PM Daily Market Commentary - 4/25/2017

davefairtex
By davefairtex on Wed, Apr 26, 2017 - 3:58am

 

Gold fell -12.40 to 1265.50 on moderately heavy volume, while silver dropped -0.35 to 17.63 on extremely heavy volume. Gold fell all day long, starting in Asia and ending the day near the lows in the US session, making a new low to 1262.80. Silver followed a similar track, except the rate of the decline was substantially steeper for silver.

Unlike in previous days where there were down spikes that were immediately followed by dip-buying, todays gold's drop appeared to be straightforward distribution. Dip-buying more or less didn't happen, and the moves lower were not caused by any sort of manipulative spike. Instead, traders just slowly bailed out of their gold positions all day long. The candle print was a long black candle, which the code felt was bearish.   Gold closed near the lows of the day, made a new low to 1262.80, and is now approaching its 200 MA.

Open interest at COMEX for GC rose +2,009 contracts.

Rate rise chances (June 2017) rose to 75%. The increasing prospects for a rate-rise are gold-negative.

Silver staged a brief rally in Asia, and then fell for the rest of the day, making a new low to 17.52 in the early afternoon in New York. Like gold, silver's drop seemed to be more about distribution than anything else, a stark contrast to what happened last week. The candle print for silver was also a long black candle, which the code felt was bearish.  Silver is now well below its 50 MA, and today's new low invalidated yesterday's bullish-looking reversal bar.  Volume in silver over the past few weeks has been massive, but this is the first day we have really seen any mass selling, presumably by managed money.

The gold/silver ratio rose +0.71 to 71.78.

Miners gapped down at the open, and then sold off hard until about noon, after which the miners moved slowly higher for the remainder of the day. GDX was off -4.22% on very heavy volume, while GDXJ dropped -4.33% on very heavy volume also. GDX candle print was an opening black marubozu, which the code found to be more bearish than bullish. The GDXJ candle print was a confirmed bear NR7, which the code found to be bearish. On the chart, both ETFs made new lows, and GDXJ broke support, closing below an important previous low set back in early March. The GDX:$GOLD ratio was hit hard today, and it is back to the lows set in early March.

Platinum fell -0.55%, palladium rose +0.52%, and copper climbed +1.27%. Copper's strong rally took it back above its 9 EMA, and it also printed a swing low. Copper remains in a downtrend, but this swing low is a hopeful sign.

The buck fell -0.32 to 98.60, continuing its plunge following the French first round presidential election on Sunday. The move was all about the Euro, which jumped +0.57% to 109.92, convincingly moving across its 200 MA for the first time in 7 months. Candle print was a long black candle, which the code felt was neutral.

Martin Armstrong thinks this Euro move is ultimately a big head-fake (https://www.armstrongeconomics.com/markets-by-sector/foreign-exchange/euro/the-fate-of-the-euro/) as the Euro needs to rise above 126.22 in order to break its downtrend line. The rising Euro is proving no help to gold, and the situation is even worse for those in Europe who are gold owners. While gold fell -0.97% in USD, the drop in Euros was more like -1.58%. It now seems pretty clear that the bid underneath gold for the last few weeks came out of Europe, and once the French elections were over, that bid appears to have gone away.

Crude managed to find some buyers today, moving up +0.15 to 49.36. Crude did make a new low to 48.87, but managed to rally back by end of day. After market close, the API report showed a surprisingly bearish inventory build: crude +897k barrels, gasoline +4.4 million barrels. This report took crude down about 40 cents after it was released – without the API report, oil would have put in a nice rally. Candle print was a high wave, which the code found to be somewhat bullish (27% chance of a low). We definitely need a confirmation tomorrow for this to turn into a reversal bar. It probably all depends on the EIA report due out at 10:30.

SPX gapped up overnight once again, and continued rallying, ending the day up +14.46 to 2388.61. SPX managed to clear a previous high today, invalidating its downtrend. Materials led (XLB:+1.61%) while utilities trailed (XLU:-0.13%). Trump reflation appears to be back on, more or less.

The VIX moved slightly lower, down -0.08 to 10.76. That's about as low as the VIX goes.

TLT plunged -1.20%, diving through its 9 EMA and closing quite near the lows of the day. As with gold, there were no buyers for bonds today – traders were just interested in getting out. This confirms the “safe haven unwind” we are seeing in gold. Market is clearly back to risk on.

JNK rallied +0.22%, making a new high and approaching the previous high set back in late February. JNK is saying risk on.

CRB managed to rally today, up +0.54%. 4 of 5 groups rallied; the only sector to fall today was PM. That's another bit of evidence of the safe haven unwind/risk on trade.

Rate rise chances are back well above 70%, and rising every day. Trump is about to announce his fantastic new tax policy. The market appears to be discounting any impact from a government shutdown. Relief from the French election continues to reverberate.

In response, bonds and gold are both selling off; rather than this being manipulation as it was prior to the election, now it seems to be just distribution from traders taking off their “Le Pen” trades.  How long this goes on is anyone's guess. However, there were no reversal candles today, so its probably not the time to buy the dip.

What's next up? We have the 2nd round elections in France (Macron 61/Le Pen 39) in early May, British elections in June, the Greece Debt can-kicking in July, and the German elections in October. I don't think Europe will have much to contribute in the way of political chaos to help gold - unless the Italians give us a surprise, or Erdogan decides to rattle the EU's cage with migrants & refugees.

We do have Stockman's doomsday scenario which has yet to play out: Trump's tax plan runs aground in Congress, infrastructure spending doesn't happen, reflation dies, debt ceiling doesn't get raised, and then the market crashes.  He can be a gloomy guy sometimes, but its something to keep in mind.

Given the distribution today in PM and the sell-off in bonds, we might have further to fall in PM before things stabilize. Miners are looking particularly vulnerable, given the support breaks in both GDX and GDXJ.  This is especially serious given the falling dollar, which should be helping, but isn't.

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5 Comments

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 321
Break

Looks like another bad day for PMs and another good day for the stock market.  Hopefully, we can get a selling break in the PM space at least one day this week.

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 321
Miners

They're actually holding in there pretty well....although Sandstorm Gold is getting smoked for some reason. surprise

vadim_75's picture
vadim_75
Status: Bronze Member (Offline)
Joined: Oct 18 2015
Posts: 48
sand

Sandstorm buys Mariana today. I was lucky enough to get rid of Sand yesterday. )

BTW, what a disaster in the gold mining space for the last two days! First Barrick reported badly (-10+%) today Sand deal and Goldfield production Q1 weak report.

Which illustrated why one can't invest in miners and without a gold exposure it's just a bunch of crap.  

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5058
trump tax plan => gold positive

So the Trump Tax Plan came out.  Gold liked it.  Even the miners recovered from down -2% and are now in positive territory.  I don't know which part gold liked exactly, but that's the announcement that caused the move.  SPX did not like the plan.  It is now in negative territory.

 

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 321
Tax Plan
davefairtex wrote:

So the Trump Tax Plan came out.  Gold liked it.  Even the miners recovered from down -2% and are now in positive territory.  I don't know which part gold liked exactly, but that's the announcement that caused the move.  SPX did not like the plan.  It is now in negative territory.

 

It'll explode the deficit.  They use dynamic scoring, but we know what that "really" means.  It likely won't pass without a lot of compromising.  The 5yr note auction didn't go so well, I read.  Also, don't know if it's related or if it matters, but Canada's largest mortgage lender blew up today.

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