PM Daily Market Commentary - 1/22/2018

By davefairtex on Tue, Jan 23, 2018 - 5:12am

Gold rose +2.20 [+0.17%] to 1333.40 on very heavy volume, while silver dropped -0.01 [-0.09%] to 17.01 on light volume. The buck tried to rally today but failed; that seemed to help gold, at least to some degree.

There were a number of cross currents today. Over the weekend, the SPD delegates grudgingly approved the grand coalition agreement, which was Euro positive. Then the US Senate agreed to pass a short term funding bill that put an end to the government shutdown after one day. That was dollar-positive. The Euro ended up winning the struggle today, moving up +0.31% - which pulled the dollar down -0.20%.

Gold chopped sideways-to-higher today in a relatively narrow range, printing a neutral doji candle on the day. Still, the forecaster saw something it liked, rising +0.34 to +0.17, issuing a buy signal for gold. Certainly gold remains above its 9 MA - the 9 has acted as support for the last 3 days, which is a positive sign.

COMEX GC open interest fell by -11,760 contracts today; 36 tons of paper gold, gone. That's a pretty big drop, it smacks of short-covering, which doesn't make much sense for this point in the cycle if we assume the rinse section of the wash-and-rinse cycle is about to start. If the OI drops again tomorrow...that might just mean that the commercials are expecting higher prices ahead.

Rate rise chances (March 2018) remains at 73%.

Silver also chopped sideways, but its bias was slightly negative. The forecaster noticed this, and dropped -0.13 to -0.11, which is a sell signal for silver.  Still, silver appears to have found support at its 200 MA.  Mostly silver appears to be moving sideways rather than selling off.

COMEX SI open interest rose +2,709 contracts today. Perhaps managed money is going short. They've been doing that a lot in recent weeks.

The gold/silver ratio rose +0.20 to 78.39. That's bearish.

The miners moved up slightly, with GDX up +0.25% on light volume, and GDXJ rose +0.32% on very light volume. XAU forecaster really liked the move, rising +0.38 to +0.26, which is a buy signal for the mining shares.  As with gold, the XAU has found support on its 9 MA, which is a bullish sign.

Today, the GDXJ:GDX ratio rose, and the GDX:$GOLD ratio rose also. That's slightly bullish.

Platinum plunged -1.53%, palladium fell -0.45%, while copper rose +0.66%. The big drop in platinum resulted in a bearish engulfing (50% reversal) plus a sell signal from the forecaster (-0.35 to -0.08). I suppose after a $140 rally it was bound to happen sometime. Copper is trying to figure out if it wants to resume its uptrend, while palladium remains near its highs. Volume on today's platinum plunge was very heavy.

The buck fell -0.18 [-0.20%] to 90.09. Currencies were actually fairly volatile – prices moved back and forth, pulled by events in Germany, then the US, but finally it was the Euro that won the struggle, rising +0.31% to 122.61, quite near the multi-year high. USD forecaster rose +0.04 to +0.36; the buck continues to move sideways in a range, hovering just above 90. A break below 90 and gold probably takes another leg higher.

Crude rose +0.46 [+0.72%] to 63.94. Crude had a big spike higher at around 11am, plunged back down again and then drove higher into the close. I have no idea what caused it, but whatever it was, the market ended up concluding it was good news. Forecaster issued a buy signal for crude today, rising +0.23 to +0.07. Is this all the correction we get for crude? Could be.  Oil equities sure think so.

SPX rallied strongly today, up +22.67 [+0.81%] to 2832.97. The market launched right after the open and continued moving higher all the way through into the close. The forecaster saw something it didn't like, however, and it dropped -0.48 to +0.10. What was it?  Falling open interest in crude oil, of all things.  Energy did extremely well (XLE:+2.16%) while materials brought up the rear (XLB:-0.24%). This wasn't just an energy rally, however – many sectors did well today.

VIX fell -0.24 to 11.03.

TLT rose +0.10%; it remains in a downtrend. TY rose +0.04%, after first making a new low. TY forecaster rose +0.11 to -0.69, which is still a strong downtrend. Utilities tried to rally but mostly failed, rising just +0.14%.

JNK rose +0.08%, managing to move up slightly along with the rest of the bonds. JNK forecaster moved up +0.20 to -0.11; JNK remains in a downtrend.

CRB rose +0.37% to 196.22. CRB remains right on the edge of a major breakout above multi-year resistance, but so far it hasn't been able to execute. 4 of 5 sectors rose, led by industrial metals (+0.69%).

Both gold and the miners have found support on their 9 MA lines, as you would expect them to do if the uptrend were still intact.  Forecasters for both have signaled buy once more.  Silver remains weak, and possibly under pressure from the managed money shorts, while gold saw a big drop in open interest that suggests the commercials might be covering - here of all places.

Crude is looking reasonably strong again after a week of mild retracement, and the buck may be headed lower once again.  Certainly the buck isn't looking very strong right now.

Unless that dollar takes off, I suspect gold will manage to continue moving higher.  That's what the tea leaves say right now.

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Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 392
Smacked Again

I love to watch gold being up all night long and then selling off sharply right before the US equity markets open.  It's awesome.  Just can't seem to get past that $1350 level.  It has no problems getting to $1330 a couple times per year, but it just can't seem to move higher.  It's not DXY related this morning.  So, I guess that's a bad sign.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 392
I Guess I Should Probably Just Shut Up Now


davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5874

Sometimes you have to wait for end of day before you know how things turn out.

I don't really know what caused the rally, but sometime in the afternoon, buyers just decided they wanted to buy PM - gold, silver, miners.

It wasn't explicitly tied to the buck breaking 90 - which was my initial thought.  It looks like it just happened all on its own.

Was this all a big trick so that someone could pick up some cheap mining shares?  Maybe that's too much conspiracy.

Silver still looks weak, FWIW.

TechGuy's picture
Status: Gold Member (Offline)
Joined: Oct 13 2008
Posts: 468
Re: Gold Smackdown

Cold Rain Wrote:

" love to watch gold being up all night long and then selling off sharply right before the US equity markets open"

I've thought about trading on those swings. unfortunately I don't have the time to build a model to see if its profitable. If there is a consistent swing every trading day, its likely a profitable trade.



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