Precious metals began the week yesterday on a steady note with a bit of physical demand throughout the Asia Pacific region. This was followed by another weak economic report from China as their Manufacturing Index came in lower than expected, setting the stage for further stimulus action from their Central Bank which brought about more buying. Today is a holiday in much of Europe, and as often happens, the decrease in liquidity brings volatility to our market.
Prices spiked up in early U.S. trading as speculative short covering was reported in the OTC market while buy stops on the futures exchange were elected above $1,185.00 and $16.50. As the recent trading ranges continue after the lower end held late last week, we still have a market that is looking for a directional leader. As gold has failed to provide that leadership, I would expect silver to give it a try this week. The week begins with support in gold at $1,175.00 and $1,165.00 while resistance stands at $1,192.00 and $1,210.00. Silver support stands at $16.35 and $16.15 while resistance can be expected at $16.75 and $17.00.
In retrospect, the inability of precious metals to continue the rally on Wednesday, following the very weak GDP report and benign FOMC statement, was certainly a sign that our market was running out of steam despite gold and silver breaking above resistance levels at $1,210.00 and $16.50. The rout began yesterday with recent long positions in gold being liquidated when it failed to hold $1,200.00, as an unexpected strong reading on U.S. employment hit our market hard when the Labor Department reported initial jobless claims had fallen to a 15-year low.
While the USD has continued to weaken the second half of this week, our market appears to be more focused on global interest rates which have spiked higher and have added pressure to our complex. With gold in the driver’s seat, we have quickly gone from attempting a further break out on the upside to now looking for support from physical buyers as gold has returned to the lower end of the recent trading range in the low $1,170.00s. As often happens, our market manages to stage a rally when it feels most vulnerable and that may yet happen again, but I would expect the short sellers to push us back towards $1,1150.00 before we talk about another look at $1,200.00.
Have a good weekend,
Precious metals continued to probe higher yesterday buoyed by two more weak economic reports. U.S. Consumer Confidence, which is a key indicator of the economy’s health, unexpectedly fell in April by over six percent and the closely watched Federal Reserve Bank of Richmond’s manufacturing survey also missed the mark by coming in lower than expected. The bottom line for precious metals traders and investors was that the USD weakened and our market moved higher. Today begins with another weak economic report but perhaps not a shock to the markets given the recent run of weak data. First quarter U.S. GDP rose just .20 percent verse the economic consensus which looked for a 1.00 percent gain as the USD is again probing lower which should further support our market.
Later today we get a statement from the FOMC as the two-day meeting concludes. I would expect some concession from voting members in today’s statement that economic data does not support a rate hike in June. The key will be any hint over the action that will be taken in September. If the committee acknowledges our economy is now facing a head wind it could set the stage for further weakness in the USD as the likelihood of a rate hike later in the year diminishes.
Precious metals ended last week on the ropes when gold failed to hold support in the mid-$1,180.00s as investors pushed U.S. equities to record highs. Trading resumed yesterday with a steady tone as several headlines over the weekend regarding Greece’s ongoing issues were followed by a story that the Chinese Central Bank may increase their bond purchases to include those issued by local governments in an effort to further stimulate their economy. The result was broad based buying throughout Asia which was followed by good buying in Europe.
This morning finds recent short sellers likely looking to cover as the rally continues with gold closing in on $1,200.00 and silver has spiked higher having just broken above $16.00. While the rally to begin the week is encouraging, it is yet to be seen if this is just another move within the recent trading range or resistance can be broken at the 100-day average in gold at $1,211.50 and $16.56 in silver. Keep a close eye on the market Wednesday afternoon as the FOMC meeting ends with a statement but no press conference with Chair Yellen.
Despite a continuation of mixed news, but with a bias towards weak economic data, gold and its cousins have not been able to rally and are beginning to feel like we are going to see lower prices. Ahead of next week’s FOMC meeting on the 28th and 29th the committee will be discussing weak readings on new home sales, manufacturing, durable goods and rising unemployment claims. From my perspective the June rate hike is off the table and a hike in September is far from certain.
Despite the data, which is supportive for precious metals as it has weakened the USD a bit,for the second half of this week our market feels vulnerable to the downside as overall volume remains low and physical demand, while picking up a bit the past few days, is not impressive. Look for gold and silver to test $1,175.00 and $15.50 where physical demand should begin to pick up and support the market. If we break below these levels it could be a quick ride down to $1,150.00 and $15.00.
Have a good weekend,
Not much has changed for gold and silver this week as the U.S. trading day begins with gold and silver continuing to pivot around $1,200.00 and $16.00, but currently below those levels. With growing concerns over the possible default and exit from the Euro by Greece along with increased tension in the Middle East as U.S. and coalition warships track Iranian boats suspected of carry weapons to Yemen, it is a bit surprising that gold has not performed better and broken through resistance above $1,210.00.
On the flip side, we have a market that is trading on low volume, platinum and palladium continue to move lower and this combination is likely to empower short sellers to pressure gold and silver. If the recent pattern continues, we can expect physical demand to pick up and support gold in the low to mid $1,180.00’s while silver could test $15.50.
Despite the largest cut in Chinese interest rates since 2008, the 1.00 percent reduction in reserve requirements failed to propel gold through resistance above $1,210.00. This morning finds pressure on our market coming from U.S. equities recouping much of Friday’s big loss and another speech by New York Fed President Dudley in which he reiterated his stance that he hopes the FOMC will begin raising rates later this year.
Despite the debt situation in Greece continuing to worsen there were surprisingly few headlines over the weekend as the prospect for Greece leaving the Euro-zone continues to increase. As the technical picture in our market continues to dominate gold and silver have quickly moved from testing resistance to looking for support levels to hold as gold is back to the mid $1,190.00s and silver has fallen below $16.00. Platinum and palladium are on the ropes this morning as both have fallen below their 10-, 50- and 100-day averages.
Gold continues to be the captain of the ship as precious metals remain stuck in their recent trading ranges. As gold continues to pivot around $1,200.00 we have seen physical demand pick up every day this week on the dips while speculative and perhaps producer selling emerges on the rallies. Economic data has been mixed all week as have comments from FOMC members, which has only added to the directionless tone of our market. The headline story for today as we already begin thinking of what our market will do next week is the big sell-off in equities, which is being fueled by concerns over the Greek debt situation (will it remain in the EU) and regulatory concerns in the Chinese market which will bring greater regulatory oversight.
On the positive side for gold, we have crude oil making a new high for 2015 yesterday, interest rates as witnessed by the 10-year bond remain very low and the USD has backed off over the second half of the week. This morning’s much anticipated reports on the Consumer Price Index and Leading Economic Indicators followed the trend and were mixed as compared to economic consensus, but perhaps ever so slightly supportive of precious metals. As the U.S. equities slide is continuing as I finish today’s commentary, it will be interesting to see if traders move into gold and it can challenge the 100-day moving average at $1,212.25.
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Have a good weekend,
Roy Friedman is off today, so our insights come from Peter Aan, a Senior Dillon Gage Metals Trader.
Gold is trading today inside yesterday’s range, but at mid-morning is near the top of its range. Stepping back a bit from the chart, we see a market at a point of equilibrium – well below the high from April 6 at 1224.50 (June contract), but finding buyers well above the recent support at the March 31 low of 1178.20. Look for a penetration of Tuesday’s range (1201.3 to 1183.5) to be the first indication of direction.
Silver is also inside Tuesday’s range so far today, but its chart pattern is weaker than gold’s. Moderately oversold, this market could begin a test of the April 10 high of 16.650 (May contract) if Tuesday’s high of 16.340 is taken out.
The Platinum chart resembles the gold chart. A penetration of Tuesday’s high of 1160.90 (July contract) could set the stage for movement towards the April 6 high of 1188.20 and a penetration of Tuesday’s low of 1141.20 could encourage a move towards the March 30 low of 1114.70.
Palladium shows yet another inside day so far. Like the others, yesterday’s range is the key – 770.75 to 755.00 in the June contract. The nearest resistance level of note is the recent high of 788.00 and the nearest support level is 751.60 from April 8.
Peter Aan joined Dillon Gage in 1983, and is currently a metals trader for our metals division. He is the author of numerous articles for Futures magazine and Stocks and Commodities magazine. He is the author of The Relative Strength Index: A Comprehensive Research Report and a co-author of Trading Tactics: A Livestock Futures Anthology, published by the Chicago Mercantile Exchange.
Despite the stronger USD and hawkish comments from FOMC members on Friday, gold led the way higher, recording a fourth straight weekly gain. Unfortunately, it was not a very convincing gain as volume remained light and the rally appeared to be driven by short covering. This morning finds our market looking for direction as technical levels continue to keep us in a tight trading range. On the positive side, we have crude oil holding $50.00 and moving higher today, but with the record inventory hanging over that market it is difficult to see crude rallying enough to take gold significantly higher.
The big weight on our market continues to be the USD. The breakout I expected when the Euro broke 1.10 did not happen and for the moment it capped gold at $1,225.00. If the USD continues to strengthen and it takes a run at parity against the Euro, the likelihood is gold will move back towards and perhaps lower than $1,150.00. Interest rates and FOMC policy at this point are neutral in my opinion as economic data will dictate when the rate hike comes. I continue to think it will be a single hike this year in September, but more importantly it is likely already built into the market and when it does come it will not be a shock and will have a minimal impact on all markets. In the short term with gold in the driver’s seat we can expect support from the low $1,200.00s through the mid $1,190.00s with resistance from $1,210.00 through $1,212.00.