Current Thoughts for 1/28/2016

From the Trading Desk

Yesterday’s Federal Open Market Committee was predominantly dovish. The Fed left interest rates unchanged and the projection for further rate hikes for the remainder of the year was notably less ambitious than in previous meetings. Gold had been trailing lower for most of yesterday’s trading session but the FOMC ignited it. Gold shot up to make fresh three month highs before sellers emerged ahead of the 200 day moving average at $1,132. After failing at the 200 DMA technical barrier, gold has moved lower today and will look to find support at its 100 day moving average of $1,106. The talk of the market today was the price action seen on the LBMA Silver Price.

The LBMA Silver Price is a benchmark used by miners, refiners, jewelers, central banks, consumers, financial institutions, and traders around the world that, in theory, provides an instant in the day where there is full transparency of the silver price. Buyers and sellers emerge to trade on the LBMA Silver Price until there is volume equilibrium and then the price is set, or fixed. Every time that the price is fixed for it, the spot price of silver at the time should more or less be exactly in line with it. In an unbelievable and unprecedented market event though, the LBMA Silver Price today fixed over 80 cents below the spot market. It was set at $13.58 with the spot market trading around $14.42… a 5.50% discrepancy… not even close!

What makes it all even more outrageous is that policy makers, in the name of “transparency” and “regulation”, forcibly revamped the century-old London fix in 2014 with this new LBMA Silver Price. After today’s price setting, how’s that transparency and regulation working out for them now? Any producer that sold on today’s LBMA Silver Price is irate, and rightfully so. This is a classic case where more regulation and government influence ultimately hurts the participants in a given market. We’ll see if anything comes of the CME and LBMA investigating the case further… my guess is not much.

Gold and silver opened a bit lower and did absolutely nothing today. Gold needs to get over $1,122 to have a run if it can move past $1,125 also. Silver is still somewhat bullish overall but today weak. Dollar was down pretty big and the metals should have gone higher but they literally, looking at the charts, took the day off.

The market traded higher on oil today, nothing more except a slightly better jobs data. The durable goods report came out and was worse than expected like most non-jobs or non-employment data has been the last year. This is what the Fed knows is going on but ignored this data only looking at jobs data and raised rates. It tells me the jobs and unemployment data alone is not reliable.

Short and sweet today since gold gave us nothing.


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About Doug Eberhardt

Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534


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