PM Daily Market Commentary - 8/11/2016

davefairtex
By davefairtex on Fri, Aug 12, 2016 - 3:33am

Gold fell -7.40 to 1340.10 on moderately light volume, while silver dropped -0.22 to 20.00 on heavy volume.  Currency once again was the driver - a late-day rally in the buck seemed to cause problems for both gold and silver.

Gold tried rallying today, managing to hit 1360 at one point, but once the buck bottomed out at around 11am Eastern, gold was sold for the rest of the day, closing near the lows.  Candle print for gold was bearish; it was (take your pick) a two-candle swing high, a bearish engulfing, or a confirmed bearish shooting star.  That all sounds fairly unpleasant, but the patterns were all fairly low-rated: maybe 23-33% chance of marking a high.

Gold is back below the 9 EMA.  Yesterday's failed rally is starting to look slightly more ominous, but gold remains within the trading range bounded by 1310 on the bottom and approximately 1375 on the top.

Gold open interest fell by -1,150 contracts today.

Silver managed to avoid a disagreeable candle print; today it printed just a long black candle which doesn't give us much of a clue about direction.  Silver remains within the middle of its recent trading range, with support at 19.25.

Both miner ETFs rallied to new highs today, but sold off after gold started its downhill slide after 11am.  GDX was down -0.83% on light volume, while GDXJ fell -1.07% on moderate volume.  Candle print today was a slightly bearish spinning top, which looks a bit like a shooting star but the upper shadow isn't quite long enough to qualify.  Miners remain near their highs, and above the 9 EMA.

Platinum fell -3.14% and printed a bearish-looking two candle swing high (42-64% of a high), palladium tumbled -4.76% and also printed a swing high, while copper rose +0.92%, providing one bright spot on a generally bad day for the metals.  The big moves in platinum and palladium are curious - especially palladium, which had a very large selling day today, a total reversal from the strong rally we saw yesterday.  These large moves might be a bearish "tell" for PM overall.

The USD rose +0.22 to 95.80.  Right now gold appears to be very sensitive to moves in the buck.  These effects come and go, but right now that's where things seem to be, and the buck appears to be struggling to set a direction - and so gold is being pushed around accordingly.

WTIC shot higher today, up a big +1.97 [+4.75%] to 43.46, completely wiping out yesterday's big drop, making a new high, and printing a stronger-than-average bullish engulfing candle pattern (45-57%).  News articles allege this was because of bullish-sounding comments by the Saudi energy minister who talked about a possible agreement to "stabilize prices" at an upcoming OPEC meeting in September, as well an IEA monthly report released today that forecasts a large inventory draw coming in 3Q 2016.  Which was decisive?  I have no idea.  What we care about is the big price move, which entirely negates the bearish swing high that appeared after the US petroleum status report.  Today's move is in-line with the bullish COT report which shows that managed money is leaning heavily short.

SPX rose +10.30 to 2185.79, setting a new all time high - again.  Rally was led by energy (XLE:+1.47%), which isn't much of a surprise given the strong move in oil.  Retail rallied on "good news" from Macys who beat estimates, but whose revenues were 4% down y/y; company plans to close 100 stores.  Some retail companies have taken a 50% hit to their share prices since mid-2015.  This was a "not quite as dreadful as we thought" sort of rally.  VIX fell -0.37 to 11.68.

TLT was hit for -0.89% today, printing a two-candle swing high (although this is 4 swing highs in the last 6 weeks without too much ill effect).  Bond direction is still not clear - trend is generally lower, but bonds keep trying to rally.

JNK rose just +0.17%, a new high but a very modest gain especially since oil did so well.  Maybe there is not much gas left in the tank for JNK.

CRB gained +1.36%, following the jump in oil prices.  This negates yesterday's loss, but it doesn't bring back the uptrend just yet.

Gold and silver both remain within a trading range, miners continue to make new highs, but the somewhat alarming price movement today in platinum & palladium have me wondering if that will end up pulling gold and silver lower.

Martin Armstrong has said that he would prefer to see gold drop back below 1044 prior to staging its big rally he expects to see coming in 2017-2018.  He calls this a "slingshot move" - the energy built up by a massive head-fake below 1044 would end up powering a much larger rally going forward.

https://www.armstrongeconomics.com/armstrongeconomics101/basic-concepts/slingshot-v-phase-transition/

The most bullish position for gold would not be a rally, but a SLINGSHOT to the downside FIRST. That will convince everyone it’s a bear market and then they will fight the rally exactly as they have done in the US share market. Then you will have the confirmation that it will move sharply higher. Without a SLINGSHOT, then gold must coil to create the base for a Phase Transition. We should see which will unfold by January.

The other option he sees is a sideways consolidation followed by a phase transition that occurs when the collapse in confidence in government finally passes some sort of tipping point.  He's rooting for the slingshot because "you make the most money that way."

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10 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5681
bad retail sales = a happy day for gold

Retail sales were expected to grow by 0.4% (annual rate of 4.8%) but instead they were flat, and if you subtract auto sales, they declined by -0.3%.  Retail sales is a very important indicator - that plus industrial production and payrolls pretty much defines GDP.

The buck immediately lost 0.50, and gold jumped $15 right when the report was released.

Bad economic news = good news for gold.

Is it all about the buck right now?  Well, it seems to be about rates and the buck.

At some point, it will be about confidence in government & central banking, but we aren't there just yet.

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5967
London Close = Bad day for gold
davefairtex wrote:

Retail sales were expected to grow by 0.4% (annual rate of 4.8%) but instead they were flat, and if you subtract auto sales, they declined by -0.3%.  Retail sales is a very important indicator - that plus industrial production and payrolls pretty much defines GDP.

The buck immediately lost 0.50, and gold jumped $15 right when the report was released.

Bad economic news = good news for gold.

Is it all about the buck right now?  Well, it seems to be about rates and the buck.

At some point, it will be about confidence in government & central banking, but we aren't there just yet.

Well, it started out okay for gold, but as is often the case on Friday, it seems, once the London close happened for gold it was straight to the proverbial woodshed with wave after wave of high frequency gold slamming.

You know, because such as.

So instead of being up $15, it is very suddenly down over -$7 on the day.

For reasons, because such as.

The only legitimate reason I know of for gold to get slammed on a Friday afternoon is so that nobody carries the wrong impression into the weekend about how much everybody trusts the central bankers and their associated partners in central planning.

Carry on.

 

sand_puppy's picture
sand_puppy
Status: Diamond Member (Offline)
Joined: Apr 13 2011
Posts: 2032
$5 Billion in gold contract sold suddenly

A picture of the minute to minute gold chart for today is amazing.

http://www.zerohedge.com/sites/default/files/images/user3303/imageroot/2...

22,000 contracts sold in a 10 minute period!  Amazing what you can do with paper-gold.

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5967
Also...

Also, remember to act surprised when, out of nowhere, a sudden stock buying spree initiates in the futures pit at ~3:30 pm and lifts all three indexes to new, all-time, record-er closes!

Wash, rinse, repeat.

This feels and acts like a big case of image management by the authorities at this point. 

With a raft of troubling economic data, clearly the only responsible course of action is to lift all indexes to ever higher levels, while keeping gold safely contained.

It's what I would do in their shoes too...if I were scared witless by the prospect of reality intruding into the story.

dryam2000's picture
dryam2000
Status: Gold Member (Offline)
Joined: Sep 6 2009
Posts: 293
Total Desperation by TPTB because of the election

I suspect we are only seeing the tip of the ice berg as far as manipulation goes to keep making the populace believe all things economic and financial are just grand.  Four bad economic data points today, but magically the 'markets' continue to keep chugging along & the anit-market assets such as PM's are pounded down.

The physical world always wins sooner or later.  They may be able to keep getting away with this longer than most of us can imagine, but I suspect that after the election they will have to let some of the pent up pressures loose.  Until then, all bets should be off.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5681
bid for gold

So I totally agree that the commercials were eager to push price back down again.  They've been doing that at every opportunity.  Naturally.

What I've noticed is that the bid under gold weakens every time the buck rallies.  Did any of you guys notice that the buck recovered most if not all its Retail Sales losses?  And soon after the buck had recovered, say 90% of its losses, that's when the commercials struck.

It could have been the European close too - maybe a lot of the bid is from Europe right now.  Its hard for me to tell.

But the dollar rebound was an enabler today, I think.  It weakened the bid under gold, and that weakened bid allowed the commercials free rein to hammer price lower.

Check out the candle on USD.  Its a reasonably impressive hammer candle.  I'll know more about what it all means when I get today's closing data.

If you look at many different markets, you can make connections and see a sort of "network effect" that you will miss if you just watch price movements in just one single market alone.  That's why I never like a chart that just has the price of gold that someone marks up and effectively gasps in horror that "OMG the price of gold dropped!"  I want to see what the buck did, what copper did, what SPX did, and how bonds reacted.

Money flows from thing to thing.  Sure the commercials push the price of gold around, but they are vastly more effective at doing so when money is flowing out than when money is flowing in.

dryam2000's picture
dryam2000
Status: Gold Member (Offline)
Joined: Sep 6 2009
Posts: 293
USD/JPY

 

I agree.  It's good to look at multiple variables.  Here's a nice graph.  Gold typically trades very much in lockstep with USD/JPY.  Today was quite odd.

Not only was the USD/JPY odd, but equities hit all-time highs despite 4 negative data points this morning.  Pretty much everything reversed course from the prior negative data......on no news.  It all goes along with the all is grand with the economy propaganda story.

dryam2000's picture
dryam2000
Status: Gold Member (Offline)
Joined: Sep 6 2009
Posts: 293
Graph

Finally....Here's the USD/JPY plotted against gold the for the past 72 hours leading up the smash from nowhere.

 

 
 
Again, this is not just about gold.  It's about multiple asset classes.
Coda's picture
Coda
Status: Member (Offline)
Joined: Jul 5 2016
Posts: 7
If this isn't a

If this isn't a well-coordinated intervention, I don't know what is.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5681
some confusion

I agree.  It's good to look at multiple variables.  Here's a nice graph.  Gold typically trades very much in lockstep with USD/JPY.  Today was quite odd.

Not only was the USD/JPY odd, but equities hit all-time highs despite 4 negative data points this morning.  Pretty much everything reversed course from the prior negative data......on no news.  It all goes along with the all is grand with the economy propaganda story.

I'm not sure where you get your information, but your source is confused.

First of all, gold and USD/JPY don't trade in lock step.  Sometimes they do, and sometimes they don't.  If you follow it daily, like I did for a while - or if you ran a correlation study on the daily chart at stockcharts, it would become more clear.  Silver is much better correlated than JPY, and even silver and gold don't always move in lock step.

The buck overall rallied strongly in the hours following the bad retail sales print.  The EUR/USD pair is larger than JPY (for USDX: Euro is 57.6%, JPY is 13.6%) and the Euro spiked hard on the release, and then sold off almost back to its starting point.  And AUD/USD, which is smaller but is fairly well correlated with gold long term, sold off even harder than Euro following the initial spike.  It ended the day in negative territory, down -0.64%.  This is why I say the bid for gold weakened because of currency moves.

Secondly, I'm not sure where you come up with the "equities hit all-time highs" claim today.  Looking at all four major indices (SPX, INDU, RUT, NDX) I see no new high today.  Here's an SPX intraday chart for the last 3 days.  The new high happened near the close on Thursday.  There was no new high Friday.

 

 

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