PM Daily Market Commentary - 4/12/2017

davefairtex
By davefairtex on Thu, Apr 13, 2017 - 5:11am

 

Gold rose +12.40 to 1288.90 on moderately heavy volume, and silver moved up +0.15 to 18.49 on heavy volume. The metals moved sideways for most of the trading day up until about 3:10pm in New York, when Trump decided to tell us all that the dollar was “too strong”. Bang, buck loses 0.70 in the space of about an hour, sending gold and silver up sharply at the same time.

Boy, if you knew what Trump was going to say at any given moment, that would probably help your trading results.

Entirely because of the Trump comment, gold took another leg higher, printing a strong closing white marubozu which the code felt was bullish. We have to pull back to the weekly chart to see where the next resistance level is for gold.  Turns out, its a long way away, at 1338, set on the day of Trump's election.  While the proximate cause of the move today was Trump, gold didn't just spike higher - it felt as though gold was looking for a reason to rally, and it was able to retain those gains through the close.  My sense is, there is a lot that the market is worried about right now, and so the line of least resistance is up.

Open interest at COMEX for GC rose +10,785 contracts.

Rate rise chances (June 2017) remain at 62%.

Silver's move was a bit less impressive; it moved higher, but ran into selling pressure at the 18.50 resistance area. Candle print was just a long white candle, which the code felt was mostly neutral. Given the all-time-high in the commercial silver short positions, I suspect the commercials are eager to keep gains in silver under control if they can do so. However if the buck keeps plunging, that is by no means a given.  The one thing they have going for them is that silver isn't as popular of a safe haven metal as is gold.

If silver can get through 18.50, we might see a nice pop.

The gold/silver ratio rose +0.09 to 69.71.

Miners sold off as the metals moved sideways, recovering only after the big move higher in the metals. GDX closed the day up +0.86% on moderately heavy volume, and GDXJ climbed +1.44% on moderately light volume. GDX printed a spinning top, which the code felt was mildly bullish. The closing white marubozu from GDXJ was a bit more bullish, but still not anything dramatic. The GDX:$GOLD ratio continues to improve, which is a positive sign. GDXJ:GDX has a long way to go to move back into bullish territory.  You can also see that the GDX is still a ways from its previous high, while silver is right at the previous high, and gold is well through it.  On a relative basis, GDXJ looks even worse.

Platinum rose +0.39%, palladium fell -0.58%, while copper plunged -2.63%. Today's move saw copper plunge through 2.60 support. Copper made a new lower low today.  Dr. Copper is signaling things are not well in the world economy at the moment.  The breakdown is probably good for gold, and bad for silver.

While my data shows that the buck rose today, that's only because the “pit close” occurs at 14:30 Eastern time, while the big plunge in the buck happened after 15:10. As a result, the big move wasn't recorded in today's data. Using other sources, the buck appeared to fall about -0.70 closing at around 99.90, entirely because of Trump's comments about the dollar being too strong.

While gold's move was mostly a currency effect, gold-in-euros did manage to make a new high today regardless. Gold in euros is very overbought, with RSI-7=93.  That's a serious danger zone; it says that risk of a decline in gold right now is quite high.  Of course the metal could go higher – Korea, Syria, Trump, and maybe even an SPX correction – but once the fuss dies down, the snap-back could be pretty strong.

Crude fell -0.56 to 53.06. Crude did manage to make a new high to 54, but the EIA report didn't satisfy the market for some reason; the report looked bullish to me (crude inventory draw: -2.2 million barrels, gas inventory draw: -3.0 million barrels) but the market was not impressed, and crude moved slowly lower following the release. Candle print was a bearish engulfing, a 39% chance of marking the top. That's relatively bearish. Its possible that crude needs to take a rest after climbing so rapidly over the past few weeks; as of yesterday, oil too was quite overbought, with RSI-7=88.

SPX fell -8.85 to 2344.93, closing below its 50 MA for the first since Trump was elected. This is a clear longer-term warning sign – its why we watch the moving averages. Utilities did best (XLU:+0.74%) while industrials were hit hardest (XLI:-1.38%), along with materials (XLB:-1.24%) and financials (XLF:-0.81%). The Trump trade looks to be unwinding.

VIX moved higher again, up +0.70 to 15.77. That's the highest VIX rating since the Trump election cycle.

TLT continued moving higher, up +0.55% making a new multi-month high. Its clear that bonds – and gold - are the place to be right now that SPX is starting to look a bit ill. TLT is saying risk off a little more loudly right now. If we get a real SPX correction, I'd expect a nice breakout out of TLT.

JNK rose +0.08%, a somewhat surprising move with SPX and crude both falling. Its neutral right now.

CRB fell -0.33%, printing a bearish engulfing right at the 50 MA. 3 of 5 groups fell, led by the plunging industrial metals group which was led by the big drop in copper.

Momentum is still to the upside in the metals.  Those pesky miners are still lagging, but at least the GDX:$GOLD ratio continues to improve.  That's something.  Gold and TLT are both currently acting as safe havens; the dollar, not so much.  Declining rate-increase chances and the (slowly) unwinding Trump trade make the dollar look a bit less attractive.  Still, gold is now overbought.  At some point, the buyers in this particular up-cycle will run out of cash, and the balance will shift to the commercials, who I'm sure are loading up short as price rises.

When the RSI gets into the 80s (and the 90s, if your currency is the Euro), its not a time to be buying.  Its not a sell signal, but it does tell us that risk is increasing.  "Buying breakouts" tends to be a sucker bet in the metals - at least most of the time.

After all, peace might break out at any moment, and then where would you be?

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20 Comments

robie robinson's picture
robie robinson
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Trusted

Has anyone experience buying PMs online in the form of simple jewelry? ie.chains etc.

We have plenty of bullion/coinage just interested in a different form.

Thanks Robie

fated's picture
fated
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Reply to Robie.

No I haven't. But I know there's a company in Australia - Goldstackers - who sell plain rings and necklaces, and simple pendants in various Karat - I think catering somewhat for the local Indian customer base. I do not know if they ship overseas or store locally for OS customers, but it could be worth investigating.

I often look in the window of the local jewellers when they have massive markdowns (in the order of 50%) and wonder what would be worth buying, and what wouldn't. But I am usually too busy, and too lazy to do the math to figure out if there are any bargains or quality items.

I also look at what's in the local antique stores but don't have the knowledge to buy with wisdom.

As far as jewellery goes, I really don't wear any much so it would be investment only, which takes out some of the fun.  My wedding and engagement rings are 9K white gold and total no more than a days average wage AUD. They were bought in a time of poverty and for robustness not show. They are now quite banged up (think gardeners hands!) and the teency, tiny stone chips are long lost - sentimental value only and relatively worthless to anyone else.

Ditto the very overpriced 925 silver earrings I was given for my 21st Birthday many, many, moons ago.

I do consider plain jewellery a less conspicuous store of wealth than bullion or coins, and think of stories heard from WWII era of jewellery being used to facilitate passage to safety etc.

Best of luck in your search.

 

davefairtex's picture
davefairtex
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chinatown

RR-

Has anyone experience buying PMs online in the form of simple jewelry? ie.chains etc.

I would encourage you to go off-internet.  Long ago (15 years?) I went to Chinatown in San Francisco to buy a 23k gold chain from a gold shop there.  I think I got it for around $60 over melt value, if memory serves.

Naturally, there's a cash price and a credit price.

There is usually a Chinatown in every major city.  I haven't done a survey, but I suspect there are gold shops in every Chinatown.

Certainly in Asia its fantastically easy, and you can get each piece for about $20 over melt, but that wasn't what you were asking.

You could always combine a jewelry-buying trip and a vacation all rolled into one.  Bring the whole family, and then have everyone go back through customs looking like Mr. T.  :)

"I pity da fool."

Cold Rain's picture
Cold Rain
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End of Week Drop

Any bets on whether we see a sharp pullback in PMs today or tomorrow?  My guess is that we'll see one or both days down.  Seems like we usually see a fairly weak day or two near the end of a given week.

Adam Taggart's picture
Adam Taggart
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GoldSilver.com Jewelry

Robie -

Mike Maloney and his team over at GoldSilver.com offer 22K and 24k "bullion jewelry", specifically made for folks who want to hold their gold in discrete, easily transferrable form:

https://goldsilver.com/buy-online/gold-without-borders/

agitating prop's picture
agitating prop
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When Trump recently visited

When Trump recently visited China, he could have been agitating for a floating yuan, less affixed to the dollar. It might be easier to coerce implementation of this strategy than to impose restrictive tariffs --  and would have the same effect. 

When he is talking down the dollar, I think one can assume something like this is going on.  

vadim_75's picture
vadim_75
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Something new: GLD is up 0,5%

Something new: GLD is up 0,5% GLDJ is down 2,5% )) and i'm making a progress - even not trying to find any sense from it, just observing.))

 

Cold Rain's picture
Cold Rain
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Afganistan

Trump dropped a big bomb over there.  Stocks taking a hit.  We might get 3 countries in a week, if we can sneak a tomahawk into NK before the end of the day.

davefairtex's picture
davefairtex
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bullion jewelry

Wow.  So while I think the product looks awesome, and I would trust the people involved, the prices are extortionate.

They are selling a 1-oz 24k gold bangle for $1910.  With gold at $1290, that's $620 over melt per ounce!!

I pick Chinatown.  You can probably get the XRF test done by some jeweler on whatever you buy for less than $50.  In asia, that test is $10 per piece.

 

davefairtex's picture
davefairtex
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big bombs

I think the Big Bomb in Afghanistan, and the missiles that hit Syria, were all in fact targeted at North Korea.

"Kill a chicken to scare the monkeys."

Or in this case, two chickens were probably killed in order to scare one monkey, and perhaps to encourage the monkey's friend to take action.

Herman Kahn comes to mind - specifically his advice on how to win a game of chicken (vis-a-vis strategic nuclear policy): "get in the car drunk, wear dark glasses, and throw the steering wheel out the window as soon as the car has gotten up to speed."

Along those same lines, Trump's very reputation for impulsiveness makes this monkey-scaring exercise much more effective.

 

thc0655's picture
thc0655
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The monkey

Except the monkey seems to be genuinely insane and incapable of even recognizing what is in his own best interest and acting on it. His friend though seems to have tired of his crazy antics.

robie robinson's picture
robie robinson
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Thanks Dave

Richmond VA, has no Chinatown. Great idea though.

Thanks, Robie

davefairtex's picture
davefairtex
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insane monkeys

Tom-

Except the monkey seems to be genuinely insane and incapable of even recognizing what is in his own best interest and acting on it. His friend though seems to have tired of his crazy antics.

I'm going to refer you to "Rules for Rulers."

"The king can't build roads alone, can't enforce laws alone, can't defend the nation or himself alone.  The power of the king is not to act, but to get others to act on his behalf."

While ideally you would try to scare King monkey, alternatively, you can aim to scare King Monkey's Key Supporters.  To paraphrase R4R, the King can't build or launch the missiles alone.

Will KJU freak out once he sees this key-supporter-scaring routine starting to play out?

Certainly I think the project definitely has its risks, but the risks are lower now than they will be 5 years hence when King Monkey has an actual ICBM with the range to reach the US.  That's one viewpoint anyway.

But regardless of how well we think it might work - or not - my (speculative) assessment still stands.  Biggest Bomb Ever may have been dropped in Afghanistan, but it was targeted at North Korea.

DT: "We need to send a message to NK.  What's the biggest bomb we have?"

NSC: "MOAB"  (https://en.wikipedia.org/wiki/GBU-43/B_Massive_Ordnance_Air_Blast).  "Its a 10 ton monster."

DT: "Perfect.  Now who can we drop it on?"

NSC: "Well...there's this group in Afghanistan that killed a special ops guy last week."

DT: "Great!!  Drop it on them tomorrow."

It just feels like Trump.

thc0655's picture
thc0655
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Yes, but...

I'm with you on nearly every point, but I have my doubts about a few things.

Will KJU freak out once he sees this key-supporter-scaring routine starting to play out?

I have serious doubts that he is capable of the kind of rational calculus of which you speak in referring to Rules for Rulers.  (Of course that may just be his act.  But it's a very convincing act.)  And his people live in a mind-bending cult, nearly completely cut off from the rest of the world and any possible alternative thinking.  Who knows what they know and how their thinking works.

But regardless of how well we think it might work - or not - my (speculative) assessment still stands.  Biggest Bomb Ever may have been dropped in Afghanistan, but it was targeted at North Korea.

Agreed.  But preemptively attacking NORK definitely requires a declaration of war from Congress, though an immediate counterattack against them after a nuclear strike wouldn't.

 

davefairtex's picture
davefairtex
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war powers

Tom-

I have serious doubts that he is capable of the kind of rational calculus of which you speak in referring to Rules for Rulers.

My point does not depend on him having any sort of rational calculus at all.  Once his key supporters decide that if he remains, there will no longer be any treasure to distribute, they'll knock him off faster than you can say "Caligula."  R4R tells us that revolutions don't happen because the people revolted, but because the court decided it was time to swap out the ruler.  Case in point: a distressingly large number of those Roman emperors were killed off by the Praetorian Guard.

Agreed.  But preemptively attacking NORK definitely requires a declaration of war from Congress, though an immediate counterattack against them after a nuclear strike wouldn't.

I'm not sure that's correct.

https://en.wikipedia.org/wiki/National_Command_Authority

While the President does have unilateral authority as commander-in-chief to order that nuclear weapons be used for any reason at any time, the actual procedures and technical systems in place for authorizing the execution of a launch order requires a secondary confirmation under a two-man rule, as the President's order is subject to secondary confirmation by the Secretary of Defense. If the Secretary of Defense does not concur, then the President may in his sole discretion fire the Secretary. The Secretary of Defense has legal authority to approve the order, but cannot veto it.

I'm not seeing any mention of Congress in there.

I also didn't see any authorization of Congress required for Trump's missile attack on Syria.

Perhaps this is why.  The wiki page on the War Powers Act says the following:

https://en.wikipedia.org/wiki/War_Powers_Resolution

The War Powers Resolution requires the President to notify Congress within 48 hours of committing armed forces to military action and forbids armed forces from remaining for more than 60 days, with a further 30-day withdrawal period, without a Congressional authorization for use of military force (AUMF) or a declaration of war by the United States. The resolution was passed by two-thirds of Congress, overriding a presidential veto.

So if we use what seems to be a fairly common interpretation, the President gets to do what he wants for 48 straight hours on his own, after which he has to write a note to Congress.  Then, he gets another 60 days of combat operations, after which he gets ANOTHER 30 day "withdrawal period."

So that's 3 months of sustained military activity, all without a DoW or an AUMF.

Of course, impeachment could happen much faster than that if he really went against the will of Congress, but a pre-emptive strike against NK seems well within his authority under the War Powers Act.

At least, that's what it seems like to me.

davefairtex's picture
davefairtex
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Distantly Related, but Interesting: AUMF 2001

The post-9/11 AUMF, signed Sep 18, 2001, is a case in point.  Its a blank-check authorization, duration unlimited, to attack anyone, anywhere, that could potentially be linked in any way to the 9/11 attacks.  The meat of the resolution is as follows:

https://en.wikipedia.org/wiki/Authorization_for_Use_of_Military_Force_Against_Terrorists

That the President is authorized to use all necessary and appropriate force against those nations, organizations, or persons he determines planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001, or harbored such organizations or persons, in order to prevent any future acts of international terrorism against the United States by such nations, organizations or persons.

Here's a fascinating podcast by Radiolab on this specific AUMF, and an explanation of the mechanics of how it has been applied by the government since its passage in 2001.

http://www.radiolab.org/story/60-words/

Mark Cochrane's picture
Mark Cochrane
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Lessons from history?

History may not repeat but it sure rhymes.

We tried to force Korea to negotiate back in 1871 (link).

What happened the first time the US tried to intimidate Korea?

The isolationist nature of the Joseon Dynasty government and the assertiveness of the Americans led to a misunderstanding between the two parties that changed a diplomatic expedition into an armed conflict.

Sound familiar? The US won handily and got to award their first 'overseas' medals of honor but we also should have learned that the Koreans didn't think like Americans.

The Korean deputy commander was among the wounded who were captured.[12] The US hoped to use the captives as a bargaining chip to meet with local officials, but the Koreans refused, calling the captives cowards and "Low was told that he was welcome to keep the wounded prisoners".[13]

It is fairly easy for the US to force this issue because it is unlikely that we will pay much of the humanitarian costs. Gambling is great when you get to bet with other people's lives. I'd hate to be in Seoul right now.

Eannao's picture
Eannao
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Posts: 146
If you shoot the king, don't miss

Jim Rickards has done an excellent podcast on the geopolitical situation which might be of interest. Available here

Personally, I thought North Korea were a bit of a joke and I didn't realise their nuclear threat is real.

Rickards thinks a strike against North Korea is imminent.

Uncletommy's picture
Uncletommy
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Posts: 573
Check and Mate or playing with matches?

"In every situation one easily discovers moves of violent, forceful and immediate effect. Their purpose is to produce a change in valuation, so as to humiliate that which is strong and to put into the foreground that which has been but slightly esteemed. Such moves are. . . -- in short, all moves which contain a menace sudden and violent"  -- Emanuel Lasker from Lasker's Manual of Chess

Win, draw or resign? Am I seeing a pattern develop? We, indeed, live in interesting times.

Nate's picture
Nate
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Posts: 590
Armstrong podcast

Renowned financial expert Martin Armstrong says the biggest risk out there is the effect a strong U.S. dollar has on the global bond market. Armstrong explains, “There’s these people who keep saying the dollar is going to crash.  If the dollar crashes, the world is happier and basically celebrating.  You have half the U.S. debt equivalent in emerging market debt issued in dollars.  If the dollar goes up, they are in trouble.  Then you are going to see sovereign defaults. . . . The U.S. is not going to default, but as you start defaults elsewhere outside the country, it makes people begin to get concerned about sovereign debt.  Sovereign debt is the worst of all.  It’s not secured.  If the U.S. government defaulted on its debt, what would happen?  You cannot go down to the National Gallery and start lifting Picassos.”

So, a bond market crash is a distinct possibility? Armstrong says, “Yes.  All these things are contagions. . . . The real risk is coming from Europe and Asia.  That is the real risk. . . . There is no place to go but the dollar at this point.”

If and when a global collapse comes, it will come from China or Europe. Armstrong says, “Yes, because you don’t collapse the core economy.  It’s always the peripheral coming in.  It was the same thing in the Great Depression.  It wasn’t the fact that the U.S. defaulted.  The problem was the first bank that went down was in Austria, and it happened to be owned in part by the Rothschilds.  When people hear a bank owned by the Rothschilds went down, people started to sell off all other banks.  Then all the countries defaulted.”

Armstrong says there is going to be a major “monetary reform” in the not so distant future, and the U.S. will end up with a dollar for domestic use and a dollar used for international trade, sort of like a “domestic dollar” and an “international trade dollar.” Armstrong says, “Yes. All it is doing is replacing the dollar as the reserve currency.  That would satisfy China and Russia, and it would simply be maintained by an international board.  I strongly advise against the IMF.  It’s way, way too corrupt.”

So, is gold a good asset to have with a coming currency reset? Armstrong says, “Yes, at that point, you are talking about a hedge against government.  When you go through these monetary crises, effectively, all tangible assets rise in price, not just gold and silver. . . . Tangible assets have a value to everybody globally.  The downside is on real estate.  I would never put 100% of my money in real estate because it is not moveable.”

Fast-forward to now, and Armstrong predicts, “The economy is not going to come back. We are not going to see economic growth.”

Where is all this taking the world? Armstrong, who is an expert on economic and political cycles, says, “You have to understand what makes war even take place?  It does not unfold when everybody is fat and happy.  Simple as that.  You turn the economy down, and that’s when you get war.  It’s the way politics works.”

http://usawatchdog.com/strong-dollar-could-cause-bond-market-crash-martin-armstrong/

 

 

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