PM Daily Market Commentary - 2/15/2017

davefairtex
By davefairtex on Thu, Feb 16, 2017 - 6:32am

Gold rose +5.50 to 1234.70 on moderate volume, and silver climbed +0.03 to 17.98 on heavy volume. Some large moves in the buck caused gold and silver to first sell off, and then rally; the moves were driven by both the Retail Sales report as well as the CPI, both of which were surprisingly strong.

The buck moved sideways during the Asia session, climbed during trading in Europe, and then shot higher immediately following the Retail Sales and CPI reports, both of which were released at 08:30. The buck hit a high of 101.75, but then proceeded to sell off steadily for the remainder of the day. The buck ended down -0.06 to 101.11, printing a “spinning top” candle which the candle code assesses as just mildly bearish. I'm not sure why the candle code isn't more bearish – today's move had all the hallmarks of a failed rally. The buck is only faintly overbought, with RSI7=70. I'm looking at this as a potential top in the dollar.

Gold had its usual dollar-inverse relationship, falling early, plunging after the 08:30 dollar spike making a new low to 1217.50, but then rebounding strongly as the dollar rally collapsed, with gold closing at the highs for the day. Gold's candle print was just a spinning top, but the candle code rated it quite bullishly, with a 47% chance of forming a low here.

Open interest at COMEX for GC rose by +10,073 contracts.

Rate rise chances (May 2017) rose to 42%. That's a big move, probably driven by the CPI report, which showed a y/y change of 2.5%, and a m/m change of 0.6% - which, annualized, would yield an inflation rate of 7.2%!

Silver followed a similar track, dropping early, plunging immediately following the 08:30 report releases, and then rebounding as the dollar retreated. Silver ended up printing a dragonfly doji candle, which the candle code assesses as bullish. Silver also ended closing above its 200 MA for the first time since November 2016, which is a bullish sign. Silver is slightly overbought, with RSI7=74. As silver did not perform quite as well as gold today, the gold/silver ratio rose +0.21 to 68.67, which is mildly bearish. This is a bit surprising, since I'd expect an inflation trade to be quite positive for silver.

Miners were mixed; GDX rose +0.04% on very light volume, while GDXJ dropped -0.69% on light volume. Candle print was both a “thrusting” candle pair, as well as a “closing white marubozu” - the combination was assessed by the candle code as bearish. GDX remains above its 9 EMA, but the very light volume rally doesn't particularly inspire confidence, especially given the strong performance in gold.

Platinum rose +1.01%, palladium climbed +1.08%, and copper rose +0.56%. The metals had a fairly bullish day.

Crude fell -0.02 to 53.32, closing essentially unchanged. Candle print was a doji/NR7 candle, which the code rates as mildly bearish. The EIA report confirmed what the API report had to say yesterday; it showed a big, bearish 9.5 million barrel inventory build for crude. The report resulted in a whole lot of volatility which ultimately ended up going nowhere – let's call that a victory if you're long oil. There is a fair amount of commentary about the strong concentration of commercial short interest in oil, and how that usually leads to a correction. Oil remains above all 3 moving averages, and it continues to chop sideways in a range as it has done for the past 9 weeks.

SPX rose +1167 to 2349.25, making yet another new all time high. Today it was sickcare in the lead (XLV:+1.08%) with energy trailing (XLE:-0.39%). This marks 6 straight up days, moving the index into extremely overbought conditions – RSI7=89. The “opening white marubozu” candle print is not even slightly bearish. VIX fell -0.33 to 10.74.

TLT fell again today, dropping -0.46%. Bonds don't like inflation, or hot retail sales, or a rising stock markets, or a dropping dollar. Bad news all around for TLT.

JNK fell -0.03%, basically unchanged. JNK is within a few pennies of its recent multi-year high. JNK remains in a strong uptrend and is signaling risk on.

CRB jumped +0.51%, climbing back above its 50 MA. 3 of 5 groups rose, led by agriculture products.

You have to like gold today; once the buck started to come down off the highs, buyers jumped in to push gold well into the green by end of day. Silver also looked reasonably good, although a bit less enthusiastic than I would have thought. Miners look weak; I'm not sure why. The other metals are all looking supportive. If the buck does top out here, we could see a nice move ahead of us in PM.

Is the buck still a safe haven with Trump and the national security state apparently engaged in a struggle for control over the government? Its hard to know. Its one of those black swans; it sure could matter in a big hurry if an actual coup occurred. The two things backing the dollar are confidence, and what you can buy with it.  If you remove confidence (and/or the confidence in "the rule of law") - the buck likely has a long way to fall once people sort out the implications.

One last point.  I believe the deep state got away with a coup with the JFK assassination.  Things were never the same after that.  How will things change if Trump is removed?  This time around, it is being done in a very public way.  There will be no plausible deniability.  They will have removed a duly elected President with the support of the opposition party.  That is certainly the setup right now.  A good chunk of the left will cheer if the CIA takes out Trump.

Seems like a bad precedent.

Gold is looking pretty good at the moment.

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2 Comments

Atreat's picture
Atreat
Status: Bronze Member (Offline)
Joined: Dec 4 2011
Posts: 29
Gold Silver Ratio

https://srsroccoreport.com/the-gold-silver-ratio-explained-like-never-be...

Hi Dave,

Wondered if you had any thoughts on this if you have time.   Made sense to me.

Thanks

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 4134
seems right to me

The market today has totally dismissed gold and silver as money.  Instead they value them as mere commodities, based on the cost of production and some supply and demand forces. 

To understand when gold and silver will be revalued as MONEY or STORES OF VALUE, we need to pay attention to the energy market.

So this lines up with what I see too, most of the time.  The current market does indeed value gold and silver as "mere commodities" for much of the time.  Certainly, if oil becomes a lot more scarce, and we don't have a replacement, then I'd guess that silver suddenly becomes a lot more valuable, since as we know the above-ground supplies of it are less than gold, about 72k tons.

But until this sort of thing comes to pass, what we've learned is that - from the pricing standpoint - gold and silver are commodities, with occasional forays into money-land.

That could change if the safe havens - the buck, yen, and Euro all either vanish, or take big hits.  Which I suspect they will, in time.  Then gold will become money even without an increase in oil prices.

I'm becoming more and more "pro gold" as the chaos in America builds.  When the CIA tries to knock off the President, all I can think is, "got gold?"

Euro will eventually explode, and the Yen is a basket case, the RMB will also explode too (Chinese banking problems), so what does that leave?  CHF?  Too small.  I have no idea what the Swiss will do when this happens.  Maybe -10% deposit rates.

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