PM Daily Market Commentary – 2/21/2017
Gold rose +0.70 to 1236.70 on moderate volume, and silver fell -0.02 to 18.03 on very heavy volume. A big dollar rally initially caused problems for gold, but just after the New York open, buyers showed up for both metals, eventually erasing the losses by end of day. Given the dollar rally, gold and silver both did quite well.
Gold fell for half of the day, starting in Asia and continuing through to the New York market open as the buck moved steadily higher. However, the plunge in gold reversed right around 09:45 at the time of the PMI Manufacturing Index Flash report. Immediately after the report was released, gold jumped $6 in about 10 minutes, while the dollar marked its high, and started selling off. What was inside the report? Put simply, evidence of cost-push inflation. Costs were reported to be at a 30-month high, while selling prices were flat.
By the end of the day, gold moved back to flat, even though the buck remained fairly strong. This suggested that gold was up strongly in other currencies – looking at gold:$XEU, we see gold rallying +0.81% in Euros. That’s a strong day; gold’s “neutral” day in USD terms was just a currency effect.
Looking at the chart, we see a doji candle print, which normally is not helpful but the candle code assigns this doji an extremely bullish rating. The relatively strong volume underlines this assessment. Add to this the excellent performance of gold on a strong dollar day – well let’s just say I bought some miners after seeing this behavior. FWIW. YMMV.
Open interest at COMEX for GC rose by +1,707 contracts.
Rate rise chances (May 2017) rose to 40%.
Silver had much the same pattern as gold, although it marked a low at 08:55 and not 09:45, but silver did not hold on to as much of its gains by end of day. Candle print was a “high wave” candle, which the code finds somewhat bullish. The gold/silver ratio rose slightly, up +0.11 to 68.59.
Miners fell, with GDX down -0.69% on moderately light volume, while GDXJ dropped -1.12% on moderately light volume too. Miners gapped down and sold off, reversing back up at 09:45 along with gold, wiping out all the losses and some of the gap down open. Candle print for GDX was a “spinning top”, which the candle code found to have a 39% chance of marking a low – I’d call that fairly bullish. GDX remains below its 200 MA and 9 EMA. If you’re looking for a dip to buy, this one might work out.
Platinum fell -0.06%, palladium climbed +0.64%, and copper climbed +1.31%. Copper printed a high percentage swing low today; this underscores the “inflation” trade.
The buck rallied strongly today, rising to a high of 101.54, topping out due to the ISM Flash Manufacturing report at 09:45, and ending the day up a respectable +0.40 closing at 101.29. This was mostly because of an -0.75% plunge in the Euro, which ended the day at 105.36, and is now back below all 3 moving averages. Euro is back to looking ill; who says fundamentals don’t work anymore? They still seem to play out in the currency markets. Candle print was a “confirmed bullish NR7′, which the candle code rates as quite bullish. It looks as though the dollar rally will probably continue.
Crude rose +0.58 to 54.23, closing materially above the magic 54 resistance level for the first time in a year. Having said that, crude did mark an intraday high of 55.03, but it was not able to retain its gains. Candle print was a shooting star, which represents the classic failed rally. Candle code says its somewhat bearish, with a 28% chance of marking the high. The resistance remains quite strong, with sellers emerging to pound prices down every time price moves above 54.
SPX rose +14.22 to 2365.38, which resulted in yet another new all time high. RSI7 rose to 90, which is very overbought. Utilities led (XLU:+1.05%) while materials brought up the rear (+0.33). It was a rare day when no sectors were down. Candle print was an “opening white marubozu” which the candle code rates as slightly bearish (17% chance of a top). Likely that’s a sign of just how overbought the market is; normally the white marubozu candles are not bearish at all. VIX rose +0.08 to 11.57.
TLT fell -0.17%, remaining within its recent trading range and closing just above its 50 MA. Its hard for TLT to rally when the equity market appears to be unstoppable.
JNK broke out to a new high, up +0.38%. JNK’s move takes it back to levels not seen since August 2015. JNK is signaling risk on.
CRB dropped -0.04%, more or less unchanged. CRB is moving slowly lower after topping out in mid-January.
The bid under gold remains quite strong, in spite of the dollar rally. That’s because gold in euros continues to move higher – right now $GOLD:$XEU is overbought, with an RSI7=86. That’s a bit of a danger sign.
Why does gold continue to rise strongly in Europe? My guess: a combination of the inflation trade, along with a flight to safety from the upcoming elections in Europe, along with a weakening in the USD as a safe haven because of Trump. Do I see this changing? Not in the near term.
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Gold and silver down a bit…doesn't look to be a currency effect as the dollar is nearly flat. But miners are sucking wind today.