Investing in precious metals 101

PM Daily Market Commentary – 1/3/2018

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  • Thu, Jan 04, 2018 - 04:22am

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    davefairtex

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    PM Daily Market Commentary – 1/3/2018

Gold fell -4.60 [-0.35%] to 1314.50 on heavy volume, while silver dropped -0.05 [-0.29%] to 17.17 on moderately heavy volume.  A relatively strong dollar rally [+0.35%] did hurt the metals to some degree, but mostly today’s move appeared to be just selling pressure in the PM space – with some of it driven by the FOMC minutes release at 2pm.

Gold made a new high to 1323 very early in Asia, but then sold off – chopping mostly sideways until the FOMC minutes were released at 2pm. At that point, the sellers unloaded on gold, driving it down $8 in 15 minutes on some heavy volume. Gold bounced back, but the bounce faded into the close. Today’s print was a spinning top/bearish harami, which had a 51% chance of marking the high. Forecaster dropped -0.27 to +0.20; that still leaves gold in an uptrend.  On the chart, it doesn’t look all that bad.

COMEX GC open interest rose by +13,182 contracts today. That’s 41 tons of of new paper gold.

Rate rise chances (March 2018) is at 68%, up 12% today. Gold generally doesn’t like increased chances of a rate hike.

Silver followed gold’s track for the most part. Although the dip in Asia was larger, silver managed to bounce back and make a new high to 17.28 immediately before the FOMC minutes release. After the release, silver was hit for a 15 cent loss over 15 minutes, and the bounce back was fairly feeble. Silver printed a spinning top candle, which had a 31% chance of marking the top. Forecaster plunged -0.22 to +0.14, which leaves silver in an uptrend.  It felt to me as though silver was doing better before the FOMC minutes release, and then did worse afterwards.

COMEX SI open interest rose +67 contracts today. It doesn’t seem as though there was a massive short assault on silver today.

The gold/silver ratio fell -0.04 to 76.56. That’s neutral.

The miners sold off in the morning, and then chopped sideways until the minutes release at 2pm, whereupon they plunged but then bounced right back up again. GDX fell -1.05% on heavy volume, while GDXJ dropped -1.71% on very heavy volume. GDX printed a bearish harami (57% chance of a bearish reversal) as did GDXJ (32% reversal chance). XAU forecaster fell -0.23 to +0.37; XAU remains in an uptrend. Effectively, all of the losses in the miners came just after the open. That’s still bearish, but it isn’t directly related to the minutes release – for the most part, traders bought the minutes-release dip.

Today, the GDXJ:GDX ratio fell, as did the GDX:$GOLD ratio. That’s bearish.

Platinum rallied +1.33%, palladium fell -0.81%, while copper fell -0.50%. Platinum managed to clear its previous high – it is curious that it did not suffer the way gold and silver did today. I’d say that’s bullish overall for PM.  Copper has fallen for 3 days in a row, and printed a swing high today. Copper’s forecaster remains in an uptrend, but it is fading rapidly (down -0.11 to +0.07).

As mentioned, the buck rallied +0.32 [+0.35%] to 91.87. Candle print was just a long white candle, which was neutral. Forecaster jumped +0.20 to -0.62, which is still a strong downtrend. Is this the low for the buck? The FOMC minutes were interpreted as being somewhat more hawkish than expected; that’s how I read the increase in the rate rise chances. However, most of the dollar gain came long before the minutes were released, so I’m not sure how much of the rally was simply due to anticipation, or maybe just ringing the cash register prior to the event. The Euro printed a swing high today.

Crude rose +1.55 [+2.57%] to 61.92. Crude rose steadily, starting from about 530 am through to the close in New York. There wasn’t any one triggering item that I saw – prices just steadily moved higher. After market close, the API report looked perhaps a bit bearish (crude -4.99m, gasoline +1.87, distillates +4.27) but the market didn’t seem to care. Perhaps it was all about Iranian protests. Candle print was a strong line (bullish continuation) while the forecaster jumped +0.60 to +0.57, which is a buy signal. I’m not sure I’d actually buy it though, with RSI-7=88. Volume was very heavy.

SPX rose 17.25 [+0.64] to 2713.06, continuing its new year rally with another new all time high. The opening white marubozu was a bullish continuation, and the forecaster rose +0.09 to +0.90. Energy led (XLE:+1.50%) while utilities did worst (XLU:-0.79%). It was another fairly broad-based rally day for SPX.

VIX fell -0.62 to 9.15.

TLT rose +0.48%, printing a bullish harami which was actually neutral. Forecaster dropped -0.05 to -0.64.  TY rose +0.09%, and its forecaster rose +0.04 to -0.30. In spite of today’s rally, bonds remain in a downtrend.  Bonds did not seem much affected by the minutes release.  I suspect they are primarily driven by supply concerns – a debt-funded tax cut, plus $30 billion per month in balance sheet normalization.

JNK shot up +0.49%, which is a large move higher for JNK. The strong line candle was bullish, and the forecaster issued a buy signal, rising +0.54 to +0.51. I’m guessing this has to do with the strong rally in oil, perhaps? Or maybe its just the general risk on sense that equities are giving off.  It wasn’t about the Fed at all.

CRB rose +0.33%; 3 of 5 sectors rose, led by energy. Industrial metals may be putting in a top here, but the rest of the complex continues to move higher.

Might this be the near term top for PM? There are no sell signals yet, but some candle patterns look somewhat unpleasant –  especially gold and GDX. If the buck has put in a low, then the answer is probably yes.

But as I said before, the dollar rally was not triggered by the FOMC minutes release. While the rate rise chances for March did increase significantly, that increase did not drive the dollar move.  So we’ll just have to wait and see where the buck goes next.

For now at least, the PM trend remains up.

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