Wednesday, February 1, 2017
Today's Spotlight Market
Both large and small speculators are holding overall net-long positions in the precious metals sector, with the large specs being more aggressive in adding to the long positions of late. According to the most recent Commitment of Traders report for the reporting period ending January 24, non-commercial traders added 1,140 new net-long positions to their Silver holdings, bringing the overall net-long position to nearly 70,000 contracts. In Gold, 443 new-net long positions were added, which took the net-long position to over 107,000 contracts. Small speculators were more involved in Gold the past week, adding 825 new-net long positions, while in Silver there was actually a small reduction in the long position, shedding 19 contracts during the reporting period.
Precious metals bulls have had something to smile about the past several trading sessions, as recent U.S. Dollar weakening and an apparent move by some investors out of "risk" assets have benefited both Gold and Silver prices. February Gold was up over $20 per ounce at its highest levels on Tuesday, trading once again above the $1200 price level on concerns regarding how quickly the Trump administration will be able to implement economic friendly policies given the divisions seen from political leaders regarding the administration's executive actions so far. In addition, we have seen the value of the U.S. Dollar index decline since multi-year highs were made at the start of the month, with further declines seen on Tuesday following the release of the Chicago Purchasing Managers Index which fell to a reading of 50.3 in January, vs. 53.9 in December. Silver appears to be the stronger of the two major precious metals, currently trading at a 2 ½ month high, which may be a signal that the buying interest is coming from speculative traders rather than those looking for "flight to safety" assets. Gold prices remain below recent highs, but Tuesday's strong gains took prices above the 20-day moving average, which could trigger additional buying interest by short-term momentum traders hoping to see Gold prices make a run to test the recent highs just above the 1220.00 price level.
Looking at the daily chart for March Silver futures, we notice prices breaking out to the upside following a brief correction and a successful test of the 20-day moving average. While prices are now at multi-week highs, we note some upside headwinds in the form of the 200-day moving average, which is currently hovering just above the 18.000 price level. Momentum for Silver prices is strong, with the 14-day RSI moving above 60, with a current reading of 62.46. 18.000 appears to be the next major resistance level for the March contract, with support seen at the recent low of 16.635 made back on January 27.
Mike Zarembski, Senior Commodity Analyst