METALS: The Bears Still Control but Their Grip is Exhausting Itself

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Chart-595OUTSIDE MARKET DEVELOPMENTS: Global equity markets were mostly higher overnight with the All Ordinaries the biggest winner. The Asian economic calendar was relatively quiet with the Reserve Bank of Australia deciding to leave interest rates unchanged. The European schedule started out with October German factory orders that bested expectations by a wide margin. However, the widely anticipated highlight of the European session was supposed to be third quarter Euro zone GDP but that reading just barely managed to beat estimates of a +1.6% year-over-year rate with a +1.7% result. The North American session will start out with the October international trade balance which is expected to see a larger deficit from September’s reading. Third quarter nonfarm productivity and unit labor costs are forecast to hold steady from their second quarter levels. The October Canadian merchandise trade balance is expected to show a smaller deficit than September. The highlight of the North American session will probably be October factory orders which are forecast to see a sizable jump from September’s +0.3% reading. The November Canadian Ivey PMI is expected to see a modest uptick from October’s 59.7 reading. Earnings announcements will include Bank of Montreal, AutoZone and Toll Brothers before the Wall Street opening.

gold-bars-595GOLD / SILVER: The gold market swung widely around both sides of unchanged in the action Monday and without weakness in the Dollar, gold and silver prices might have remained in downside breakout ground. Some players think that the gold market is poised to fall away sharply because of the fear of rising US rates and fresh damage on the charts and we have to generally agree with the bear camp. However, we also have to think that gold is approaching a key low in the wake of months of declining open interest, significant declines in COT spec long positioning and declining volume on the latest selling wave as that could signal selling exhaustion. On the other hand, gold was not lifted by the uncertainty from the Italian situation over the weekend and its charts remain patently bearish. Apparently rising US Treasury yields have also undermined sentiment toward gold and that angle was given added credence by patently hawkish dialogue from a couple of Fed members yesterday. While the trade hasn’t become fearful of more than a “one and done” from the Fed, the prospect of a December hike has become very high! While we haven’t seen reports of bargain hunting buying by Indian players the Indian Revenue Secretary overnight indicated that they have no plans to limit gold ownership but that news is only partially supportive. News from the World Gold Council that gold could be accepted as a Sharia instrument is probably supportive of gold but it remains to be seen how broad based that status will become! The world’s largest gold ETF saw their holdings fall by 0.32 tonnes on Monday to reach their lowest level since May 31st, and have not seen a build since November 9th (the day after the US election).

Platinum BarsPLATINUM: The platinum group metals probably drafted some support to start the trading week off news that Zimbabwean production might be threatened by labor issues ahead. It makes sense for Zimbabwean miners to expect higher wages when South African miners saw increases in their last negotiations. We also have to think that platinum into the November lows might have attracted some fund buyers that in turn were looking for a reflation play. In fact, platinum prices at their lows last week were $300 an ounce below their 2016 highs, which amounts to a 25% slide in prices within 4 months! Palladium on the other hand is overbought relative to the last 12 months, which in turn might mean that platinum is indeed a value compared to palladium. It should also be noted that platinum forged an upside breakout with its close yesterday and it also closed above a key moving average and it has managed to extend that action in the early going today. Near term upside targeting in January platinum is seen up at $958.

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