Silver Spikes to $62.89 on Fed Cut – But Weekly Bearish Divergence Flashes Caution: Don’t Chase, Wait for the Dip 
Stay long in Apr’17 CME gold Earlier in January we closed our long gold trade recommendation in order to lock in profits ahead of the largely uncertain risks around Trump’s inauguration and the kick-off of his presidency. Obviously, both those immediate catalysts have passed but arguably, much of the uncertainty remains. Yet, from our perspective now, we view this lingering ambiguity as a potential extra accelerant to a near-term, fundamental based rally in gold.
On treasuries, our Fixed Income research team reiterated their view last week that “there is room for yields to decline over the coming weeks” given their skepticism on large-scale fiscal stimulus and the potential for growth to moderate among other drivers like seasonality and stretched investor positioning to the short side.
From an FX perspective, while long dollar positioning remains material even after the retracement lower in the dollar index YTD, our analysts believe, “the broad dollar does still seem vulnerable should Trump’s first several days in action disappoint those looking for primarily growth-friendly and reflationary policies, without stoking disruption or trade-confrontation risks.”
Gold futures for April delivery on the Comex division of the NYME rose to a session peak of $1,232.20 a troy ounce, the highest since November 11th. Investors continued to pile in to gold as they eyed political risk elements, with President Donald Trump's administration on the back foot over its immigration and other policies.
Combining these macro views with the general sense of uncertainty in markets (safe haven demand) and the relatively clean investor positioning in gold—after bottoming out in early January, net managed money positioning on the CME has lengthened to around 60,000 contracts long this week, still well off an average of ~153,000 contracts long last quarter—compels us to recommend going long the Apr’17 CME gold contract.
Hence, we advocate adding longs in Apr’17 CME gold at a spot price of around $1,233/oz. Trade target is $1,285/oz with a stop loss at $1,178/oz.
