PM End of Week Market Commentary - 3/3/2017

davefairtex
By davefairtex on Sat, Mar 4, 2017 - 11:27am

 

On Friday gold rose +0.50 to 1234.90 on moderately heavy volume, and silver climbed +0.21 to 18.00 on moderately heavy volume also.

This week, all of the PM-group elements have fallen below their 9 EMA lines - for many things, this happened on Thursday.  All miner ETFs are doing significantly worse, with all miner ETFS now below all 3 moving averages.  Only copper and palladium, both of which tend to be industrial metals, remain in a longer term uptrend.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Copper $COPPER 0.89% 22.51% falling rising rising rising ema9 on 2017-03-02 2017-03-03
Palladium $PALL 0.11% 43.31% falling rising rising rising ema9 on 2017-03-02 2017-03-03
Gold $GOLD -1.84% -2.37% falling rising falling rising ema9 on 2017-03-02 2017-03-03
Silver $SILVER -2.28% 18.00% falling rising rising rising ema9 on 2017-03-02 2017-03-03
Platinum $PLAT -2.95% 5.25% falling rising falling rising ema9 on 2017-03-02 2017-03-03
Senior Miners GDX -8.00% 12.01% falling rising falling rising ma50 on 2017-03-02 2017-03-03
Silver Miners SIL -8.07% 44.99% falling rising falling rising ma50 on 2017-03-02 2017-03-03
Junior Miners GDXJ -11.37% 29.81% falling rising falling rising ma50 on 2017-03-02 2017-03-03

Gold made a new high on Monday, but then more or less fell for the remainder of the week, down -23.10 by Friday's close.  Most of gold's losses came on Thursday, with gold being pulled lower by a smash in silver that took place on that same day. Friday saw gold make new lows but a swing high in the dollar helped to pull gold prices back up to even. Candle print for Friday was a “bullish harami”, which the candle code says is very bullish, with an 84% chance of marking the low.

The May rate-increase chances rose to 82%; the March rate-increase chances are at 80%. A flock of Fed officials appeared this week and dropped pointed hints to let us all know that they were likely to raise rates in March. One would think this would be uniformly dollar positive, but things appear to be more complicated than that.

COMEX GC open interest fell -12,148 contracts.

Silver was outperforming gold, looking quite strong right up until Thursday at 11:30 in New York; it was at that moment the commercials decided to pound the price of silver about 65 cents in less than an hour. The deliberate assault drove silver through its 200 MA.  Friday's rally stopped right at the 200.  Silver ended the week down -0.42.  Candle print on Friday was a “bullish harami”, which the candle code says has a 48% chance of marking a low. That's a hopeful sign.  Silver closed right at its highs on Friday.

Miners plummeted this week, with GDX falling -8.00% and GDXJ plunging -11.37%. Much of the move in the miners came on Monday, a day on which GDXJ was hit for a massive -9.5% loss. Theories abound as to why the miners sank long before the silver smash on Thursday; perhaps its just as simple as the commercials going short miners prior to the big smash in the metal. Candle print for both GDX and GDXJ on Friday was just a “long white” candle; still, the candle code felt both prints were bullish. This week's bearish price action drove the miners below all 3 moving averages. Volume in GDX was higher than normal, and the volume in GDXJ was immense.

Does this mark the low?  We've rallied 2 of the last 3 days, but Thursday's drop was pretty ugly.  We really need to see a confirmation (and/or swing low) to say that momentum has reversed; the most I'll say is that the downside momentum is slowing down.  The juniors look a bit better than the seniors in that regard.

USD

The buck rose +0.39 to 101.44 this week, driven higher by a “Presidential” appearance by Trump where he managed to read from the teleprompter and not say anything crazy, and it was boosted further by a volley of signals from Fed officials strongly hinting that a March rate increase was on the way. On Friday Yellen seemed to confirm the rate increase for March, but at the same time talked about a “gradual removal of accomodation.”  The Yellen giveth, and The Yellen taketh away.  Perhaps that's why the buck printed a two-candle swing high on Friday, which the code says has a 79% chance of marking the top.

US Equities/SPX

The US equity made new all time highs again this week, up +15.78 [+0.67%] to 2383.12. Primary driver this week was the relief from Trump's speech to Congress. No farting, no belching, no taunts - POTUS was relatively well-behaved and the market rewarded him with a 32 point rally the day after. Candle print: spinning top/NR7, which the candle code says is neither bullish nor bearish. Momentum remains to the upside.

VIX fell this week -0.51 to 10.96.  That's Trump Relief, from what I can see.

This week's sector map shows homebuilders & financials in the lead, while the defensive items (utilities, staples, REITs, and telecom) trailed. The biggest gainer over the past 52 weeks: financials. That's partially about Trump, and partially about the expected series of rate increases.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Homebuilders XHB 2.57% 14.38% rising rising rising rising ema9 on 2017-02-09 2017-03-03
Financials XLF 2.25% 38.58% rising rising rising rising ema9 on 2017-02-09 2017-03-03
Energy XLE 1.41% 19.23% falling falling rising falling ema9 on 2017-03-03 2017-03-03
Healthcare XLV 1.36% 12.18% rising rising rising rising ma200 on 2017-02-03 2017-03-03
Industrials XLI 0.65% 23.82% rising rising rising rising ema9 on 2017-02-03 2017-03-03
Materials XLB 0.44% 22.58% rising rising rising rising ema9 on 2017-03-01 2017-03-03
Technology XLK 0.44% 24.94% rising rising rising rising ema9 on 2017-02-01 2017-03-03
Cons Discretionary XLY 0.09% 13.30% rising rising rising rising ema9 on 2017-03-01 2017-03-03
Utilities XLU -0.14% 10.58% rising rising rising rising ema9 on 2017-02-16 2017-03-03
Cons Staples XLP -0.25% 6.41% rising rising rising rising ma200 on 2017-02-07 2017-03-03
REIT RWR -1.24% 3.91% falling rising rising rising ema9 on 2017-03-02 2017-03-03
Telecom XTL -2.13% 26.79% falling rising rising falling ma50 on 2017-03-02 2017-03-03
Gold Miners GDX -8.00% 12.01% falling rising falling rising ma50 on 2017-03-02 2017-03-03

Gold in Other Currencies

Gold fell in every currency this week, dropping the most in Rubles (-49). Gold in XDR fell -19.79.

Rates & Commodities

TLT plunged -2.18% this week, with the big drop happening on Wednesday – the day that the Fed first notified us that a March rate increase was likely.  Bonds really don't like rate increases. This is what I mean about “news driven markets” - TLT looked as though it was ready to break higher on Tuesday, and then on Wednesday the Fed comes out with the near-term rate increase talk, and that was good for a 2% drop in TLT.

JNK made a new high this week, but then retreated, ending the week down -0.16%. That's not a very big move; JNK remains quite close to its highs.

CRB fell -0.64%, making another new low this week and continuing its slow retreat from the mid-January highs. Falling energy and PM prices led commodities lower.

Crude fell -0.77 [-1.43%] to 53.24. Most of the losses came Wednesday and Thursday, after the crude oil market reacted badly to what appeared to be a relatively modest crude inventory build of +1.5 million barrels. Friday saw oil rally back, as reports came out of a nearly-100% OPEC compliance with the oil production limitation regime. This was credited to Saudi Arabia, which has cut production more than promised to make up for other OPEC producers who have fallen short.  Who is really afraid of low oil prices?  That would be the Kingdom of Saudi Arabia.

http://oilprice.com/Energy/Energy-General/Oil-Prices-Find-Support-As-OPEC-Compliance-Nears-100.html

Physical Supply Indicators

* SGE premium to COMEX fell dramatically this week; it is now at +0.59 over COMEX. No more premiums in China.

* The GLD ETF tonnage on hand fell -0.59 tons, with 841 tons in inventory.

* ETF Premium/Discount to NAV; gold closing of 1234.90 and silver closing of 18.00:

 PHYS 10.15 -0.20% to NAV [up]
 PSLV 6.83 -0.65% to NAV [down]
 CEF 12.49 -7.2% to NAV [up]

* Bullion Vault gold (https://www.bullionvault.com/gold_market.do#!/orderboard) showed no premiums for gold or silver .

* Big bar premiums are lower for gold [2.19% for 100 oz bars in NYC], lower for silver [+2.83% for 1000 oz bars in NYC], and higher for silver eagles at +17.28% [NYC].

Futures Positioning

COT report covers trading through Tuesday February 28th, when gold closed at 1248.80 and silver 18.36.

In gold, commercials added a big +37k shorts, while managed money added +24k longs and bailed out of -12k shorts. Managed money has now exited about 50% of the short positions they had at the December lows. If we're looking for some kind of top in gold, from a “managed money short” perspective we're about halfway there. From a long perspective, we are far from marking any sort of top. In fact, this week was the very first week when Managed Money actually bought a large number of long contracts.

In silver, commercials added +3.9k shorts, bringing the total to 158k total. Commercials now have just as many shorts as they did at the highs set last year. That's a clear danger sign for silver – and perhaps it helps to explain why silver was pounded so hard this week. Commercials might be getting nervous about the rally – maybe they want to cash in while they still can. Managed money has been largely responsible for the silver move. They added +6.3k longs this week; the long exposure from managed money continues to rise towards last year's peak. From the COT perspective, silver is well into the danger zone for a top.

Gold Manipulation Report

There were no after-hours spikes seen this week. The assault on silver on Thursday was done “in broad daylight” (i.e. during market hours in the US); this time zone is not watched by my spike analysis code.

Summary

The entire PM complex sold off this week, led by the plummeting mining shares. Gold did best (on a percentage-wise basis), which is usually a bearish sign.  Last week, the miners gave us a glimpse into the future – their poor performance presaged this week's unpleasantness.  Meanwhile, SPX continues to make new highs, the Fed has decided to increase rates sooner rather than later, and crude remains mired in the 52-54 trading range it has occupied for the past 12 weeks.

I'm starting to think that there might be some big money buying the dips whenever crude sinks down to the 52 level.  As in - some sovereign wealth money from the Middle East.  Its temporary paper oil demand put in place to keep price from sinking below 50.

Gold COT still looks bullish – although the commercials jumped in heavily short this week, just in time for prices to drop. The silver commercial short position has built up so high, its clearly in the danger zone; at this point it is marking a top for silver.

Gold and silver big bar shortage indicators still show no signs of shortage in the west or the east. ETF premiums were mixed, while GLD tonnage was unchanged. In Shanghai, premiums have vanished.

Next week we have Nonfarm Payrolls on the 10th, and the week after is March 15th, a sort of triple-witching involving elections in the Netherlands, the FOMC meeting announcement, and debt limit ceiling expiration.  I'm not sure that Payrolls will really move prices, since at 80%, a rate increase is already baked into the cake.

From what I can see, I believe that gold is becoming immune to the Fed rate-rise plan.  In 2016, worries about rate increases really moved prices around, but now gold doesn't seem to care so much.  And Trump is no longer gold-poison either.  At this point, he's seems like a neutral influence.

From my macro perspective, the downside for gold seems to be minimal.  Rising rates don't seem to matter anymore to gold, we have ever-increasing chaos in Europe, and a virtually unlimited supply of unrest coming out of the Trump administration's interaction with the newly-created Democratic Outrage Machine.

I don't think that things will get calmer in the next 6 months.  I think they're going to get a lot more exciting.  Whether its Greece, Italy, France, or the Netherlands, I believe something really interesting is going to happen in Europe this year.  The ECB might be able to buy every bond issued by every government, but it cannot save the Eurozone from its own voters who have become fed up with the situation.

Based largely on how prices have reacted over the past 2 months, I think this is one of those "buy the dips" situations.  Of course, picking the entry point is always an adventure.  What's more, the mining shares look to be really volatile right now.  10% drops are just no fun (and a 24% drawdown for EXK!), but if you wait for the swing lows and use stops, you should minimize losses and if I'm right, you'll get in at some fairly good prices.

YMMV, Caveat Emptor, and always use stops - because you, or I, can always be wrong.

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7 Comments

Nate's picture
Nate
Status: Platinum Member (Offline)
Joined: May 5 2009
Posts: 573
local coin shop

Visited the local coin dealer this morning.  I always ask what's new, and he told me that the past 8 years conservatives were scared about Obama's policies and purchased lots of 'insurance'.  Now the liberals are scared about Trump and have joined the conservatives in purchasing 'insurance'.  What's interesting is that his old clients continue to purchase PM's, and as you might expect,  his February sales set a new record.  Very happy camper. 

He showed me the latest Redbook, which is a price guide to US coins.  He is a 'special consultant' in the  Redbook for modern bullion coins.  In order to place prices on modern bullion coins, one has to estimate an average bullion price for 2017.  He used $20 silver and $1350 gold to generate the coins value.  It will be fun to revisit bullion prices at the end of this year and see how good his guess was.

Assuming no wear, junk silver sold slightly below melt.  War nickels are well below melt.  He had a little of everything this morning - Krugerrands, Maples, Eagles, both rare date and 'junk' US gold, small bars, French angels, and even some nuggets. 

 

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 323
It's That Time Again

Time for your daily 11:00 am PM slam.  Down they go.

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5568
You can set your watch by it...
Cold Rain wrote:

Time for your daily 11:00 am PM slam.  Down they go.

When the US ""markets"" are open for business, gold gets sold.  

Somebody has a scheme they run whereby they make money running the tables, nearly always to the downside.  

The only enduring mystery to me is why anybody still takes the other side of that bet.  It's like the old gag with Lucy and Charlie Brown and the football.

You'd think they'd stop trying to kick that football after a while leaving the ""market"" to the boyz and girlz turning in the perfect, unblemished, ""trading"" win ratios.

No losses = no risk.  I do believe that the gold ""market"" is a no risk business for someone.

Again, don't trade, just accumulate physical, ... and remember to try and act surprised when this scam blows up on JPM and they go crying for special relief and sudden rule changes to protect them from serious losses when they finally come.

Here's my surprised face...I've been working on it.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 323
Good Call

Chris, good call on the Barney Fife image.  Incidentally, that's who I think of when I think of all the jabroni's over at the Fed trying to set effective monetary policy.  They're fumbling around trying to figure out which pocket their bullet is in as the criminals escape.

Agree completely on owning physical vs. trading as far as preparing for the coming storm.  I have a speculative position in a few miners, though.  If they go to zero, I can afford to lose it.  That said, I'd like to think they will eventually go higher...someday, one day, maybe, hopefully, perhaps.  But maybe they won't.  Who knows.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 323
Support

Unless support for gold has moved into the mid/upper $1220s over the weekend, it looks like a close below to start the week.

yogmonster's picture
yogmonster
Status: Member (Offline)
Joined: Apr 1 2013
Posts: 8
MJB's picture
MJB
Status: Silver Member (Offline)
Joined: Jan 5 2016
Posts: 117
In light of May SI contracts falling below 17.50

Pay me my silver now :-) 

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