You probably noticed gold popped up yesterday. In case you didn’t, here’s the 5-day chart for gold.
What are the reasons behind such a jump, right when half the world was writing gold off?
The first piece of the puzzle is plain old demand. While much of the news about gold relates to its store-of-value function – especially by central banks – there are several big uses of gold as an input for commercial goods – especially jewelry, and then electronics.
Just last week we reported on the drop in Indian gold imports in the April-Oct timeframe. Now the word is out that imports during November were up 71% year-on-year, to 71 tonnes from 30 tonnes in October. That’s a good sign for two reasons. First, it means retailers are expecting a good-to-strong marriage and gifting season, so they’re placing orders to replenish inventories in advance. And second, it means the Indian consumer may be starting to recover from a difficult two years economically.
The other piece of yesterday’s puzzle was the sudden change in US-China trade war negotiations. Last week the talking heads were arguing between themselves about whether a phase one agreement was real, and whether it was significant or just noise. Then the US Congress passed a bill supporting democratic protesters in Hong Kong. Boom. China put the freeze on talks, and Trump changed his talk to how it might be better to negotiate a deal after the US presidential election.
That’s good old geopolitical uncertainty right there. You think you know what’s going on – but you’re proven wrong. And that unsettles investors.
So gold popped right back up to its resistance level, confirming the current trading range is indeed 1450-1480 in international gold prices, 139.50 in GLD pricing. The more things change, the more they stay the same.
The latest prognostication for 2020 gold prices is 1550/oz, by Murenbeeld & Co. That still sounds a bit low to these ears, but the market will have the last say, as always.
The Gold Enthusiast
DISCLAIMER: No securities were mentioned in this article. The author is long the overall gold sector via positions in NUGT, JNUG, a few junior miners, and covered calls on part of the NUGT and JNUG positions. The author may trade options positions in NUGT and/or JNUG in the next 48 hours if market conditions warrant but has no plans to make any other trades n the gold sector in that timeframe.
The SPDR Gold Shares (GLD) was trading at $138.67 per share on Wednesday morning, down $0.44 (-0.32%). Year-to-date, GLD has gained 12.15%, versus a 17.26% rise in the benchmark S&P 500 index during the same period.
About the Author: Mike Hammer
For 30-plus years, Mike Hammer has been an ardent follower, and often-times trader, of gold and silver. With his own money, he began trading in ‘86 and has seen the market at its highest highs and lowest lows, which includes the Black Monday Crash in ‘87, the Crash of ‘08, and the Flash Crash of 2010. Throughout all of this, he’s been on the great side of winning, and sometimes, the hard side of losing. For the past eight years, he’s mentored others about the fine art of trading stocks and ETFs at the Adam Mesh Trading Group.