Investing in precious metals 101

PM Daily Market Commentary – 1/17/2018

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  • Thu, Jan 18, 2018 - 01:42am



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    PM Daily Market Commentary – 1/17/2018

Gold fell -11.50 [-0.86%] to 1327.30 on very heavy volume, while silver dropped -0.21 [-1.19%] to 17.00 on moderately heavy volume. The metals were on a roller-coaster today, driven mostly by currency. Gold and silver were even until the Euro started selling off in the afternoon in the US; as the Euro plunged, so did the metals.

Gold’s track was generally lower for much of the day – so was the Euro. The tracks of the two items line up fairly closely, which is why I say gold was currency-driven today. While the drop in gold today was substantial, and gold did end up printing a swing high (63% reversal), the forecaster fell -0.15 to +0.05, which leaves gold in an uptrend. Gold remains above its 9 MA.

COMEX GC open interest rose by +10,660 contracts today. It feels like the commercials have been substantially increasing their short positions every day, using all the rallies as short entry points.

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

Silver looked a lot like gold, following the track of the Euro for most of the day. Like gold, silver printed a swing high, but silver is now below its 9 MA, and the forecaster dropped -0.07 to -0.17, which puts silver deeper into a downtrend. For now, round number 17 did seem to provide some support, but silver is looking distinctly weaker than gold at this point.

COMEX SI open interest rose +172 contracts today. Commercials don’t appear to be leaning on silver the way they are in gold.

The gold/silver ratio rose +0.26 to 78.05. That’s bearish.

The miners actually rallied to a new high today, but then sold off as the Euro plunged. GDX fell -1.76% on heavy volume, while GDXJ dropped -1.77% on heavy volume also. XAU forecaster dropped -0.29 to +0.05, which is still an uptrend – but not by very much. We don’t have enough information yet from the miners to provide us direction.

Today, the GDXJ:GDX ratio was flat, while the GDX:$GOLD ratio fell. That’s bearish.

Platinum rose just +0.07%, palladium climbed +1.88%, while copper fell -0.82%. Platinum printed a northern doji (41% reversal) and its forecaster dropped -0.18 to +0.11. It is still in an uptrend, but platinum has had a long rally, and at this point platinum is very overbought (RSI7=90). Palladium remains in an uptrend as well.

The buck rose +0.16 [+0.18%] to 90.23 after first making a new low to 89.87. After heavy selling last week, the buck may be in the process of putting in a low here, but the forecaster isn’t impressed so far: it rose +0.06 to -0.71, which is still a very strong downtrend. But even in a downtrend, the buck doesn’t just move straight down – it drops, and then regroups for a time, and then moves down once more. We seem to be in one of the regrouping periods right now.  I use the 5-day forecaster so it can look through the regrouping periods and instead focus on the larger trend.

Crude rose +0.20 [+0.31%] to 64.03. Part of that was due to the API report that came out after market close: it looked reasonably bullish to me (crude -5.1m, gasoline +1.8m, distillates +0.6m). The crude forecaster dropped -0.12 to +0.16, which still leaves crude in an uptrend.

SPX staged a very strong rally, up +26.14 [+0.94%] to 2802.56. Apple announced they would be bringing money (a quarter-trillion dollars) back to the US. This may be why tech led (XLK:+1.50%), while materials brought up the rear (+0.46%). It appears that equities related to the commodity rally are taking a bit of a break.

VIX rose +0.25 to 11.91.

TLT fell -0.14%, making a new high intraday that was aligned with the lows in equities, but then sold off as the equity market rallied. TY fared worse than TLT, dropping -0.37% and making a new low. TY forecaster fell -0.10 to -0.67. The 10-year is yielding 2.57%, not far from the 2.60% line-o-death. A break through 2.60% could lead to a fairly large sell-off in bonds – and that’s really not far away at all.

JNK fell -0.08% – JNK has chopped sideways for the past week.

CRB rose +0.67%, making a new high to 196.40. 4 of 5 sectors rose, led by livestock (+1.03%). While industrial metals and agriculture are fading a bit, PM, energy, and agriculture continue to move higher.

Gold has gone up for 6 weeks in a row now, which lines up fairly well with the dollar’s six weeks of decline. I think gold could go a bit higher still, but based on the rising OI, the commercials appear to be leaning on gold fairly heavily right now, and if the dollar ends up reversing higher, gold will probably come under even heavier attack – such as the spike assaults we witnessed a few days ago on silver that appear designed to run long-side stops and move price lower.

The one wrinkle is the overall commodity rally, which seems to be preparing to break out to multi-year highs. That’s tied to currency to some degree, but is also probably tied in with the apparent success of the credit-growth reflation effort in both Europe and Japan.

Normally I’d be looking for gold to correct around now, but if the commodity rally continues to power higher, that probably beats the commercials’ choreography/timeline for the PM wash-and-rinse cycle. Oil is hanging tough in the 60s – crude prices are just slowly grinding ever higher.

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