turn Precious Metals Bearish

The employment report released this morning was close to estimates, and the initial response by the precious metals markets was bearish.

Gold
Gold, which had shown some strength during the night, dropped about $9.00 initially upon release of the report this morning, then found some buyers. This still leaves us still clearly within the range of recent weeks, but not far above the 1079.20 level I mentioned earlier this week. I continue to see a close above 1104.90 (December contract) as a strong bullish sign, and a penetration of Friday’s low of 1079.2 as a sign that new lows are likely.

Silver
Silver has worked timidly higher through the week, and is holding up better than the gold. The charts still show a congested, range-bound pattern for the last few weeks. I continue to consider a penetration of Friday’s high of 14.970 (September) as a strong bullish sign, but another test of recent lows cannot be ruled out.

Platinum
On Tuesday, Platinum meekly peeked into new lows for this move, but refused to carry through, and the action since then has been contained by Tuesday’s range. We are at the low end of that range as I write this, and I think another penetration is probable, barring a close above 956.80 (October).

Palladium
After making new lows on Tuesday, Palladium has worked a little higher. Last night we managed to trade above 604.00 (September), but we need a close above that level before we even consider calling a change in trend. A move to more new lows seems probable.

American Eagle Sales as of 8/6/15

The following chart includes the year to date totals from the U.S. Mint as of 5pm on August 6th and the amount of change since our last report on July 30, 2015

Gold
Coin Sales in oz. /#coins + from 7/30/15
One oz.
344,500
344,500
1,500
1,500
Half oz.
23,000
46,000
0
0
Quarter oz.
25,000
100,000
500
2,000
Tenth oz.
52,500
525,000
0
0
Total
443,000
1,012,000
2,000
3,500
Silver
Coin Sales in oz. /#coins + from 7/23/15
One oz.
28,372,000
28,372,000
1,057,000
1,057,000

Gold’s Short Term Picture Neutral

It’s probable that markets of all stripes will have an eye on the employment data being released Friday morning at 7:30 CST. Reaction to the report is often volatile, but sometimes the market quickly cools down.

Gold
Gold continues in a trading range, with all the action so far this week contained in Friday’s large range. Although the long-term trends are still pointing south, the short-term picture could not be more neutral. I continue to see a close above 1104.90 (December contract) as a strong bullish sign, and a penetration of Friday’s low of 1079.2 as a sign that new lows are likely.

Silver
Yesterday, Silver came within 1.5 cents of the low for this move, as suggested by Monday’s commentary. The close showed some strength, however, and it is holding up well this morning. I continue to consider a penetration of Friday’s high of 14.970 (September) as a strong bullish sign, but another test of recent lows cannot be ruled out.

Platinum
Platinum tested the 946.30 low yesterday, as suggested on Monday. It actually penetrated that low slightly, but closed in the upper part of the day’s range. The market today is quietly lower, and new lows seem probable. A close above Tuesday’s high of 956.80 (October) will be an early signal for higher prices.

Palladium
Palladium covered a lot of ground on Monday, taking out a few recent highs and making new lows for this move as well, settling somewhat lower for the day. It’s quiet and close to unchanged as I write this, and I see little reason not to look for lower prices. A close above 604.00 later this week would put that forecast in doubt.

Shipping/Storing Precious Metals Outside of the United States.

What you must know before deciding to ship precious metals outside of the United States.

While some folks prefer storage abroad, there are significant factors to consider and select the best option. For instance, many countries assess a tax or duty on incoming precious metals or bullion products. Also, many common carriers such as FedEx or UPS may have limitation on a per package insurance value, or may have a prohibition against shipping precious metals products. Before you package your assets and drop it in the mail do your due diligence.

Use our dealer or a customs broker to determine the exact limitations and regulations that impact the specific product and the country where you would like your package to be stored. Typically investors and corporations feel comfortable shipping through common carriers such as FedEx or UPS, as long as the packages are fully insured and have tracking information. Being well informed will save you from future financial headaches.

For example, because IDS Group operates depositories in the United States and Canada, we are often asked what is the best method to ship precious metals from the United States to Canada. We recommend the method that is fully insured and trackable, with adult signature required to receive the package. Always inspect the package when you receive it to make sure that no one tempered with it. The general rule for shipping precious metals across the Canadian border duty-free is that gold and silver must meet the following minimum purity requirements; Gold must be 99.9% pure while Silver and Platinum must carry a minimum purity of 99.5%. Metals which are less pure are subject to a 13% GST tax upon entry to Canada. It is important to note that these metals must be in bar, ingot, coin or wafer form. Coins must be issued by a government authority as legal tender. Other countries have different regulatory thresholds for purity and product restriction and if you do not review the requirements first you may find yourself paying too much or having your precious metals held up at customs.

Precious Metals Funds Report Large Outflows

By Peter Aan

Signs of the Times: Goldcorp, a major North American gold producer, cut its dividend due to weak gold prices, and stated that it would consider reconfiguring or partially closing mines if gold should linger below $1,000 for an extended period. Precious metals funds reported outflows at $1.2B, the largest weekly outflow since December 2013. Let’s look at the technical picture as we start the week.

Gold
Gold is moderately lower as I write this, and continues in a sideways pattern, still digesting the steep fall from the first half of July. I continue to see a close above 1104.90 (December contract) as a strong bullish sign, and a penetration of Friday’s low of 1079.2 as a sign that new lows are likely.

Silver
Friday’s close was near the middle of the trading range, and this morning we are somewhat lower. A penetration of Friday’s high of 14.970 (September) would be decidedly bullish, but if Friday’s low of 14.510 is pierced, I look for a probable move through the recent lows.

Platinum
The 999.70 high (October) of recent weeks should still be watched as a signal for higher prices, but this morning’s action is lower, and Friday’s low has been taken out. Lower prices, and a test of the mid-July low of 946.30 seems possible.

Palladium
Does Palladium even know that it’s a precious metal? It’s often at odds with the other three, and today is showing impressive strength. It’s still a sideways, congested market, though, and like the others, will only look bullish when it can trade above the range of recent weeks. If today’s close is strong, we could see movement later this week towards the July 23 high of 641.50. If today has a weak close, we could slump down towards the recent lows.

Peter Aan joined Dillon Gage in 1983, and is currently a metals trader for our metals division. He is the author of numerous articles for Futures magazine and Stocks and Commodities magazine. He is the author of The Relative Strength Index: A Comprehensive Research Report and a co-author of Trading Tactics: A Livestock Futures Anthology, published by the Chicago Mercantile Exchange.

Gold Buoyed by U.S. Employment Cost Index Report

Two headlines caught my eye this week: “Prepare for gold prices to plunge…as low as $350” and “Forget about whether $100 silver is possible—how about $1,000”. There’s no shortage of shocking headlines, but the reality for the foreseeable future is probably somewhere between $350 gold and $1,000 silver.

Gold
Gold worked lower since my last commentary, until this morning when it started trending sharply higher, buoyed further by the release of the U.S. Employment Cost Index report. This gives us an outside day, and a strong close will have us looking for higher prices. A close today above 1104.90 would be a strong sign that some sort of bottom has been put in.

Silver
Silver is also forming an outside day, and the tone of the chart is a little more bullish than Gold. We have already pierced the July 23 high of 14.960 (September contract), so a strong close will have me looking for higher prices next week. If we do work higher, the first resistance to watch in the coming weeks is 15.900 from mid-July.

Platinum
Platinum also has formed an outside day today, but the current price is close to yesterday’s close, so the picture here is a bit more neutral. If buyers come in, watch the July 23 high of 999.70 (October contract). A penetration of that level will be a strong sign for higher prices.

Palladium
Palladium is the only metal in this group that is not forming an outside day. Intraday, we have taken out the 610.0 level (September) I mentioned earlier this week, giving the chart a bearish tone. In the absence of a strong close today, I continue to look for lower prices next week, with a probable test of the July 20 low of 595.0.

Peter Aan joined Dillon Gage in 1983, and is currently a metals trader for our metals division. He is the author of numerous articles for Futures magazine and Stocks and Commodities magazine. He is the author of The Relative Strength Index: A Comprehensive Research Report and a co-author of Trading Tactics: A Livestock Futures Anthology, published by the Chicago Mercantile Exchange.

American Eagle Sales as of 7/30/15

The following chart includes the year to date totals from the U.S. Mint as of 5pm on July 30th and the amount of change since our last report on July 23, 2015

Gold
Coin Sales in oz. /#coins + from 7/23/15
One oz.
343,000
343,000
32,000
32,000
Half oz.
23,000
46,000
2,000
4,000
Quarter oz.
24,500
98,000
2,000
8,000
Tenth oz.
52,500
525,000
4,000
40,000
Total
443,000
1,012,000
122,000
84,000
Silver
Coin Sales in oz. /#coins + from 7/23/15
One oz.
27,315,000
27,315,000
2,942,000
2,942,000

A Quiet Tone Across Precious Metals

Gold
Gold traded in a narrow range yesterday, an inside day, and doesn’t seem to be invigorated this morning. A penetration of Monday’s range (1104.90 to 1088.0, basis the December contract) may signal an end to this congestion.

Silver
Silver has a situation similar to Gold. Monday was a quiet day, and a penetration of that day’s range (14.740 to 14.495 in the September contract) may signal the next significant move.

Platinum
The tone here is quiet, also. I continue to view a penetration of 999.7 (October contract) as a signal for higher prices, and 969.1 for lower prices. A penetration of either number on a closing basis would be stronger than an intraday penetration.

Palladium
I continue to watch for a penetration of 641.5 (September) as a clue to higher prices. If we move lower and 610.0 is pierced, that will set us up for a test of the July 20 low of 595.0.

Peter Aan joined Dillon Gage in 1983, and is currently a metals trader for our metals division. He is the author of numerous articles for Futures magazine and Stocks and Commodities magazine. He is the author of The Relative Strength Index: A Comprehensive Research Report and a co-author of Trading Tactics: A Livestock Futures Anthology, published by the Chicago Mercantile Exchange.

Test of Gold’s Friday Low Possible

by Peter Aan

Gold
On Friday, Gold penetrated the July 20 low, but buyers lifted the market off of its low, and that buying pressure spilled over into today’s session, but then selling returned. Bottom line? A test of Friday’s low seems probable. A close today in the upper part of the range would put that forecast in doubt.

Silver
Recent action in Silver is similar to Gold. A test of the recent low is the most obvious scenario.

Platinum
Platinum continues to consolidate on a short-term basis. A penetration of 999.7 (October contract) is still the number to watch for a signal for higher prices. If Friday’s low of 969.1 is penetrated on a closing basis, we could be in for a test of the July 20 low of 946.3.

Palladium
Palladium is also treading water on a short-term basis. Continue to watch the 641.5 recent high (September contract) and the 595.0 low for the next clue as to trend direction.

Peter Aan joined Dillon Gage in 1983, and is currently a metals trader for our metals division. He is the author of numerous articles for Futures magazine and Stocks and Commodities magazine. He is the author of The Relative Strength Index: A Comprehensive Research Report and a co-author of Trading Tactics: A Livestock Futures Anthology, published by the Chicago Mercantile Exchange.

Gold Crashes Thru Recent Low

Gold

Gold crashed through the recent 1080.0 low, as discussed earlier this week. Like Sunday night’s selling spree, the market quickly found some buyers, and found equilibrium at a level well above its extreme low, but still much lower than yesterday’s close. In the days ahead, be suspicious of any rallies, and wait for a daily close above the high of the low day before looking for something meaningful to the upside.

Silver

Silver took out the 14.49 level, as suggested in my last commentary. Lower prices and more new lows are the obvious expectation here, and a test of that 14.10 level mentioned on Wednesday seems possible in the coming days. Look for a daily close above the high of the low day to signal an end to this leg of the bear market.

Platinum

Platinum has been consolidating for the last few days, but yesterday’s failed rally attempt points to more new lows. A penetration of yesterday’s high of 999.7, especially on a closing basis, will identify the July 20 low of 946.30 (October contract) as a significant bottom. A penetration of 946.30 will signal a continuation of the bear market. Long-term market support levels are much lower at 761.80.

Palladium

Yesterday’s failed rally ended in a lower close, and that selling pressure has spilled over into today. Watch these two levels for clues to the next intermediate-term move: the high from Thursday at 641.50 and the July 20 low of 595.0 (September contract). If 595.0 is taken out, we will turn our attention to the 555.90 low from 2012.