PM Daily Market Commentary - 3/1/2017

By davefairtex on Thu, Mar 2, 2017 - 7:18am


Gold rose +1.20 to 1250.00 on moderately heavy volume, while silver climbed +0.10 to 18.46 on moderate volume. A strong dollar rally (USD:+0.63) made life difficult for gold, which somehow managed to stay afloat in the face of some heavy pressure from the currency markets.


Gold sold off during the strong dollar rally making a new low to 1237.20, but found buyers when the buck marked its high just before the US market opened. As the buck retreated off its highs, gold managed to recover all of its losses by end of day, printing a “takuri line” candle, which the candle code thinks is relatively bullish (a 38% chance of marking the low). I especially like the fact that gold managed to find buyers even though the buck had a strong day.

Open interest at COMEX for GC fell -1,859 contracts.

Rate rise chances (May 2017) rose to 71%. Gold traders seem to be largely ignoring the rising Fed rate increase prospects; this is a major change. In the past, gold buyers would panic and flee whenever rates would look as though they were about to rise, but that's no longer happening. I believe this is really good news for gold.

Silver more or less ignored the move higher in the buck; it fell slightly during Asia trading, but then took off as the dollar topped out and fell back somewhat from the highs.  Silver's candle print was a just a long white candle, but the candle code found it to be quite bullish. The gold/silver ratio dropped -0.30 to 67.71. Right now, silver just looks unstoppable.  It is demonstrating almost a straight-line move higher.

Miners rallied on the day; GDX rose +0.57% on moderate volume, while GDXJ was up +1.90% on moderately heavy volume. Miners gapped down at the open, fell a bit, but then rebounded as gold recovered. Miners actually outperformed gold for the first time in 8 days, causing the GDX:$GOLD ratio to recover. This is an early sign of recovery in the mining shares. Candle print for GDX today was just a “long white” candle, which has only a low probability of marking a low here. GDXJ on the other hand printed a “white marubozu”, which the candle code rates as quite bullish.  I'm looking more towards GDXJ to signal a turn in the miners - so that's the chart I'll show you today.  You can see how buying started after the gap down, and it just didn't stop until the market closed.  Its the best day the juniors have had in about a month.

Platinum fell -0.76%, palladium rose +0.65%, and copper climbed +0.64%.

The buck rose strongly today, breaking out to a new high of 101.98 before falling back; it closed the day at 101.69, up a very respectable +0.63. To what do we credit this big move? Trump looking Presidential in his Congressional address - to the relief of the rest of the world? Rate rise chances dramatically increasing? Take your pick. Candle print was just a “long white” candle which the code said was neither bullish nor bearish. The buck is now clearly above the 50 MA for the first time in six weeks. Momentum is now up.

Crude fell -0.33 to 53.67. Crude rallied ahead of the EIA report, but fell soon after the report was released. EIA revealed a +1.5 million barrel inventory build, but the market was not pleased, dropping about 70 cents off the highs. Candle print was a spinning top, which the candle code said was bearish. Crude fell below its 9 EMA as a result of today's move.

SPX screamed higher, up +32.32 to 2395.96, breaking to a new all time high. Candle print was an “opening white marubozu” which the candle code felt was very bullish. Financials led (XLF:+2.85%) while utilities trailed (XLU:-0.89%). Based on these moves, today was a “rate rise expectations” rally, but also a broad-based market rally too, judging from which sectors did well (materials, industrials, tech, and cyclicals). VIX fell -0.38 to 12.54 – the drop in VIX was not as brisk as one might have expected given the big move higher.

TLT was hammered, plunging -1.86% and dropping below its 9 and 50 MA lines. This was another element of the “rate rise” expectations move. Bonds do not like higher rates.

JNK fell -0.11%, but remains within a few pennies of its high.

CRB rose +0.34%, printing a swing low today. This was mostly about industrial metals and agriculture today; 3 of 5 sectors rallied.

We are in a seriously news-driven market. The two drivers of prices today were Trump's speech before Congress last night, along with an interview given by New York Fed President William Dudley to CNN in which he more or less projected a rate rise in March.

The really interesting bit is that gold was largely unfazed by the surprise move by the Fed. Notice that TLT sold off hard, while gold found buyers and closed flat on the day - in the face of a big dollar rally.  This should get you to sit up and take notice.  It will probably be difficult for gold to rally substantially in a strongly-rising dollar environment, but the price action suggests that the downside risk of holding gold right now are minimal.

And this is before we see any sort of disaster from the Eurozone.

Lastly, we finally see buyers in the miners starting to show up. The reversal of the GDX:$GOLD ratio is a bullish sign. I'm not certain the danger is completely past - a swing low would make me a lot more comfortable.  Here's what the rally in the ratio looks like.

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davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5681

Boy, no sooner than I write something optimistic about gold, both gold and crude promptly sell off and make new lows.

Well I guess the candle code only gave yesterday's print a 38% chance.  I guess now I know why.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 378
Not Pretty

Yeah, Dave, it looks like gold is set up to have a pretty terrible day.  Might get that $1230 test today...if not lower.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 378

Looks like the commercials are finally ready to hit silver...they've been building their short positions for some time.  Wonder if we'll drop all the way back to $17 or lower over the coming weeks?  No bid under the metals or miners today.  Going to end up being a very, very ugly day in the PM space.

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