Gold and Silver Current Thoughts 1-15-2015

From the Trading Desk

Just when it looked like gold had exhausted its move to the upside, an entirely unexpected market event gave it new legs in today’s trading session.  A shocking move from the Swiss National Bank reignited markets fears and caused investors to flock to the safe haven appeal of gold.  Switzerland’s central bank abandoned its long-standing floor against the euro which spurred double digit reactions in the CHF and EURCHF, colossal intraday moves for currencies.   The SNB also cut its interest rate on sight deposit accounts to negative .75% and the forward swap curve is in negative territory up to eight years out now.  The SNB decision is positive for gold because the yellow metal is now a positive yielding asset versus holding CHF.

Upon the Swiss National Bank news release, gold jumped through double top resistance at $1,244.50 and then had even more stops triggered at its 200 day moving average of $1,253.50.  Its high on the day is $1,267, a 61.80% Fibonacci retracement level, and the market is seeing selling emerge as the session winds down.  Volume on the electronic exchange for the active February contract is over 250,000 lots, the second highest volume day of the contract.  With gold moving up $100 this year so far, it would not be surprising to see some consolidation around these levels in the near term.

In watching CNBC today, the IMF chief Christine Lagarde wasn’t even contacted by the Swiss before making such a move. Do the Swiss know something that the rest of us don’t?

An interesting tidbit that my friend from Switzerland sent me was that the move in the Swiss franc away from the Euro today “(in just an hour or so’s time) was the equivalent of the DJIA moving 4,300 points.” Imagine waking up in Switzerland and checking your Euro bank account just lost 30% against the Euro today. Now imagine that you had your account in Swiss francs and just saw your purchasing power increase to buy more items priced in Euro’s. At some point, this is going to show why gold should be considered “insurance” against the inevitable. But for now, the U.S. dollar is the beneficiary.

The dollar at first took the news badly and fell hard below 92 then rebounded and is presently at 92. If you look at the following Euro/USD chart, where does it tell you the Euro will go? What does this mean for the dollar? Even if the chart is in a different language, you can see that the Euro and Dollar are destined for parity.

 

$1,267.20 was the high today in gold and look for that to be taken out tomorrow if the trend is going to continue higher. First support is the $1,220.50 mark.

Silver didn’t really get the Swiss boost and is still acting more like the deflationary industrial metal. $16.21 is the 20 day moving average to watch and see if breached. $17.24 for the bullish side.

Mining stocks had a nice boost today as the dollar temporarily fell quickly and breached the 92 level I spoke about yesterday. They held strong most of the day and only gave a little back by closing.

ETFs

UWTI and UGAZ gave back some today. After the release of today’s natural gas numbers, there wasn’t anything to be bullish about and I lean towards DGAZ again at this point. Oil seems to have resumed it’s fall, but is showing signs of a bottom. Look for higher highs on UWTI if that’s the case.

TNA tried to get going this morning but the jobs numbers came in worse than expected and a downgrade of AAPL and the stock market couldn’t get going and kept falling throughout the day. I thought we might get a run up towards the 80 mark again and would still go long any higher high but also look for a higher high in TZA as well if this decline decides to gain momentum.

The arrows aren’t really giving us any conviction one way or another so when in doubt, stay out, and I feel that is the case for tomorrow, the last day before a 3 day weekend. I will note however that the monthly green in gold was triggered. I just find it hard to accept this as being a long play when the dollar index is still shooting higher and the Euro has so many issues as they await Draghi and later this month the Greek vote.

Next report will be Monday due to the holiday as markets won’t open again until Tuesday. We’ll see what tomorrow’s trading brings. If anything out of the ordinary occurs I will write a morning or mid-day report. I thought about doing so today, but the moves happened so quickly that there wasn’t much to do but watch. Again, that’s why gold is insurance. You just don’t know. But we can read data and hopefully make educated guesses.

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