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Daily Analysis: Gold Tops $1300 on Mixed US Numbers

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Friday Market Recap

Asset Current Value Daily Change
S&P 500 2453 0.13%
DAX 12991 0.07%
WTI Crude Oil 51.05 0.85%
GOLD 1304.00 0.58%
Bitcoin 5712 7.49%
EUR/USD 1.1813 -0.15%

The eagerly awaited Retail Sales and CPI reports came out today, and the US economy delivered a mixed bag, with inflation lagging expectations but core retail sales beating the consensus estimate. The market clearly focused on the CPI miss, as Treasuries rallied, rate hike expectations plummeted, the Volatility Index (VIX) hit another record low, and gold continued its rally. The precious metal is headed to the weekend above the $1300 level again, with the long-term uptrend remaining dominant, despite the widespread bullish trend in risk assets.

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Equities remained very quiet, at least in the US, with the major indices drifting sideways all day long, with a slight bullish bias thanks to the outperforming Nasdaq. The Japanese market continued its rally, with the Nikkei gaining 1% and hitting yet another two-decade high in the process. Europe remained inside a very narrow trading range, with the DAX and the EuroStoxx 50 both being only a tad below their recent highs.

DAX, 4-Hour Chart Analysis

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Currency markets settled down after the previous hectic sessions, but the rally continued down under, with the Aussie and the Kiwi adding to their recent gains. The Yen also continued to drift higher, and the Pound outperformed both the USD and the Euro in the choppy environment. Oil, especially the Brent contract, bounced back after yesterday’s decline, as the Iraqi-Kurdish standoff near Kirkuk made energy investors nervous.

AUD/USD, 4-Hour Chart Analysis

Cryptocurrencies

Bitcoin continued its explosive break-out move today, setting the tone for the whole segment, but Ethereum, Monero, and Litecoin also joined the rally with near double-digit gains. The price of the ETH token got a boost from the progress of the Byzantium upgrade, while LTC and XMR likely concluded their deep corrections and could be resuming their uptrends, with Dash also flexing its muscles near the $300 level. Ripple is still trading in its short-term consolidation pattern while NEO and IOTA are lagging the other majors and ETC struggling with the $12.50 level ahead of another possibly busy weekend for the segment.

ETH/USD, 4-Hour Chart Analysis

Key Economic Releases on Friday

Time, CET Country Release Actual Expected Previous
2:30 AUSTRALIA RBA Stability Report
Tent. CHINA Trade Balance 193 bill 266 bill 287 bill
14:30 US Retail Sales 1.6% 1.5% -0.2%
14:30 US CPI 0.5% 0.6% 0.4%
16:00 US UOM Consumer Confidence 101.1 95.4 95.1

Key Economic Releases on Monday

Time, CET Country Release Expected Previous
3:30 CHINA CPI 1.6% 1.8%
3:30 CHINA PPI 6.3% 6.3%
14:30 US Empire Manufacturing Index 20.3 24.4

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Analysis

Technical Analysis: Litecoin Continues Surge as Bitcoin Tests Highs

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With the crypto world being focused on the historical futures launch, the major coins all enjoyed buying following a hectic weekend, and a volatile week as a whole. BTC itself got another boost from the widespread publicity and the volatile correction of the recent days ended, with the most valuable coin bouncing back towards its all-time high.

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While the long-term picture remains severely overbought, the short-term picture is not stretched and further gains are possible even amid the elevated correction risk. That said, investors should wait for a more favorable entry point to ad dot their holdings, while traders should control position sizes in the light of the long-term setup. Major support levels are now near $13,000, $11,300, and $10,000, with stronger levels still at $8200 and $7700.

BTC/USD, 4-Hour Chart Analysis

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The major altcoins are all up today, but only Monero and Litecoin are still within short-term uptrends, and the segment as a whole is still dangerously overextended, and a deeper correction is very likely in the coming weeks. LTC continued its recent break-out, getting close to the $200 level, and joining the extremely overbought group regarding the long-term momentum, and triggering a long-term sell signal in our trend model. Key support levels are found $100 at $75 and $64, with a weaker primary level at $125.

LTC/USD, 4-Hour Chart Analysis

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Long-Term Analysis of the Silver Market

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Silver

The silver market has once again caught investors’ interest as the price is nearing areas not seen since late 2008.

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2017 started at a low point for silver, and it seems it will end the year that way as well, meaning investors who bought at the beginning of the year haven’t suffered nor gained much.

This doesn’t mean, however, that the price hasn’t moved during the year. After the low start of the year, silver quickly tacked on about 18% to a top of $17.50 per ounce.

In terms of fundamentals in the silver market, things look a bit complicated for 2018. There are multiple forces pulling in different directions for the price of silver going forward:

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Positives

  • A sharp stock market correction can be expected to occur some time in 2018. Most likely, this will happen sooner rather than later. Stock market crashes always trigger a flight to safety, meaning gold, silver, and quite possibly bitcoin, can benefit.
  • We are seeing signs that inflation may be starting to rise again, although this is not confirmed yet. Rising inflation is always good for precious metals.
  • If the US federal budget deficit widens as a result of the new tax reform, the US dollar may suffer as a consequence. Goldman Sachs put out a note to investors in November 2017 saying that the US debt is “on track” to reach an “unsustainable” level in coming years. Fed Chair Janet Yellen has also said about the US debt that it is “the type of thing that should keep people awake at night.” Rising debt levels creates uncertainty about the economy, which is generally good for gold and silver.

Negatives

  • Central banks around the world seem committed to raise interest rates in 2018. Rising interest rates are bad for precious metals because it would make it more attractive to put money in the bank.
  • The cryptocurrency bull market is on track to continue, diverting attention and capital away from precious metals as a traditional store of value. However, this one is uncertain, as it may also be considered a positive in the way that the rise of cryptocurrencies brings the inflationary and unsustainable nature of fiat currencies into focus.
  • The US dollar may have hit a bottom in 2017 and trade higher compared to other major fiat currencies going into 2018. A stronger dollar is always bad for precious metals, which are priced in dollars.

Silver chart

When looking at the chart, we can see that silver is back down to were it started the year, which coincides with a major support area where it has turned several times in the past few years.

From a technical perspective, silver has been trading in a triangle pattern on the longer-term weekly chart, with the price now trading very near the lower end of the triangle, adding confluence to our bias that silver will trade up from here.

Silver failed to live up to our prediction from early 2017, and is now even trading well below the level from that time.

A low price by any measure combined with two major technical support levels adds confidence to our trade and makes silver a low risk and potentially high reward trade for 2018.

Depending on your own strategy and investment style, you may want to wait for the price to break out from the current triangle pattern it has been trading in for the past year and a half. You would then give up some of the potential return for an even safer trade. After that, major resistance is found around $17.50 and $18, with lots of upside potential if we can finally break through those levels.

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Analysis

Long-Term Cryptocurrency Analysis: Look Out Below?

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After last week’s observation that a major top is in or near in the segment, the Bitcoin surge continued for almost a week, with Thursday’s wild session taking the coin as high as $19,000 (the article uses Bitstamp prices) on some exchanges. While the currency already pulled back by more than 20% the long-term picture is still extremely overbought and a much deeper correction is likely in the coming weeks.

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BTC spiked below $13,000 today, violating the primary weak support at $13,300, with further levels now at $11,300, $10,000 and $9000, but stronger support only found at $8200 and $7700. Next week’s futures launch could cause another jump in trading activity, and volatility is expected to remain very high amid the likely correction.

BTC/USD, Daily Chart Analysis

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While not all altcoins participated in the, supposedly, last part of the rally, IOTA, Monero, and towards the end of the week Litecoin, also stretched above all conventional targets with IOTA also turning exponential after a deal with Microsoft. The coin exploded by more than 350% before entering an initial sharp correction, breaking the steepest short-term uptrend. Strong support is only found at $3 and $1.5, but potential Fibonacci support is at $2.35.

IOT/USD, Daily Chart Analysis

Let’s see how the long-term charts of the other altcoins look after the crazy week.

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