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Gold traded between $1,168 and $1,189 yesterday and closed up $11 an ounce at $1,182 thanks to weakness in the volatile greenback as the U.S. Dollar Index tumbled by more than a full point to finish the week at 97.80…Silver soared 62 cents yesterday to close at $16.73…Copper enjoyed its biggest daily gain since May 2013, jumping nearly 4% to close at a 10-week high of $2.74…Crude Oil added more than $1 a barrel to $46.57…

Commodity gains yesterday were aided by a sharp rise in the Chinese yuan…it enjoyed its best week against the dollar in more than 7 years after China’s central bank reportedly drove the currency higher in a bid to squeeze out speculators…

A sentiment shift in Gold has occurred, so a positive finish to the month is likely in the cards, thanks primarily to the dovish tone from the FOMC Wednesday…this is reflected in charts (see below) and through a Bloomberg survey that shows Gold traders are the most bullish since the week ending January 2…

This is a special Saturday morning “Market Musings” due to travel yesterday…our regular Week-In-Review And A Look Ahead will be posted tomorrow, followed by BMR Morning Market Musings during its regular time slot again Monday…

Oil Update

Not that this will translate into production decreases anytime soon, but U.S. drillers cut the number of rigs drilling for Oil by 41 this past week to 825, the lowest total rigs since March 2011, according to the latest survey by Oil services firm Baker Hughes…the number of Oil rigs this week declined for a 15th week in a row, matching the longest streak for Oil rig reductions set in March 2009…

Meanwhile, this should come as no surprise – the increasingly radical Obama administration yesterday issued comprehensive rules on hydraulic fracturing, trying to set a national standard for the controversial drilling practices that have helped fuel the U.S. Oil and natural gas boom…yesterday’s move sparked immediate criticism from energy companies that claimed the rules, regarding federal lands, are too onerous…two industry groups filed a lawsuit minutes after the announcement, seeking to block the rules in a federal court…

U.S. Dollar Index On The Retreat

The key theme in the markets since last summer has been the fastest rise in decades in the U.S. Dollar Index which finally seems to have hit a wall – temporarily at least – at the psychologically important 100 level…the pullback started Wednesday after the Federal Reserve surprised many traders with a less optimistic assessment of the country’s economic health, throwing into serious doubt expectations of a June increase in interest rates and pushing the dollar lower…

The Fed’s statement didn’t specifically address the dollar but took an indirect swipe at the greenback by highlighting the fact that “export growth has weakened…inflation has declined further below the Committee’s long-term objective”…and the “Committee continues to monitor inflation developments closely.”  

Importing Deflation

With such a huge move in the Dollar Index since last summer, the U.S. is now importing deflation or “disinflation” which runs counter to the Fed’s objective of seeing inflation ramp up to the 2% level…ironically, it seems that the higher the Dollar Index goes due to the anticipation of a Fed rate hike, and the perception that the U.S. and the rest of the world are on very different monetary paths, the less likely a rate hike might actually be this year…the Fed is clearly concerned about the potential negative affects of a runaway dollar, so will they be able to keep the greenback in check?…that remains to be seen…

Chart Developments

Technically, the dollar has started a consolidation pattern that may resemble the ones that occurred last October and from late January through most of February this year…it’s possible the correction could be deeper than the previous two, but that will be dependent on economic numbers that flow in over the coming weeks including upcoming important CPI data…

Superb support for the Dollar Index exists from the rising 50-day moving average (SMA), currently at 95.31, and the 96 level which earlier was important Fib. resistance…look for the RSI(14) to find support at the 50% level as it has throughout its run…a break below that mark would signal the likelihood of a deeper correction…

Rebound In Euro Underway

The latest euro chart confirms that the Dollar Index has put in a temporary top (we emphasize “temporary” because the dollar bulls could easily go on the march again in a few weeks or a month or two)…

This 20-year monthly chart shows the euro in a downsloping flag for the past 7 years…this past week, it found support – as expected – at the bottom of that flag with oversold RSI(14) conditions also at previous support…

So a rally in the euro appears to be in the works…it closed Friday at 108, enjoying its best week in more than 3 years, and the next Fib. resistance levels on this chart are 113 and 122…

Gold 2.5-Year Weekly Chart

The $1,150 support level for Gold has held, for now at least, and a near-term rally to the 50-day SMA in the mid-$1,220’s can’t be ruled out…RSI(14) is on the upswing – Gold is emerging out of a downtrend that started at the late January high of $1,308 when bullion hit the top of the downsloping flag on this 2.5-year weekly chart…

Yesterday’s Markets

Asia

China’s Shanghai Composite made a sudden surge in the afternoon session, charging 1% to close at its highest level since May 2008 – 3617…Japan’s Nikkei, meanwhile, edged closer to the 20000 level as it finished up 86 points at 19560…

Europe

European markets posted broad-based gains yesterday with the FTSE closing above 7000 for the first time…

North America

The Dow climbed 169 points yesterday to close at 18128 while the Nasdaq finished above the 5000 level, just 23 points shy of matching its 15-year high…

In Toronto, the TSX gained 68 points while the Venture added 4 points to close at 671…very late in yesterday’s session, Doubleview Capital (DBV, TSX-V) reported that it has closed the first tranches ($570,000) of a financing, so this should allow DBV to immediately get back to work on the Hat Project and follow-up on Hole #23 and an emerging reinterpretation of the Gold-rich Copper porphyry system there…

Copper Fox Metals Inc. (CUU, TSX-V) Update

Intriguing activity in Copper Fox Metals (CUU, TSX-V) which has doubled over the last 12 sessions after closing yesterday at 28 cents…this certainly demonstrates that “bargain hunters” have undervalued northwest B.C. porphyry plays on their radar screens…last Tuesday, Copper Fox announced a $4.8 million 2015 program to advance its Schaft Creek joint venture project which features nearly 1 billion tonnes of proven and probable reserves…this year’s work will focus on geotechnical/geometallurgical modelling and domain definition, evaluation of key economic drivers, and exploration of the LaCasse Zone (1,500-m drill program)…

Suddenly, for the first time in 3 years, Copper Fox has convincingly broken out above its 200-day SMA which has also reversed to the upside…this represents a major trend change…the question is, why now?…

Kootenay Silver (KTN, TSX-V) Update

Kootneay Silver (KTN, TSX-V) has a high-quality exploration play unfolding with its La Negra Silver discovery, contained within the Promontorio mineral belt in Sonora, Mexico…we all know how prolific Sonora is as a mineral region…the La Negra breccia discovery is situated approximately 6.5 km north of Kootenay’s flagship Promontorio Silver resource, and a 30-hole follow-up drill program commenced about a month ago…

Technically, KTN is on the edge of a potential significant breakout as you can see in this 3-year weekly chart…

Note:  John holds a share position in CUU.  Both John and Jon hold share positions in DBV.