Gold and Silver Current Thoughts 2-24-2015

From the Trading Desk

The overnight session was painfully quiet.  Volume on the electronic exchange was dismal with participants on the sidelines due to the Chinese holiday and anxiety over FOMC Chair Yellen’s congressional testimony on the US economy today.  The precious metals slid quietly lower overnight in the absence of physical demand.  The easing of Greek debt funding concerns also did not do any favors for the precious metals complex.

On to the US session, Yellen’s commentary provided some initial choppy trading conditions but the markets have since calmed.  Of note, Yellen remarked that guidance will be changed before rates are hiked and that rates won’t rise until there are another couple of meetings.   She also talked about how the Fed views the dramatic oil price sell off as a more durable source of stronger growth and a temporary factor countering inflation concerns.

The testimony ultimately provided some bids for gold as it shot up to the session highs before settling back down into its intraday range.   Initial support is coming in at the double bottom of $1,190 and then more significant support waits below at $1,170.  Silver has traded lower in six of the past seven trading sessions and looks poised to break lower with further pressure of the $16 handle.  There is a quadruple bottom at $15.55 if stops are triggered at $16 in silver.

Pretty much all of the ETFs I speak about were range bound today and it was not a good day to get long anything. There was a sharp spike in the morning in JDST and of course the opposite for JNUG, GDX, GDXJ and NUGT. Then we had a reversal and broke the lows on JDST and the highs on the 4 mining ETFs. Ironically, GDX, NUGT and JDST ended lower and GDXJ and JNUG higher.

Gold is up $9 in after hours trading and silver up 26 cents.

I had said yesterday that we had Draghi speaking and then Fed Chairman Yellen and we should expect volatility and that’s what we got. I also said the following;

It may be a difficult day to trade unless you can catch a wave up or down quickly based on price action which will move fast based on what comes out of the mouths of the aforementioned. Volume was lower for all the ETFs, so many traders are confused and when in doubt, stay out. Wait for a trend to develop and jump on it with stops.

That describes today to a T, and unfortunately we didn’t get an trend to develop as gold closed right at the $1,200 mark and silver was about flat for the day. Look to see what the trend is tomorrow that develops and jump on it. It can go either way for the short term.

TNA gave us another higher high but it is creeping up rather than jumping up. TNA closed at 85.90. Many are calling for a reversal, but the market just keeps moving higher. A reversal will come, you can bank on it. And that is why I would keep one eye every so often on TZA for a higher high and trade it long.

UGAZ gave us 6 cents higher and not much of a move. I would still play the higher high on natural gas ETFs in the morning as it could go either way for the short term. I can’t even lean one way or the other, but I know many in the U.S. are feeling the cold. Too bad it doesn’t apply to today’s trading. Let the market tell you what to do, not today’s weather.

RUSS gave up some of what it gained yesterday and RUSL was up 7.67% to 24.15. I can’t be bullish Russia and lean always against RUSL, but I can’t ignore price action. Trade the higher high of the two tomorrow. RUSL may have simply gone up with the general markets today.

Oil tried to move higher today but just couldn’t do it and DWTI snuck up another 1.59 to 121.60 at present. Look for the higher highs on either tomorrow. I can’t really lean one way or the other here either, but I do think we fall further in oil overall (deflation). Same with gold of course, and thus silver.

On days like today when there is not much leaning towards a good trade, it pays to be patient for the right setup. The question is, can you be patient? A trend will develop within the overall trend and just wait for it.

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