Gold prices were up about 1% yesterday to $1,466 an ounce. Silver tacked on 1.99% to $24.23 an ounce. Copper was selling at $3.23 — up 1.29%, and West Texas Crude was up 1.28% to $94.19.
The dollar was down 0.40%.
As you know, metals and the dollar tend to move in opposite directions.
Below is the PowerShares DB US Dollar Index (NYSE: UUP).
The greenback has been falling for the better part of five years.
No wonder gas is at $3.50…
The dollar is down as gold has gone up. The chart shows UUP is trading at the top of its range. It is also in a pennant, or flag, formation.
Look for the dollar to trade in an ever-tighter range for the next few months, dropping back to below 22 then bouncing back up until it breaks out (up or down) with authority.
Expect higher volatility in gold and silver until this breakout occurs.
Short-term traders should buy on the low trend line and sell on the top, and be quick to take profits on both up and down moves…
The dollar was down on Monday because of expectations that the European Central Bank will become ultra-accommodative (that is they will cut rates and print money).
The U.S. Federal Reserve is also going to announce monetary policy this week. The market won’t expect a change in U.S. rates, as inflation is low and spending acceleration is off (0.2% growth in March from 0.7% growth in February).
It is counterintuitive that more euros would raise the value of the euro, but no one ever claimed the market was logical. The thinking goes the stimulus will boost the Eurozone economy and create growth.
(I should mention that 23 years of stimulus and money-printing in Japan has done nothing but create the heaviest debt load in the known universe, unmitigated stagnation, and public works in the middle of nowhere.)
Indians Buying Gold
There are reports across the media that Indians have used the sell-off two weeks ago to buy up silver and gold at a discount.
According to Bloomberg:
Gold consumers in India, the world’s biggest importer, thronged jewelry stores across the country for a second week on speculation that bullion may extend a rally after the biggest plunge in three decades.
“We waited for sometime to see if prices will fall more but when we saw them moving up again, we decided it’s time,” said Sripal Jain, a 77-year-old silver dealer who came with his younger brother, daughter and daughter-in-law to buy gold necklaces at Mumbai’s Zaveri Bazaar.
“We don’t have any wedding or occasion coming up. The rates fell, so we decided to buy.”
There is such a rush that physical gold is trading at a $10 premium to the spot price in India, as compared with a $2 premium just a few weeks ago.
Additionally, the Akshaya Tritiya holy day is May 13. This is when 900 million Hindus buy precious metals.
Singapore Silver
In Singapore, last week’s drop in silver prices has caused a run on the physical metal.
Inventories are depleted and waiting times have doubled. At one large silver retailer, holdings of bars fell to just 54 ounces from 60,000 ounces in two and a half weeks.
The Perth Mint is meeting supply in Asia by ramping up production as quickly as possible.
Apple Calls
Last Thursday I told you in this space that Apple would bounce. As I write this, it is up to $432.03 from a low of $385.10. (If you bought calls, you should sell them. We are at the top of the down trend.)
That same day I suggested silver was going back up…
Readers of Options Trading Pit are now up 66.15% in three trading days. We will likely have sold them by the time you are reading this.
We will bank some cash and wait to buy the next dip.
All the best,
Christian DeHaemer
Check us out on YouTube!Christian is the founder of Bull and Bust Report and an editor at Energy and Capital. For more on Christian, see his editor’s page.
