Gold broke-out on Monday, and silver broke-out even more, but will their price advances hold?
This is turning out to be a challenging week for the markets, and it really has that "hope for the best, prepare for the worst" feel to it.
Fundamentally speaking, this is the way it has been across society.
For example, the coronavirus death toll in the US keeps climbing higher, but many, including President Trump, are hopeful that the virus will peak, possibly even this week.
On Main Street, many businesses are having to deal with shutdowns, stay-at-home orders, and other types of business disrupting actions, but the Paycheck Protection Program has begun, and the Small Business Administration is now providing financial relief to small businesses.
When it comes to the People, we have some healthy dialogue going back and forth among the experts with regards to finding the proper balance between public health and economic activity.
The markets have been taking all of these fundamentals in stride, leaning more towards what could be called "guarded optimism".
For example, the Dow surged on Monday, and surged again on Tuesday, only to have second thoughts and give back Tuesday's gains:
The question is, what's driving the stock market right now, the technicals, or the fundamentals?
The VIX has temporarily settled on 45:
If the guarded optimism wins out this week, the fear gauge could be setting up for a move lower, but if the optimism turns into uncertainty, we could be setting up for a move higher just the same.
Yield on the 10-Year Note has been range-bound for a couple of weeks:
Call it between 0.6% and 0.8%,
While the US Dollar Index is sitting pretty much on top of 100:
Some people are going to be very happy with the dollar's next move, and others are going to be rather upset, because with moves like the dollar index has made lately, having a stake in one direction or another has got to be nerve-racking.
Crude oil's price swings are reflecting the uncertainty about possible OPEC+ production cuts:
Storage capacity, however, if filled to maximum capacity, could force everybody to cut production since there is only so much crude oil that can be stored above ground.
Copper could be sniffing out some upcoming infrastructure projects:
Federal politicians in Washington are beginning to look at a national infrastructure program as a way to accomplish many things - to repair national, public infrastructure, to stimulate economic activity and the economy, and to provide shovel-ready jobs, and one could only imagine that other nations are thinking similar things with regards to their own fiscal stimulus programs via public works.
Platinum looks very interesting here:
Platinum has been lagging gold and palladium, and now, sitting under $750 without having a significant break-out of its own on Monday, deeper-pocketed investors are likely taking a good look at platinum.
After breaking out to $2200, palladium has been range-bound between, call it, $2050 and $2250:
Palladium even tested its 50-day moving average yesterday before retreating.
The price of gold rose on Monday and kept on rising well into the evening:
At multi-year highs, if gold closes out the week above $1700, that would surely get the attention of savvy investors, but if gold closed out the week above $1750, it would be hard to not see that as bullish.
Regardless, there seems to be some nice support that's built-up at $1650.
Gold hasn't been the top performer, however, as reflected in a gold-to-silver ratio that's fallen from its recent highs to below 110:
Of course, that's the paper futures market gold-to-silver ratio and not representative of what a person can actually trade one ounce of gold for.
Silver prices broke-out above $15 on Monday:
More importantly, we've held the level, and continue to do so.
Thanks for reading,
Paul Eberhart
