GOLD PRICES RISE ON RETURNING RISK-OFF SENTIMENT

Cassie Bastien

1/31/2017 9:58:00 AM

Daily Gold & Silver Market Report – 01/31/2017

As U.S. equity markets dropped and the U.S. dollar index weakened Tuesday morning, EconomicCalendar.com’s Tracy Morganthall says Gold prices benefited from a return to a risk-off sentiment.  Based on volume in the contracts, Morganthall said, “The front month in Gold futures has transitioned from February to April.” Equity markets and the dollar saw pressure Tuesday after President Donald Trump “issued an executive order to temporarily ban citizens from several majority-Muslim countries from entering the U.S. The order has sparked uncertainty surrounding the Trump presidency and sent investors into the safe-haven of Gold,” Morganthall reports. From the December low in Gold prices to January’s peak, there was a 20 percent rise in open interest, which indicates new money entering the market, rather than short-covering. Morganthall said, “The consistent drop in open interest that took place as Gold prices turned lower last week was also favorable for the Gold bulls. An increase in open interest reported for [Tuesday’s] advance would lend added support to the bullish case.”

OPPORTUNITY FOR INVESTORS IN PLATINUM, PALLADIUM MARKET

Palladium saw its biggest drop in more than a decade last Wednesday, which commodity expert Dennis Gartman labeled as a “violent, stunning, egregious, amazing historic collapse.” Seeking Alpha noted this drop caused them to once again look at Palladium, which they had previously sold on “expectations of a pullback in the automotive market (the big source of Palladium demand).” Although there did not seem to be any fundamental news to cause such a price drop, analysts believe the move was due to profit-taking after a more than 15 percent year-to-date gain in Palladium, which those same analysts say also had no fundamental basis. The big question here is if the metal is bullish or bearish? Seeking Alpha feels a bullish argument is much stronger because there is no reason for investors to abandon Palladium holdings but not Platinum holdings, as both are used in automotive production. Despite the large drop in Palladium and Platinum over the past week, many feel that there is a significant opportunity for investors.

TRUMP IMPACT HOLDS A SILVER LINING

As TradingFloor.com Director Steve O’Hare reports, “President Trump’s immigration restrictions continued to unsettle risk appetite on Monday, especially as worries spread over the threat of protectionist policies. Given the amount of favorable information priced in, equity markets were vulnerable to a correction.” A weaker U.S. dollar and a more defensive risk tone supported Precious Metals prices, with Gold breaking $1,200 per ounce and Silver nearing the key $17 per ounce area. O’Hare said, “A further deterioration in risk appetite would provide defensive support to Silver prices, while a recovery in risk conditions would maintain confidence in the global growth outlook, which would support Silver demand.” He added that Silver has broken through the bearish channel and expects a bullish reaction on a short-term basis.

At 10:58 A.M. (ET), the APMEX Precious Metals spot prices were:

• Gold, $1,216.00 Up $19.50
• Silver, $17.57 Up $0.34
• Platinum, $996.50 Up $4.00
• Palladium, $755.40 Up $15.40

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