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Metals Rise Between Holidays

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Metals Rise Between Holidays

gold-priceAcross all of the financial markets, most participants and traders are home for the holidays. This has left very thin volumes (and, as a result, low liquidity) on the markets. Hence, even modest moves made by a handful of traders (or simply one large institution) can have an outsized impact on prices.

By 10 am ET on Tuesday, gold held it's position, trading a modest $2 per ounce higher near $1,072/oz. After sliding more than the other metals on Monday, silver rebounded this morning, adding 11¢ per ounce to $14.13/oz. Platinum and palladium each rose by about 1.25%, settling at $895/oz and $560/oz, respectively.

Technicals and Futures

With the fairly dormant activity in precious metals trading, the key technical levels for gold are largely unchanged. By holding steady in a sideways channel for much of the last week, the gold price has held near $1,069 following a dip during the weekend preceding Christmas. Overnight trading has seen prices slip, however briefly, below this mark only to bounce right back up; this signals that current support has built around $1,065/oz and $1,060/oz. Meanwhile, resistance at $1,080/oz and $1,088/oz has not budged.

Charting-Gold-MarketAt the same time, silver has been a bit more volatile (as is almost always the case). Support remains right around $14.07/oz. If the silver price falls below this level, it could slide to its lows notched earlier this month at $13.62/oz. Similarly, key resistance levels are at the white metal's 50-day moving average (50-DMA) of $14.58, and then at the December high of $14.64/oz.

In the futures market, the precious metals increased their net long position from the week before. The long positions were slightly higher than shorts for the week of December 22nd, and both groups saw declining numbers of contracts this week (except for silver, which remains net long but trimmed this position). In other words, the shorts fell more than the longs for gold, platinum, and palladium, increasing the net bullish complex.

Influence from External Markets

However modest, the gains for the metals are also encouraging given that they occurred even as the dollar rose this morning. The DXY added 0.33% this morning to 98.25. The Greenback got some support when the trade of goods deficit widened less than expected in November, with an import-export balance of -$60.5 billion. Imports and exports of goods each fell by about 2%.

Crude oil contracts greatly trimmed their net long, moving in the opposite direction. Low oil prices remain the main driver on thin markets, and there are no signs of this trend abating until at least after the New Year.

rising marketThe fact that trading volumes are so light remains a common theme across all markets, not just gold and silver. According to Afshin Nabavi, the head of trading with Swiss firm MKS SA, “If somebody buys a chunk, it will move the market a few dollars” because “[h]ardly anybody is at the [trading] desks.”

Yet, overall in 2015, the equities markets in the U.S. actually saw their highest trading volumes since 2011. As a result, this hurt financial management firms like T. Rowe Price (NASDAQ:TROW) and Franklin Resources (NYSE:BEN) but gave a big boost to (of course) shares of firms that run trading platforms, such as E*Trade (NASDAQ:ETFC), Charles Schwab (NYSE:SCHW) and Nasdaq (NASDAQ:NDAQ).

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.

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