Weaker dollar and softer 10 year treasury yields gives the price of Gold a boost this morning. At the time of this report February gold was trading just shy of $ 1180 up over $ 14.00 dollars on the day.
As I indicated yesterday, I expected to see for the first time in a long time inflows into the gold ETF and that’s exactly what occurred. So for my friends who I bet a cup of coffee that I would be correct please don’t send me any Dunkin Donut cards. To tell you the truth I’m not really a fan of coffee at all. I just wanted to get some feedback from my readers.
My technical friends are back in full swing and started the year on the right track informing us yesterday that they had seen no immediate resistance levels to speak of and expected gold to rally from yesterday’s levels. Today they expect some resistance in February gold at the $ 1182 level then nothing till $ 1195 in the February contract.
One person asked me yesterday why do we use the most active futures February contract as a level of support and resistance? Most folks use the price of spot gold as an indicator. If you use the current EFP levels one can equate the spot level to the futures. My chart friends prefer the most active futures month for their analysis. Today’s gold EFP level is -40 -60 as an indication.
The Wall Street gold traders I spoke with this morning inform me they have for the most part flattened out their positions and are poised to sell into any strong rally in the yellow metal as they still believe interest rates will continue to rise. Once again I’ll take the other side of that trade and call for a weaker dollar and softer bond yields giving the support the longs will be looking for.
For those who closely follow the CME Watch tool for future interest rate hikes here are the current odds for rake hikes at each Fed meeting.
Feb: 2 percent
Mar: 19 percent
May 29.5 percent
Jun: 48.5 percent
Jul: 45 percent
Sep 38.6 percent
Nov. 34.4 percent
Dec. 23.7 percent
As we can see at the current time there is no month in 2017 with a percentage rate of over 49 percent.
One must expect a fierce battle between the Republicans and Democrats on any proposal put on the table by the Trump
administration. And one would also hope that there could be peace on Capitol Hill. Both parties are still acting like children with President Elect Trump calling Chuck Schumer a clown this morning and Schumer calling the plan to repeal Obamacare “Make America Sick Again.”
In the meantime I expect that with the absence of news this will catapult the dollar to new heights and continued madness by both parties gold will slowly react to no new rate hikes in the cards and head to higher ground.
Now I could still hear my mother saying, “now boys play nice.”
Author Name: Walter Pehowich
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