Could Gold’s Rally Have Run Its Course?

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Roy Friedman is off today, so our insights come from Peter Aan, a Senior Dillon Gage Metals Trader.

The strong rally in Gold in the first part of the week met resistance just under the upper Bollinger Band and the March 2nd high, giving us a mid-range close on Thursday, and trading lower in early trading today. A close today below Thursday’s low of 1194.8 in the June contract would be the first concrete sign that the rally may have run its course.

Silver had a more impressive rally, taking out minor resistance formed in late February and piercing the upper Bollinger Band. It’s easing back this morning, and a close today below Thursday’s low of 16.91 in the May contract would signal a possible short-term trend change.

Platinum’s rally was not as strong as Gold or Silver, and it is struggling this morning. A failure to close above last week’s high of 1145.7 (July contract) would hint that movement back down to the recent low of 1088.8 might be forthcoming.

Palladium didn’t get the memo about the rally, and today has fallen to the lowest level in several months. The next support level is at the October low of 729.95, with subsequent levels below 700.00

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.


USD Weakness in Europe Boosts Gold

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Gold and silver traded on below average volume Monday and Tuesday as unconvincing probes higher following Friday’s big rally were sold by recent speculative buyers who locked in profits. There have also been reports of producer selling in front of $1,200.00 gold as we approach month end and the end of the first quarter of 2015. Following a continuation of USD weakness in Europe this morning, with the Euro now testing 110.00 after being at 105.00 last week, gold is again testing $1,200.00 while silver trades above $17.00.

This morning finds U.S. economic data again missing the target as witnessed by a very weak report on Durable Goods Orders which fell for the fifth time in the last six months. On the back of this news, the yield on the U.S. 10-year bond has fallen to 1.86 percent as bond traders appear to be less concerned with a rate hike by the FOMC any time soon which should support gold and silver. Crude oil moving up and a U.S. equity market which again appears to be top heavy should also lend support. Technical trading continues to dominate our market as USD movement on the back of daily economic releases set the tone for the market. Support in gold at $1,185.00 and $16.85 in silver appears to be strong, but if the rally does not continue in the coming days expect the downside to again be probed. If gold breaks $1,200.00, we can expect resistance at the 100-day average at $1,208.75 and the 50-day average at $1,222.50. Silver is trading above its 10-,50- and 100-day averages, but it has surprised me by not taking a look at $17.40 – $17.50.


FOMC Report Continues to Impact Precious Metal

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Precious metals continued to rally throughout the day on Friday as the USD weakened and crude oil rallied. The dovish FOMC report continues to impact our market as speculative short positions were covered before the weekend at the same time as now longs were entering the market. Physical demand was steady at the higher price points with silver leading the charge higher. If you believe like I do that the U.S. economy is still not out of the woods and remains on shaky legs despite the growth in payrolls and drop in unemployment rate, then you also suspect that the USD will continue to weaken through the spring and perhaps longer. The weakening USD will of course support gold and silver and just perhaps we will look back and say the recent dips below $1,150.00 gold and $15.50 silver were indeed buying opportunities. Slow and steady are just not the way for silver and the move I talked about in Friday’s commentary, calling for a run into the spread between the 50 and 100-day moving averages, happened all in one day as silver rallied over 80 cents.

Barring any geo-political news, the direction of all markets appear to be tied to the USD’s intra-day reaction to U.S. economic data. In the short term, gold support should be expected from $1,175.00 through $1,165.00. A break below $1,1650.00 likely means the USD is again in rally mode and sub-$1,150.00 can be expected. Gold is likely to face resistance as we approach $1,200.00 from producer selling, but a break above $1,200.00 should see us testing resistance between $1,225.00 through $1,240.00. Silver support should be strong as we approach $16.50 while a break above $17.00 should bring us a look at $17.40 – $17.50.


Precious Metals Rally Despite FOMC Statement

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Despite the FOMC removing “patient” from the policy statement on Wednesday afternoon, the tone of the statement and Chair Yellen’s subsequent press conference clearly had a more dovish tone than the markets were expecting as witnessed by the big rally that ensued in most markets. As the policy statement was being read, the USD weakened sharply Wednesday afternoon, rallied yesterday and is weaker again this morning as its direction sets the course for gold and silver. While there remains a possibility of a 25 basis point rate hike at any time now, most commentators see the hike coming in August. As Chair Yellen and the FOMC would like to see the unemployment rate fall further while the inflation rate stabilizes at higher levels, I do not think a rate hike will come before the fourth quarter and I am still not convinced we will see one this year. Continue reading “Precious Metals Rally Despite FOMC Statement” »


Gold and Silver Probe Lower Prior to FOMC Statement

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Ahead of the FOMC decision this afternoon, gold and silver continue to probe lower as witnessed by gold trading down to a four-month low yesterday before bouncing as we continue to trade around $1,150.00 and $15.50. Platinum and palladium continue to move sharply lower as investor and industrial demand highlighted by weak imports from China weigh heavily. Platinum, having failed to hold $1,100.00, is trading at $1,090.00 this morning which is a level not seen since 2009. Continue reading “Gold and Silver Probe Lower Prior to FOMC Statement” »


FOMC Week Begins

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Welcome to FOMC week. The two-day meeting concludes on Wednesday afternoon with Chair Yellen scheduled to hold a press conference at 2:30pm EST. All markets will be waiting for any hint on a policy change that would indicate the much talked about rates hike(s) are set to begin.  The tone of her statement and answers to questions will be critical as a dovish nature with words like “patient” continuing to be used would indicate the FOMC may be concerned with the recent weak economic data and a rate hike could be pushed back to the fall or perhaps not at all this year.  Such an indication would weaken the USD and likely bring a big rally to our market as speculative short positions, which continue to grow ,would be covered while fresh buying is being done.  A “hawkish”  tone and the removal of “patient” would signal that a rate hike in June or perhaps August is likely which will pressure our market as the USD will likely continue strengthening.

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Crude Prices Could Impact Precious Metals – Again

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As precious metals head for the finish line this week, gold and silver are currently trading above $1,150.00 and $15.50 which may be a victory of sorts considering all the negative factors currently weighing on precious metals. The USD has taken a bit of a break from its “take no prisoners” rally which has helped as physical demand remains for the moment strong enough to offset speculative selling. The next headline we may have to deal with (and it could come today) is from crude oil which is once again under very heavy pressure. Crude is down 2 percent this morning and down 7 percent for the week as it currently sits on either side of $46.00. Extreme U.S. stock market volatility has returned which may support gold if U.S. equities are pushed lower and capital rotates back to our market. Continue reading “Crude Prices Could Impact Precious Metals – Again” »


Precious Metals Reacting to Strong USD

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Precious metals and all financial markets continue reacting to the two major economic headlines which are: the strength of the USD and when will the FOMC raise interest rates. The USD has moved higher by leaps over the past two weeks and now sits at 11 year highs. On modest volume, gold and silver continue probing lower as: physical demand, which has picked up, is unable to offset speculative selling, the ETF market experiences liquidations and crude oil saw a drop of over 1 percent yesterday, which added pressure. Platinum and palladium were hit a bit harder as platinum has fallen to 5+ year lows and palladium has failed to hold $800.00.

Continue reading “Precious Metals Reacting to Strong USD” »