PM End of Week Market Summary - 1/3/2017

davefairtex
By davefairtex on Sun, Feb 5, 2017 - 9:47am

On Friday gold rose +4.10 to 1121.60 on moderate volume, and silver shot up +0.03 to 17.51 on moderately heavy volume. Nonfarm Payrolls ended up being mildly dollar negative, and thus somewhat gold-positive, with the high for the buck coming right at the time of the payroll release.

It was a mostly good week for the metals, with junior miners leading seniors, miners leading metal.  The only fly in the ointment: silver, which trailed gold by a small amount.  Copper may have put in a top (a swing high, followed on by a big closing black marubozu candle suggests this), but the rest of the metals complex looks fairly strong.  All the PM components are above their 50 MA lines, and some are closing on their 200 MAs.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Junior Miners GDXJ 6.48% 88.75% rising rising rising rising ema9 on 2017-01-31 2017-02-03
Senior Miners GDX 5.51% 51.70% rising rising rising rising ema9 on 2017-01-31 2017-02-03
Silver Miners SIL 4.87% 98.48% rising rising rising rising ema9 on 2017-01-31 2017-02-03
Gold $GOLD 2.34% 5.64% rising rising falling rising ema9 on 2017-01-31 2017-02-03
Silver $SILVER 2.10% 17.40% rising rising rising rising ema9 on 2017-01-27 2017-02-03
Platinum $PLAT 1.83% 10.53% rising rising falling rising ema9 on 2017-01-20 2017-02-03
Palladium $PALL 1.16% 46.04% falling rising rising falling ema9 on 2017-02-03 2017-02-03
Copper $COPPER -3.02% 23.29% falling rising rising falling ema9 on 2017-02-02 2017-02-03

Gold rose every day this week, breaking above the 9 EMA on Tuesday and then making a new high on Thursday. Gold was up a total of +27.90 on the week. While gold has yet to formally break out, it is right on the edge of doing so. Candle print on Friday was a hammer/spinning top candle, which the code says is bullish. The FOMC announcement on Wednesday turned out to be gold-neutral, while the payrolls report was gold positive.

The May rate-increase chances fell to 31%.

COMEX GC open interest fell -37,773 contracts.

Silver had one really good day – Tuesday – and then more or less moved sideways the other four days, up +0.36 for the week. Friday's candle print was a doji, which the candle code finds as bullish. The gold/silver ratio was up +0.03 to 69.63, which is more or less no change. Silver's breakout to a new high looks bullish, as was Friday's print. Silver is approaching the 200 MA.

Miners looked strong, with both miner ETFs breaking out to new highs this week. GDX moved up +5.51%, and GDXJ rose +6.48%. The GDX:$GOLD ratio rose nicely, as did the GDXJ:GDX ratio. The miners are rapidly approaching the 200 MA; a close above the 200 would be a bullish sign. Friday's candle print was a spinning top, which the code finds to be neither bullish nor bearish. As the miners are not yet overbought, this suggests the trend in place will likely continue.

USD

The buck fell on the week, dropping -0.69 to 99.79, with most of the damage occurring on Tuesday. To date, the buck has not been able to close above its 9 EMA, and it remains in a downtrend. Although Thursday's spinning top looked somewhat bullish, the doji on Friday didn't provide any confirmation as once again the buck tried to move above the 9 and failed. The dollar downtrend remains in place. A combination of jawboning by the Trump administration, uncertainty over the direction of US foreign policy, an increased level of concern about US inflation, and no signal from the Fed about the likelihood of rate increases all combined to pull the dollar lower. Both commodity currencies (CAD, and AUD) have staged recent rallies, which support a commodity-price driven inflation thesis.

US Equities/SPX

The US equity market rose +2.73 [+0.12%] to 2297.42, dropping below the 9 EMA for three days, but then rallying back above it on Friday. Friday's candle print was a white marubozu, which are generally fairly bullish. This one is mildly bullish, which suggests its more likely than not we will probably see new highs for SPX next week. The rally on Friday came immediately following the Nonfarm Payrolls report – it was immediate, and positive. SPX is above all three moving averages.

VIX rose +0.39 to 10.97, which is still quite low.

This week, sector map shows sickcare in the lead, apparently the result of a successful meeting of Big Pharma execs with President Trump, who while he talked about lower drug prices, also seemed to back away from allowing Medicare to negotiate for lower drug prices. Prices help us separate spin from reality, and big money seemed to think that the meeting outcome favored sickcare. Consumer staples and utilities did relatively well, while homebuilders, materials and industrials were down. This map isn't suggestive of new highs, unlike what the candle code is telling us. Utilities and staples are generally more defensive issues – they aren't the sectors that lead major market moves higher.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Gold Miners GDX 5.51% 51.70% rising rising rising rising ema9 on 2017-01-31 2017-02-03
Healthcare XLV 2.39% 8.74% rising rising rising rising ma200 on 2017-02-03 2017-02-03
Cons Staples XLP 1.18% 6.62% rising rising rising rising ema9 on 2017-02-02 2017-02-03
Utilities XLU 1.05% 5.34% rising rising rising rising ema9 on 2017-02-02 2017-02-03
REIT RWR 0.51% 5.71% rising rising falling rising ema9 on 2017-02-03 2017-02-03
Financials XLF 0.30% 37.59% rising rising rising rising ema9 on 2017-02-03 2017-02-03
Technology XLK -0.10% 24.73% rising rising rising rising ema9 on 2017-02-01 2017-02-03
Telecom XTL -0.13% 40.25% rising rising rising falling ema9 on 2017-02-03 2017-02-03
Cons Discretionary XLY -0.67% 16.54% falling rising rising rising ema9 on 2017-02-02 2017-02-03
Energy XLE -1.12% 28.16% falling rising rising falling ema9 on 2017-01-27 2017-02-03
Industrials XLI -1.35% 25.93% rising rising rising rising ema9 on 2017-02-03 2017-02-03
Materials XLB -1.38% 26.78% rising rising rising rising ema9 on 2017-02-03 2017-02-03
Homebuilders XHB -1.42% 16.14% falling rising falling rising ma50 on 2017-02-03 2017-02-03

Gold in Other Currencies

Gold rallied in every currency, doing best in GBP. Gold was up +27 in XDR.

Rates & Commodities

TLT just continues to struggle, falling -0.53% on the week. TLT is chopping more or less sideways just beneath the 9 and 50 MA lines, moving slowly lower. Friday's spinning top candle is more bearish than bullish, according to the candle code. I agree,TLT's chart still looks ill. It rallies for a day, and then sells off for another two – one step forward, two steps back.

JNK fell -0.32%, falling 4 days out of 5, but still managing to remain (just barely) above its 9 EMA. For those who are looking for a correction in the equity market, you probably also want to see JNK start to top out too. So far, that hasn't happened yet.

CRB fell -0.12%; CRB remains in a strong uptrend, below its 9 EMA.

Crude rose +0.72 to 53.91, rising 4 days out of 5 to within striking distance of the 54 resistance line which has proved so difficult for crude to close above. This week's petroleum status report showed a bearish-looking inventory crude build of 6.5 million barrels, but crude eventually rallied strongly that day, which is a bullish sign. Friday's candle print was a spinning top/NR7, which turns out to be slightly more bullish than bearish – call it a continuation. Crude remains above its 9 EMA, and in an uptrend. Next week may see crude actually execute its long-awaited breakout above 54.

Physical Supply Indicators

* SGE premium to COMEX fell to $6 over COMEX.

* The GLD ETF tonnage on hand rose +15.43 tons, with 815 tons in inventory.

* ETF Premium/Discount to NAV; gold closing of 1221.60 and silver closing of 17.51:

 PHYS 9.99 -0.47% to NAV [up]
 PSLV 6.64 -0.23% to NAV [down]
 CEF 12.28 -8.26% to NAV [down]

* Bullion Vault gold (https://www.bullionvault.com/gold_market.do#!/orderboard) showed no premiums for gold or silver .

* Big bar premiums are lower for gold [2.24% for 100 oz bars in NYC], higher for silver [+3.14% for 1000 oz bars in NYC], and higher for silver eagles at +17.76% [NYC].

Futures Positioning

COT report covers trading through Tuesday Jan 24th, when gold closed at 1211.30 and silver 17.11.

In gold, commercials dropped -2k shorts, while managed money closed -4.6k shorts and added +5.5k longs. Managed money still has 71k short contracts – plenty of fuel for a continued move higher.

In silver, commercials added a big +8.4k shorts, while managed money added +5k longs and dropped -2.8k shorts. The big addition to the commercial short position is starting to look a bit ominous. We are not at a top just yet – another 2 weeks of this and we'll be there.

Copper's COT is worth noting: managed money longs are at the highest levels ever, as are the commercial shorts. I don't know what's going on there right now, but someone has really loaded up long copper futures, and its not the guys who usually are right about the outcomes.

A similar situation exists for the Crude COT report; managed money longs are at historically high levels, as are the commercial shorts: 1.19 million contracts short – 1.19 billion paper barrels. Highest concentration ever. Again, concentrations at these levels usually mark the tops.

Gold Manipulation Report

There no spikes seen this week.

Summary

This is the sixth straight week the buck has declined: from the high at 103, to the current level at 99.79. Gold, in turn, has rallied 5 of the last 6 weeks, with the move this week looking particularly strong. As has been the case for quite a while, a weak dollar helps gold.

Gold COT still looks bullish, with managed money owning 71k short contracts. Commercial shorts are rising sharply – another 2 weeks at this speed and we might be nearing a high. Mostly, it is buying that is moving price higher (vs short covering), which is a bullish sign.

Gold and silver big bar shortage indicators still show no signs of shortage in the west; ETF premiums fell, while GLD tonnage rose. In Shanghai, premiums continue to drop, but remain positive. Chinese are still net buyers at these prices.

Gold in Euros took a dip last week, but bounced back this week; that probably helps account for gold's good performance. When gold rallies in all currencies, that's a bullish sign, since it means the move isn't just about a currency effect.

As I mentioned before, inflation is starting to become more of a thing right now. The FOMC spoke about inflation in its announcement, the CPI has ticked up to +2.1% y/y (although if you pay for your own healthcare like I do, you might see some “slightly” higher costs), and the outright jawboning by the Trump administration trying to talk the dollar down is all contributing to a weaker buck. The correlation between gold and bonds snapped this week; gold did well, while treasuries moved lower. That provides some reinforcement for the inflation thesis. Additionally, the FOMC also doesn't seem particularly motivated to stomp on the incipient inflation that it admits to seeing with a near-term rate increase.

In short, we may have a pair of new catalysts for gold. Rather than just being a safe haven, gold might benefit from both an inflation trade as well as a Trump Uncertainty trade. People who are looking for safe havens aren't particularly enamored of a tweeting President who seems to be routinely engaged in upsetting random applecarts whenever the mood strikes. Whether that's the reality, that appears to be what is going on. Perception drives confidence, and confidence drives prices. So a certain amount of safe haven money might end up going to gold, instead of the buck.

In the wildcard/white swan department, we have an election in the Netherlands coming up mid-March, GRExit (or maybe, IMF-exit) is back on the table, there is the ongoing issue with the Chinese banking system, a potential election in Italy, and of course the elections in France and Germany later in the year.

With all this, and the current price action, I think gold and the miners will continue to move higher.

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3 Comments

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 380
Gold Price

Looks like Armstrong went with $1220.80, as expected.  Awesome.

Interesting to see gold/silver up with the dollar up and bonds down this morning.

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2391
Palladium is acting weird again.

Up $25... way more than any other PM.  Why? 

Mark Cochrane's picture
Mark Cochrane
Status: Diamond Member (Offline)
Joined: May 24 2011
Posts: 1227
Dare I say....

Not a currency effect today......

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