Investing in precious metals 101

PM Daily Market Commentary – 5/21/2018

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  • Mon, May 21, 2018 - 11:09pm



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    PM Daily Market Commentary – 5/21/2018

Gold was little changed, up +0.30 [+0.02%] to 1292.00 on very heavy volume, and silver rallied +0.07 [+0.43%] to 16.53 on moderate volume. Both metals followed the Euro lower, but reversed when the Euro stopped dropping. Platinum did especially well today – a huge move of +1.65%, forecaster buy signal, bullish candle pattern – the works. Might this be a tell for the metals overall?

Gold made a new low to 1281.20 at around 3am (closing time in Japan), and then rallied strongly as the Euro recovered. Candle print was a takuri line, which had a 36 % chance of marking the low. Gold forecaster rose +0.06 to -0.01, which is very close to a buy signal for gold. This makes 4 days where sellers tried pushing prices below (roughly) 1285 but were unable to do so.  It does appear that there are buyers at 1285.

COMEX GC open interest fell -4,600 contracts. Finally, we get to see commercials covering short.  Last week’s COT report showed that gold may be approaching a low.

Rate rise chances (June 2018) remains at 95%.

Silver followed gold lower, bottoming out at about 3am, rallying back to close in the green. The spinning top candle pattern was quite bullish, but silver forecaster wasn’t happy, dropping -0.12 to -0.08, which is a sell signal for silver. Hmm. I think silver did well today. Silver is now back above its 9 MA.

COMEX SI open interest fell by -164 contracts today.

The gold/silver ratio fell by -0.31 to 78.16. That’s bullish.

Miners rallied today, with GDX up +0.63% on moderately light volume, while GDXJ climbed +0.85% on moderately light volume also. GDX printed a swing low (56% bullish reversal), and GDXJ printed a confirmed bullish spinning top (43% bullish reversal). XAU forecaster inched higher, up +0.03 to +0.04. That’s very cautiously optimistic.

The GDXJ:GDX ratio moved higher, as did the GDX:$GOLD ratio. That’s bullish.

Platinum shot up +14.60 [+1.65%] on heavy volume (closing white marubozu: 55% bullish reversal, forecaster buy signal), while palladium rallied +2.67% (bullish engulfing: 57% bullish reversal, forecaster buy signal), and copper rallied +1.27%. All three other metals did very well today.

The dollar was little changed, up +0.02 [+0.02%] to 93.29. The buck made a new high (to 93.67) and then fell back, losing all its gains by end of day. Print was a northern doji (38% bearish reversal), while forecaster dropped -0.21 to +0.27. RSI shows a bearish divergence, suggesting upside momentum is slowing for the buck. Forecaster is showing that same thing. The metals are hinting that the buck’s move might be coming to an end in the near future.

Crude moved up +1.20 [+1.68%] to 72.65. Crude is just relentless right now, making its new high right at end of day. has no real reason (at least, not one that I believe) for crude’s gain today. Forecaster is at just +0.11, which doesn’t seem like a very strong uptrend. And yet – crude just keeps moving higher.

SPX rose +20.04 [+0.74%] to 2733.01. The gain today came in the futures markets overnight – almost certainly tied to China’s agreement to reduce its trade deficit with the US. “Trade war on hold for now” – equity-market positive. Industrials led (XLI:+1.51%) with energy doing well also (XLE:+1.02%), while sickcare trailed (XLV:+0.10%).

VIX fell -0.34 to 13.08.

TLT moved up +0.05% – mostly bonds just moved sideways. TY moved down slightly, off -0.02%. Not much happened today in the bond market. The 10-year rate closed at 3.06%.

JNK moved up +0.11%; forecaster issued a buy signal, rising +0.15 to +0.06. Its hard to know if this is just a dead cat bounce – it doesn’t look like much.

CRB rose +0.98%, breaking out to a new multi-year high. All 5 sectors moved higher, led by livestock (+1.35%). Really, though, it was energy that did the heavy lifting.

Today’s move in the metals came because of a possible top in the buck. Buyers piled into platinum, gold, and silver once it became clear that the Euro had made its low – at 117.16. Certainly the Euro is oversold on both weekly and daily timeframes.

That said – M5S and Lega Nord have named a Prime Minister candidate, and appear ready to form a government. Anything could happen. Italian 10-year yield has jumped 57 basis points over the past 3 weeks. That’s a big move, but it is only a small down payment over what could happen down the road. Martin Armstrong suggested 10% as a target, and he believes it could happen practically overnight. That would be an 780 basis point move – just to give you a sense.

If Italy starts using a parallel currency (see “mini-BOT”), effectively printing money and then spending it on flat taxes and “citizen income”, things could get interesting really quickly.  It isn’t technically against the EU rules, but certainly the ECB could hit back by refusing to purchase Italian sovereign debt – the same thing they do (did) to Greece.

But currently, the market seems to be saying, “Greece didn’t exit, so Italy probably won’t either.  The EU will surely come up with something – they always do.”

Do we have a low in the metals? That’s what my technicals are saying.  But it will probably all depend on the buck.  Gold in Euros remains weak.  How will gold behave if Italian debt goes nuts – and the Euro tanks?  That is the question.

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