Investing in precious metals 101

PM Daily Market Commentary – 3/13/2018

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  • Tue, Mar 13, 2018 - 10:54pm



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    PM Daily Market Commentary – 3/13/2018

Gold rose +3.30 [+0.25%] to 1326.50 on heavy volume, while silver moved up +0.05 [+0.33%] to 16.59 on moderately heavy volume. The buck fell -0.27%, which says all the PM movement was a currency effect.

The CPI report released at 8:30 am showed that government-measured inflation rose +0.2% m/m (2.4% annualized), as was “core” inflation, which matched the consensus estimates. This caused PM prices to spike higher, which lasted right up until the news broke that Trump had abruptly fired Secretary of State Tillerson, swapping in CIA Director Pompeo. Gold was hit for a $10 loss, but then bounced back, recovering all its losses and closing near the highs of the day.  Bonds did much the same.

Gold’s candle print was a hammer candle, which had a 43% chance of marking the low. Forecaster rose +0.24 to -0.04, which is right on the edge of a bullish reversal. Gold ended the day above the 9 MA, which is bullish. Gold in euros looks quite similar – it appears to be on the cusp of a bullish reversal there also.  Up-day volume has been stronger than down-day volume, which is bullish.

COMEX GC open interest rose 22,127 contracts today. That’s a second day of large increases in open interest – 68 tons of paper gold, or 10 days of actual mine supply.

Rate rise chances (March 2018) remains at 89%. FOMC meeting in 7 days.

Silver tracked gold, falling somewhat in Asia, rallying sharply after the CPI report release, and then dipping once again after the Tillerson firing. Unlike gold, silver did not close at the highs. Silver printed a spinning top candle which was a bullish continuation, however silver’s forecaster plunged -0.13 to -0.08, which is a sell signal for silver.  Silver continues to move sideways in its recent trading range.

COMEX SI open interest rose 1,185 contracts today.

The gold/silver ratio fell -0.07 to 79.95. That’s mostly neutral.

Miner ETFs did not do so well; GDX fell -0.41% on very light volume, and GDXJ dropped -0.50% on very light volume also. In spite of that, XAU managed to edge slightly higher, and so the XAU forecaster jumped +0.35 to +0.33, which is a buy signal for XAU.  Do we believe XAU or GDX?

Today, the GDXJ:GDX ratio rose slightly, while the GDX:$GOLD ratio fell. That’s a bit bearish.

Platinum rose +0.25%, palladium climbed +1.31%, and copper moved up +0.43%. All 3 other metals remain in short-term uptrends, although all of them are trying to recover from recent sell-offs.

The buck fell -0.24 [-0.27%] to 89.22, following through off yesterday’s reversal pattern. The CPI report was dollar-negative, and so too was the Tillerson firing – after some back-and-forth first. The buck remains in a downtrend in both the weekly and monthly timeframes – so the bias remains down, even though on the daily chart the buck has more or less just moved sideways in a range for the past few months.

Crude fell -0.49 [-0.80%] to 60.86. Spinning top candle was neutral, but the CL forecaster dropped -0.17 to -0.14, which is a sell signal for crude. There have been lots of whipsaws here too, as crude is trying to find a direction above 60. After market close, the API report [crude +1.2m, gasoline -1.2m, distillates -4.3m] was relatively bullish.

SPX fell -17.71 [-0.64%] to 2765.31. SPX tried to rally early, topped out around 10:30, and then sold off for most of the rest of the day, seemingly driven lower by the Tillerson firing. Candle print was a confirmed bearish NR7, a 37% chance of a reversal.  Sector map looked bearish: tech led lower (XLK:-1.55%) along with financials (XLF:-1.11%) while utilities did best (XLU:+0.22). That’s a picture perfect bearish configuration.

VIX rose +0.57 to 16.35.

TLT rose +0.51%, moving to the top of its recent trading range. TY agrees, moving up +0.15%, with TY forecaster rising +0.18 to +0.28. That’s some cautious optimism for bonds.

JNK fell -0.31%, with the forecaster issuing a sell signal, dropping -0.28 to -0.22. JNK is also searching for direction, but my sense is it will be moving lower. BAA rates have been moving strongly higher over the past 8 weeks, which is the cousin of JNK. Rising rates = lower prices.

CRB fell -0.13%, but only 2 of 5 sectors fell, led by energy (-0.51%). CRB continues to move sideways, just below its 50 MA.

The CPI provided an initial boost for PM, seemingly reinforcing the inflation thesis, but then Tillerson’s firing was seen as distinctly negative by the equity market and the currency too. Unlike in reality TV, the country’s ratings (provided free of charge by the markets) drop when you sack the Secretary of State when he’s off traveling the world on the country’s business.

US Treasury bonds are finally seeing a bid. 10-year yields fell to 2.84%, well off their highs. Forecasters for bonds still show an uptrend, but an uptrend under some pressure.

Next week is the FOMC meeting. Gold often sells off prior to the meeting; it hasn’t done so yet.

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