PM End of Week Market Commentary - 1/13/2016

davefairtex
By davefairtex on Sun, Jan 15, 2017 - 4:35am

 

On Friday gold rose +2.00 to 1197.10 [+0.17%] on moderately heavy volume, while silver rose +0.04 [+0.21%] to 16.84 on moderate volume.

This week the star performer was copper - not a PM per se, but copper is often relatively well correlated with the PM group.  Most of the PM group is now above the 50 MA, which is a bullish sign.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Copper $COPPER 6.35% 36.30% rising rising rising rising ema9 on 2017-01-04 2017-01-13
Junior Miners GDXJ 3.56% 102.54% rising falling rising falling ma50 on 2017-01-05 2017-01-13
Silver Miners SIL 3.13% 117.66% rising falling rising falling ma50 on 2017-01-09 2017-01-13
Gold $GOLD 2.06% 11.03% rising falling falling falling ma50 on 2017-01-12 2017-01-13
Silver $SILVER 1.94% 21.55% rising falling rising falling ema9 on 2017-01-03 2017-01-13
Platinum $PLAT 1.56% 18.08% rising falling rising falling ma50 on 2017-01-04 2017-01-13
Senior Miners GDX 1.56% 73.19% rising falling rising falling ma50 on 2017-01-04 2017-01-13

Gold moved higher five days out of five, up +24.20 or +2.06%, briefly making a new high of 1207.20 on Thursday.  However, gold was never able to close above round number 1200.  None of the days were particularly eventful, it was just a slow and steady move higher.  During the week, the buck dropped -1.01%, moving down 4 days out of five. In my opinion, the drop in the buck greatly assisted the move higher in gold.

On the chart, we see gold has finally managed to close above its 50 MA which is a bullish sign.  Of course the problem is, the chart pattern looks quite similar to the one from early November 2016, just before the election.  If the buck reverses higher next week, the commercials (who have been quieter than I had expected during the recent move) will probably come out of the woodwork.  The rising volume is a bullish sign.

The May rate-increase chances rose to 33%.

COMEX GC Open interest rose +16,883 contracts – likely commercials going short.

Silver followed gold higher, making a new high to 17.02, but like gold silver was not able to close above its round number 17 either. Silver rose four days out of five, under-performing gold; this resulted in the gold/silver ratio rising slightly, up +0.09 to 71.11. Silver ended the week right at its 50 MA, with the decline in the 50 more or less matching the rise in the price of silver. As with gold, this move up to the 50 makes me a bit nervous. So far so good, but I really want to see a conclusive move above the 50 before breaking out the party hats.

The senior miners chopped sideways in a trading range this week, with GDX rising +1.56%, while GDXJ rose +3.56%. Miners endured a fair amount of selling this week; normally miners would have broken higher in a rising gold price environment. The GDX:$GOLD ratio declined, which is bearish. Its hard to tell which way the miners will break, but at least as of this week, they aren't looking as though they were leading PM higher.

USD

The buck fell four days out of five, dropping -1.03 to 101.16, ending the week right at its 50 MA. This week there were several days with some huge trading ranges, all of which ended on bearish notes. If the buck continues moving lower, we should see a gold rally. Whether the miners follow along, that's another matter. If the buck loses the 50 MA, it should see support at round number 100. Both the Euro and the Yen appear to have put in lows, with the Euro looking strongest – it closed the week right at its own 50 MA. Euro really needs a close above the 50 to keep things moving higher.

Last week's “dollar-positive” payrolls report turned out to be just a head fake.

US Equities/SPX

The US equity market ended the week down -2.34 to 2274.64, chopping sideways, ending the week just above its 9 EMA. SPX looked as though it might sell off on Thursday, but instead rallied back printing a bullish-looking takuri line candle which was (not so enthusiastically) confirmed on Friday.

VIX fell -0.09 to 11.23 – mostly unchanged on the week.  Puts remain very cheap; put-buys around 11 have generally done fairly well over the past few years.

The sector map shows consumer discretionary in the lead, with REITs and energy deep in negative territory.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Gold Miners GDX 1.56% 73.19% rising falling rising falling ma50 on 2017-01-04 2017-01-13
Cons Discretionary XLY 0.77% 15.01% rising rising rising rising ema9 on 2017-01-04 2017-01-13
Technology XLK 0.53% 22.68% rising rising rising rising ema9 on 2017-01-03 2017-01-13
Materials XLB 0.49% 30.27% rising rising rising rising ema9 on 2017-01-04 2017-01-13
Homebuilders XHB 0.38% 14.27% rising rising rising rising ema9 on 2017-01-13 2017-01-13
Industrials XLI 0.13% 27.67% rising rising rising rising ema9 on 2017-01-10 2017-01-13
Telecom XTL 0.09% 37.43% rising rising rising rising ema9 on 2017-01-13 2017-01-13
Healthcare XLV -0.04% 4.57% rising rising rising rising ma200 on 2017-01-11 2017-01-13
Financials XLF -0.13% 32.14% rising rising rising rising ema9 on 2017-01-13 2017-01-13
Utilities XLU -0.66% 10.75% rising falling falling rising ema9 on 2017-01-11 2017-01-13
Cons Staples XLP -1.15% 4.99% falling falling falling falling ma50 on 2017-01-10 2017-01-13
Energy XLE -1.99% 32.89% falling rising rising rising ema9 on 2017-01-05 2017-01-13
REIT RWR -2.48% 6.21% falling rising falling rising ema9 on 2017-01-10 2017-01-13

Gold in Other Currencies

Gold rallied in every currency this week, with biggest gains in GBP: +51. Gold rose +24 in USD.

Rates & Commodities

TLT rose +0.37%, making a new high this week, managing to cross the 50 MA and remain above it – but only by a relatively slim margin. While the rally last week was fairly strong, this week's move was much more of a side-tracking affair.

JNK climbed +0.11%, a new high for this cycle. JNK remains above all 3 moving averages and in a strong uptrend.

CRB rose +0.52%, making a new high. CRB is also in a strong uptrend. 4 of 5 commodity groups rallied this week; energy was the only group that fell.

Crude fell -0.92 to 53.04, with a large drop on Monday and Tuesday dominating the price moves on the week. Crude was able to regain its 9 EMA later on, but a drop on Friday has the chart looking a bit weak going into the weekend. Crude did manage to rally even with a fairly bearish petroleum status report – that's a major plus – but the chart isn't looking all that great.

Physical Supply Indicators

* SGE premium to COMEX fell to $15 over COMEX. The rally in gold has cut the premium at SGE in half.

* The GLD ETF tonnage on hand fell -5.63 tons, with 808 tons in inventory.

* ETF Premium/Discount to NAV; gold closing of 1197.10 and silver closing of 16.84:

 PHYS 9.82 -0.24% to NAV [up]
 PSLV 6.40 -0.05% to NAV [up]
 CEF 12.17 -6.57% to NAV [up]

* Bullion Vault gold (https://www.bullionvault.com/gold_market.do#!/orderboard) showed no premiums for gold, and a 1% discount for silver.

* Big bar premiums are higher for gold [2.12% for 100 oz bars in NYC], lower for silver [+2.99% for 1000 oz bars in NYC], and higher for silver eagles at +17.70% [NYC].

Futures Positioning

COT report covers trading through Tuesday Jan 10th, when gold closed at 1187.60 and silver 16.82.

In gold, commercials added +8k shorts, and managed money closed -11k shorts and add +8k longs. In large part, this week's rally in gold was about short covering. Managed money short positions have dropped to about 80k contracts; plenty of fuel for a rally remains, as a top might be found when the aggregate shorts drop to about 30k contracts.

In silver, commercials added +2.1k shorts, while managed money closed -1.4k shorts and added +3k longs. The less-enthusiastic silver rally was more about longs adding exposure, which makes sense, as there aren't very many managed money shorts out there right now to cover.

Gold Manipulation Report

There no spikes seen this week.

Summary

PM continued moving higher this week, greatly aided by the falling dollar. About half of gold's move was a currency effect.  What's more, gold outperformed silver, which isn't ideal, and the miners more or less just chopped sideways.  Copper was the star, up 16 cents to 2.71 and is looking to break out to new highs.

Gold COT still looks bullish, with managed money owning 80k short contracts. Silver has a small managed money short position, but managed money is going long silver, and as long as that continues to happen, silver should keep moving higher – managed money long positions have quite a while to go before they start looking overly concentrated.

Gold and silver big bar shortage indicators still show no signs of shortage in the west; ETF premiums rose this week, while GLD tonnage fell.  In Shanghai, premiums have fallen, and are now at $15. That's still bullish, but the rally in gold has cut the Shanghai premiums in half.

Both gold and silver are now at the 50 MA. If the buck continues to sink, PM should cross the 50 and continue moving higher but if the buck should start to rebound, I expect the commercials to come in with enthusiasm and push price lower.  COT still looks good for gold; the test will come when the buck has a good day.   If gold manages to avoid selling off too hard, that means the uptrend will probably continue.

Note: If you're reading this and are not yet a member of Peak Prosperity's Gold & Silver Group, please consider joining it now. It's where our active community of precious metals enthusiasts have focused discussions on the developments most likely to impact gold & silver. Simply go here and click the "Join Today" button.

5 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5423
gold breakout: +18.40 to 1214.50

Gold silver, and crude are breaking out in Asia right now - a falling dollar seems to be helping quite a bit. Gold made a new high of 1218, and silver's new high to 17.12.  SPX is off -11, which is probably helping gold to rally too.

I'd expect the first 30-60 minutes of trading in NY to be quite bullish for the miners, assuming gold stays around this price through the open.  Its what happens after that is the key.  The first hour is "retail enthusiasm" with the critical period happening in the last 30 minutes of the day.  In recent months, miners have gapped up at the open, and then sold off after the first 30-60 minutes.  If they avoid this fate today, that will be a good sign, especially if miners keep their gains into the close.

 

RPSTemple's picture
RPSTemple
Status: Member (Offline)
Joined: Jan 24 2012
Posts: 9
Re Gold Breakout

From the $ perspective gold is up. From £ sterling it is down 1.5% today and is now trading lower than it lowest point at any time yesterday.  The dollar seems to be falling. From my point of view it is a currency effect.

RPSTemple's picture
RPSTemple
Status: Member (Offline)
Joined: Jan 24 2012
Posts: 9
Re Gold Breakout

From the $ perspective gold is up. From £ sterling it is down 1.5% today and is now trading lower than it lowest point at any time yesterday.  The dollar seems to be falling. From my point of view it is a currency effect.

I should add I do not know what Teresa May said this morning, but I noticed that the £ started to climb about the time she was scheduled to be speaking on Brexit.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 364
Action

So what's driving the sweet action in PMs today?  Can it all be a currency effect?  The dollar is getting clobbered.  Stocks are selling off and bonds are hanging in there.  But with an hour to go, gold is up roughly $20 and silver is killing it...over $17 now.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5423
currency effect

Yes, I think its mostly a currency effect.  Buck (at least today) was down -1.30, which is a huge move.  I do think the commercials could be assaulting managed money shorts too, but it doesn't look like some major move back into PM.  Miners just didn't do all that well.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments