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$1280 Gets you $1320
Gold Today:
interactive Chart HERE
On March 27th we said that Gold had room to move and $1320 within 6 months is not a stretch by any means. So far, so good.
Plenty of Room to Move
Volumes and Open interest show the market has room to move higher. The descending red line has been pierced today. A settlement above that would be one less upside obstacle to overcome. Option expiration and the April contract could stall the rally. However, the growing uncertainty domestically, and the EU issues coming to a head (put never quite getting resolved) will continue to bolster support underneath. A six month target of $1310-$1320 is reasonable If we have healthy pullbacks and OI stays under $550k giving us a sign that "hot money" isn't pushing too hard. Healthy pullbacks would be on seeming closure in EU risks. But we all know that just is never going to be over. Any opiating EU news items are a dip to buy in our opinions. Full Post HERE
Mar 27th: Here is the chart that showed a break above the red line at $1255 was key to the rally's continuation
Gold on Mar 31 showing what had to happen for the upswing to continue. And thankfully it did.
Note the upsloping trend line coming in at the $1280 area. Gold is right up against what appears to be weak resistance. We can live with that. But it is Silver that scares us. The Producer hedging in Silver may cap the whole thing for now.
Silver Reality Check
Right now Silver is in the$18.30 area. If the market does not breach $18.54 soon, it is Sayanora. Here is Echobay's analysis after the Friday sell-off.
Silver Still Not Out of the Rough
It would seem, based on activity since friday Silver is in the clear. But we do not think so yet.
From a recent interview:
“[Silver] producers typically hedge concurrently. For the last few weeks, we saw that many producers had sell orders in the $18 area,” Lanci said.
He went on to add more caution, “Based on our industry contacts and a large sale of June $21.00 calls in February before the $18 level wash out soon after, we do not think silver will breach $21.00.”
He added that banks know about these orders and are tempted to sell ahead of producer hedges. “This is a recipe for a violent rejection lower, as we are seeing today. But it is not the first time.”
Above $1854 Should be a Rocket Ship Ride
According to Lanci’s research, silver has a tendency of rejecting the $18 area “quite violently,” although he added that “rejection” does not always mean lower prices.
“If too many shorts front-run the producer sales, and an event like Brexit occurs as in July 2016, the rally can be a disaster for shorts. When silver pushed back to $18 in July 2016, those producer hedges were gobbled up by fresh money and the shorts were bagged and tagged,” he explained. “There was little to stop silver from rallying as high as it did. That was a bonafide short squeeze by players who got cut front running producer hedges.”
Good Luck
Silver as of this Post
About the Author:
Vince Lanci has 27 years’
experience trading Commodity Derivatives. Retired from active trading in
2008, Vince now manages personal investments through his Echobay
entity. He advises natural resource firms on market risk. Over the
years, his expertise and testimony have been requested in energy,
precious metals, and derivative fraud cases. Lanci is known for his
passion in identifying unfairness in market structure and uneven playing
fields. He is a frequent contributor to Zerohedge and Marketslant on
such topics. Vince contributes to Bloomberg and Reuters finance articles
as well. He continues to lead the Soren K. Group of writers on
Marketslant.
- Twitter: VlanciPictures
- Website: Echobay.com
- Email: vlanci@echobay.com
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