PM End of Week Market Commentary - 6/2/2017

davefairtex
By davefairtex on Sat, Jun 3, 2017 - 9:10am

On Friday gold moved up +13.20 [+1.04%] to 1281.50 on heavy volume, while silver rose +0.27 to 17.55 on heavy volume also. Friday's move was entirely about the Nonfarm Payrolls report which surprised the market by coming in unexpectedly weak. Both gold and silver launched on release, while the buck fell off a cliff, plunging through support and making new lows. While the report itself (headline number +138k) wasn't the end of the world, and doesn't by itself signal a recession, it certainly calls into question the whole “Q1 weakness is transitory” storyline that many at the Fed were telling us.

Palladium was a huuuuge winner this week, up a shocking 6%, breaking out to a new multi-year high and leaving the rest of the metals group in the dust. Palladium has been almost a double since its low of about $450 marked in January, 2016. Those aren't quite “bitcoin” numbers, but they are really quite good.

Silver led gold, and junior miners led senior miners – but while both gold and silver made new highs, the miners were actually down on the week. How can miners go down while the metals rise? The miners are sick for some reason, that's how – nobody wants to buy them, and even Friday's big rally in the metals appeared to have been treated as an opportunity for traders to sell their miner holdings.  Silver miners look worst, below all 3 moving averages.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Palladium $PALL 6.25% 56.90% rising rising rising rising ma50 on 2017-05-30 2017-06-02
Silver $SILVER 1.18% 9.59% rising falling falling rising ma50 on 2017-06-02 2017-06-02
Gold $GOLD 0.90% 5.65% rising rising falling rising ma50 on 2017-05-24 2017-06-02
Copper $COPPER 0.31% 24.65% falling falling rising falling ema9 on 2017-06-02 2017-06-02
Junior Miners GDXJ -0.13% -5.68% rising falling falling falling ema9 on 2017-06-02 2017-06-02
Platinum $PLAT -0.68% -0.38% rising falling falling rising ema9 on 2017-06-02 2017-06-02
Senior Miners GDX -0.78% -0.04% rising falling falling rising ema9 on 2017-06-02 2017-06-02
Silver Miners SIL -2.06% 5.45% falling falling falling rising ema9 on 2017-05-30 2017-06-02

Gold moved up +11.40 on the week, with all of the gains coming on Friday. Next stop for the yellow metal is the previous high at 1297, set back in April. Friday's candle print was a closing white marubozu, which the candle code felt was quite bullish. At the same time, the buck dropped on the week almost as much as gold rose; much of the move in gold was just a currency effect. Gold in Euros appears to be just chopping sideways.

The June rate-increase chances rose +12 to 95%.

COMEX GC open interest fell -552 contracts.

Silver rose +0.21 [+1.18%] this week, making a new high on Friday along with gold, finally managing to close above its 50 MA. As with gold, all of silver's move came on Friday following the surprisingly weak payrolls report. Friday's candle print was a confirmed bullish high wave; Thursday's selloff that was bought ended up being confirmed Friday, which the code thinks is even more bullish. While silver's move higher has not been a straight line higher, thanks to the occasional bludgeoning by the banker gang in London, it has managed to retrace perhaps 60% of its losses.

The gold/silver ratio fell -0.21 to 73.04.

COMEX SI open interest rose +2,002 contracts.

Miners – what can I tell you? On the week, GDX fell -0.78%, while GDXJ edged down just -0.13%, in a week when the metals did fairly well. Trading volumes were relatively light, so its not like there was some sort of mass liquidation, but there seemed to be a fair amount of selling pressure even during times when there was good news for the metals. Friday was a good example. At 830am, gold shot higher off the NFP report, and was up perhaps $12 by the time the miners opened at 930. In the premarket, the miners had rallied nicely, but once the market opened, the selling started, and price was driven lower for about 30 minutes.  This is with gold up $12.  A rally later in the morning also ran into another wave of selling. GDX ended the day significantly lower from where it started. As a result, the candle print was a long black candle, which the code felt was somewhat bearish.

GDX appears to have formed a bit of a messy pennant - and the ongoing selling pressure suggests it is more likely than not to break lower.  On the week, the GDX:$GOLD ratio fell, which is bearish, while the GDXJ:GDX ratio actually rose slightly, which is a mildly bullish sign.

USD

Last week the buck looked somewhat positive, but this week the buck was sold, falling 3 of 4 days, with Friday's move being down -0.49 to 96.49, making a new low. While the candle code felt that the long black candle was neutral, breakdowns are generally bearish.

US Equities/SPX

SPX had a good week, up another +23.25 [+0.96%] to 2439.07, making yet another new all time closing high. Friday's long white candle was seen as mildly bullish; it is probably not a top.  Sector map shows telecom (XTL:+3.51%) in the lead, while energy (XLE:-2.28%) brought up the rear.  Makes sense that energy equities don't like plunging energy prices.  This week's move looked a bit more bullish; homebuilders and materials are risk-on components.  Financials remain weak, though, and that's all the more odd given the strong chance the Fed will increase the flow from the Excess Reserves Money Spigot - to the tune of $6.6 billion annually from the expected +0.25% rate increase.

Perhaps the drop in financials is actually about the Italian elections?  More on that one later.

VIX plunged this week -2.23 to 9.81. VIX is back in the single digits.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Telecom XTL 3.51% 25.42% rising rising rising rising ema9 on 2017-05-22 2017-06-02
Healthcare XLV 2.02% 6.74% rising rising rising rising ema9 on 2017-05-22 2017-06-02
Homebuilders XHB 2.00% 11.25% rising rising rising rising ema9 on 2017-06-01 2017-06-02
Materials XLB 1.74% 13.94% rising rising rising rising ema9 on 2017-05-24 2017-06-02
Cons Discretionary XLY 1.65% 15.84% rising rising rising rising ema9 on 2017-05-24 2017-06-02
Utilities XLU 1.65% 10.10% rising rising rising rising ema9 on 2017-05-17 2017-06-02
Technology XLK 1.44% 29.86% rising rising rising rising ema9 on 2017-05-19 2017-06-02
Cons Staples XLP 1.36% 7.61% rising rising rising rising ema9 on 2017-05-19 2017-06-02
Industrials XLI 1.19% 21.72% rising rising rising rising ema9 on 2017-05-19 2017-06-02
REIT RWR 0.81% -1.84% rising rising falling rising ma50 on 2017-06-02 2017-06-02
Financials XLF -0.68% 21.08% falling falling rising falling ema9 on 2017-06-02 2017-06-02
Gold Miners GDX -0.78% -0.04% rising falling falling rising ema9 on 2017-06-02 2017-06-02
Energy XLE -2.28% -2.56% falling falling falling falling ema9 on 2017-05-24 2017-06-02

Gold in Other Currencies

Gold rose in every currency this week; gold in XDR was up +10.38.  Given the Pound had troubles, gold did especially well in GBP.

Rates & Commodities

TLT was a star performer this week, up +1.73% to a new multi-month high, finally managing to close above its 200 MA for the first time in months. Bonds are in a clear uptrend, up perhaps 9% off the lows that were made back in mid-March. There will come a time when the bond bull market ends, but that time is not yet upon us. TLT, gold, and silver are all rallying together, even though the equity market continues moving higher.  Since the buck is falling, this means money is (probably) coming from "domestic cash" into bonds. That feels like risk off to me - and its a very strong move too.

JNK fell -0.13% this week, with most of the losses happening on Thursday, when JNK printed a swing high that actually looked fairly bullish. Traders still seem to be willing to buy the dips right now in JNK, although viewed over the week, JNK is signaling risk off.

CRB had another bad week, dropping -2.22%. It appears to be heading for a re-test of the lows set back in early May. Mostly the index is falling because of energy, but ag and industrial metals are also moving lower. Commodities just don't look great right now.  That feels risk off too.

Crude plunged -2.11 [-4.23%] to 47.76 this week. After last Friday's rally, it was four days straight down. Even the bullish-looking EIA report that showed inventory draws in oil and gasoline was not enough to stem the decline for longer than a few hours. If it wasn't one thing, it was another; Iraq is exporting more, Libya is now at peace, Iran isn't covered by the agreement, Qatar is making nice with Iraq, and so on. Still, after a deep drop intraday on Friday, the buyers showed up to pull prices higher; the candle print was a takuri line, which the code felt had a 74% chance of marking the low.  Let's see if the bullish behavior survives the weekend.

Physical Supply Indicators

* SGE premium to COMEX is now +6.30 over COMEX.

* The GLD ETF tonnage on hand rose +3.55 tons, with 851 tons in inventory.

* ETF Premium/Discount to NAV; gold closing of 1281.50 and silver closing of 17.55:

 PHYS 10.45 -0.52% to NAV [up]
 PSLV 6.63 -0.36% to NAV [down]
 CEF 12.72 -6.6% to NAV [up]

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

* Big bars premiums at HAA were: gold [400oz, NY] 1.97% and silver [1000oz, NY] 3.25%.

Futures Positioning/COT

COT report is through May 17th, when gold closed at 1265.60, and silver at 17.39.

This week in gold, the commercials did not change their short positions, while managed money added +13k longs. The changes were modest, and don't change the situation, which is neither bullish nor bearish at this time.

In silver, the commercials added +6.7k shorts, while managed money bailed out of -9.9k shorts. This was a big change for managed money; they only have 29k shorts left, and an aggregate level of 10k shorts probably ends up being a turning point; this says that 2 more weeks of this size move, and silver will be at a top.

Gold Manipulation Report

While there were no after-hours spikes seen, there was a flurry of activity on Thursday that drove silver down to 17 during the London session that looked like a clear attempt to hammer price lower. Once the bludgeoning stopped (presumably the bankers got the price down to a level where they made more money on some derivative expiring that day), buyers pulled price right back up.

Eurozone Status

  • German Elections; October 2017: currently the polls show Merkel 38.25/Shulz 24.75. Shulz continues to lose ground. Both parties are pro-Euro. Non-event.

  • Greek bailout; July 2017 they need to pay 5.6 billion Euros. There has been no progress this week towards a resolution between the IMF and the Eurogroup. Still, the Greek equity market may be providing us a clue; it has rallied strongly over the past couple of days, and appears to be on the cusp of a breakout. Its not that the markets are always right - it is that the well-connected usually know the real story, and they place their bets accordingly.  It feels as though there is some sort of positive news in the offing.

  • Turkey & the migrants: no news on the migrant deal, or visa free travel for Turks this week. There are plenty of rumblings, however: Turkey is considering buying S-400 missiles from Russia, Saudi Arabia canceled some sort of shipbuilding contract, Turkey is complaining about the US arming the Syrian Kurds. Its all pointing in one direction: a slow, but steady drift away from Turkey's membership in NATO.

  • Italian Elections: a deal appears to have been struck regarding the election law between the four main Italian parties: a 5% threshold for a party to get seats, and proportional representation, patterned after the German system. This effectively knocks off a bunch of smaller parties (who are squawking, naturally), but the 4 major parties can easily get it through if they all agree. Once the electoral law is passed, elections will probably be scheduled for September, according to my reading of the tea leaves. Currently, M5S is polling at 29.6, vs the PD at 28.4. Once the elections are scheduled, things will take on an entirely new tone. Macron was seen by Brussels as the repudiation of “populism”, but once those Italians start voting, it could all come unraveled very quickly. Market-wise, I'd see it being gold-positive, and Euro-negative. The current move lower in the buck would probably come to an abrupt end. Bloomberg ran an article entitled “Italy doesn't need early elections.” The only thing more representative of the status quo position might read: "Italy doesn't need any elections at all." https://www.bloomberg.com/view/articles/2017-05-31/italy-doesn-t-need-early-elections

Summary

This week it was mostly about Nonfarm Payrolls, at least from the viewpoint of the PM observer. Metals liked seeing a weaker dollar. Oil kept falling a week after the OPEC meeting; while Friday was once again relatively positive, we'll need to see confirmation next Monday to be sure.

Gold COT report shows no change, while in silver managed money was forced to cover short in a fairly big way. In another few weeks, the managed money shorts will be all gone, and at that point we could be at or near a top.

Gold and silver big bar shortage indicators shows no shortage in the west; ETF premiums were mixed and GLD tonnage fell slightly. In Shanghai, premiums remain but are not particularly high.

What's up for next week?

Well, we have Comey's testimony before Congress scheduled for Thursday, June 8th.  Alan Dershowitz thinks that's good for Trump from a legal standpoint, but bad from a political standpoint.  He says that he hates grand juries because their proceedings are secret, while he likes open inquiries like this, because it gives him more of a chance to prepare.

We also have British elections – which may now be almost a crapshoot (today: a 3-8% differential) instead of a shoo-in for the Tories (April: a 20-25% differential). It turns out that not-campaigning after announcing a election (PM May's actual “strategy”) was a bad idea. Who knew? The polling chart is actually pretty amazing: there was an immediate sharp upturn of support for Labor once the election was announced. https://en.wikipedia.org/wiki/Opinion_polling_for_the_United_Kingdom_general_election,_2017

“So wait, I actually get to vote? I think I'll change my mind on how I answer your poll questions then.” File that one under “you just never know.”

Hey, the UK election is also June 8th.

Both events would seem to be gold-positive, at least in advance of the event anyway. And if those pesky Italians actually decide to have an early election...well that's another four months away, best case.

Trend-following code says:

Uptrend: gold, silver, copper, long bond.

Downtrend: crude, natgas, platinum, USD.

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.

 

14 Comments

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 78
Shorting Gold

Dave,

Looking for gold to peak at $1,280 and silver to peak at $18.20. Looking for gold to drop to $1,000 and silver to trade briefly in the $12s. Big moves coming....

http://i.imgur.com/4LHszw7.png

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5422
nice chart

Its always nice to see charts.  Looks like you will know if you are right or wrong pretty quickly; if price moves above 1290 you are stopped out.  I think your trade goes wrong if the buck breaks down more seriously, but if the buck reverses, then you could well be right.

Would you be a buyer on a break above 1297?

 

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 78
Thanks Dave

I'm a believer in closing prices over highs as resistance indicators. Not too concerned if spot breaks the line a bit.

Scenerio 1: Gold has a breakout above $1,280 and heads towards the upper resistance line. Precious metals bull market confirmed.

Scenerio 2: Gold fails to close above $1,280. Precious metals bear market continues....

Both great trades. Big week ahead!

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5422
i like it

I like your perspective.  Closing prices do seem to matter more than intraday moves.

And you think 1280 is the line in the sand.

Its really hard for me to go short with this much crazy stuff going on - politically, in the EU, and here in the US with Trump and the ongoing move to replace him.  Maybe that tells me something.

You need to keep coming back and providing us your view, so we end up being fair & balanced.  :)

 

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 78
Another variable

The only problem is the disconnect with silver. Silver broke it's half-way flag on Friday...

https://i.imgur.com/4oiCQSx.png

So I don't think gold will crash right away. Silver still has another 70-80 cents to climb

https://i.imgur.com/vS9PyCe.png

 

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 78
Perhaps we see more of this

Perhaps we see more of this "fly trying to break through a solid glass window" action until silver catches up to gold in a few weeks? It would be weird to have one make a move, and not the other. Perhaps the fate of precious metals over the next couple years will be decided by gold and silver... together.... in a few weeks.

 

Cold Rain's picture
Cold Rain
Status: Gold Member (Online)
Joined: Jul 26 2016
Posts: 364
Miner Clue?

Perhaps the miners are providing a minor clue to which scenario above is most likely.  They have not confined a PM breakout, which, to my understanding, you should have miner confirmation. However, with all the risks, as Dave mentioned, it's hard to see a PM breakdown here.  But that's why we play, I guess.  We should know soon enough.

Eannao's picture
Eannao
Status: Silver Member (Offline)
Joined: Feb 28 2015
Posts: 146
Inserting Images

Folks,

how do you insert images into comments? I've tried copy & paste using a variety of browsers, but with no success.

Regards, E.

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5734
Posting Images
Eannao wrote:

Folks,

how do you insert images into comments? I've tried copy & paste using a variety of browsers, but with no success.

Regards, E.

It's a bit more complicated then cutting and pasting, but not too terribly hard.  

However, you must have the image saved to your computer.  (Note:  video only needs a link copy pasted.  Some images also have links that can simply be inserted, but not all)

The steps are:

1.     Click on the image icon (See first image below)

2.     Click "browse server"

3.     Go to upper left of next window, click "upload"

4.     Select 'choose file'

5.     Select 'load file'

6.     Select 'insert image' and press OK

In your WYSIWYG editor (What You See Is What You Get) you should see a variety of buttons...one of them I have indicated in the image below with an arrow, which is your starting point:

Then you will select browse server (your window will look less complex than mine...I have more buttons as an admin...but we share the image icon), "choose file" and then "Load file" a, "insert image" and finally "OK".

A few steps at first, but you will get the hang of it very quickly.

Let me know if this works for you?

 

 

Eannao's picture
Eannao
Status: Silver Member (Offline)
Joined: Feb 28 2015
Posts: 146
The Commercials are Always Right

Dave,

as you can see from the red line on the chart below, the Commercials still have a huge short position in silver (which got bigger last week):

Doesn't this mean that the price of Silver will continue to be hammered as the Commercials continue to cash-in on these shorts? i.e. very bearish indicator for silver.

Regards, E

(Thanks for the image insertion instructions Chris)

Cold Rain's picture
Cold Rain
Status: Gold Member (Online)
Joined: Jul 26 2016
Posts: 364
$1280

Looks like that is a very good line.  Gold is struggling with it today.

PeakGold's picture
PeakGold
Status: Bronze Member (Offline)
Joined: Jun 3 2017
Posts: 78
Possible move?

I feel like this could happen tonight through friday...

 

Upper resistance created from upper resistance from this chart. https://i.imgur.com/4LHszw7.png

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5422
breakouts

I'm seeing a nice breakout today, which follows the golden cross made a few weeks back.  Lined up with the bullish overall situation in terms of turbulence, and TLT's multi-month uptrend, I'm definitely more bullish than bearish.  We'll have to see what the COT report says this Friday.  Overall, unless that COT report is bearish, I think the odds are in favor of a break above 1297.  Past that - we'll have to see.  I'll be more nervous certainly if silver doesn't follow, and if the miners remain weak.

I tend to watch things on more of a tactical level; until my candle code starts to complain about reversals, I tend to think the current trend remains in place, which is why your longer term charts are helpful to me.

For instance, bitcoin has managed to avoid giving any hints of bearish candle prints over the past two weeks.  Yesterday it showed a confirmed bullish NR7, which the code said was strongly bullish which supported a breakout to a new high, and in fact that's just what happened.  I've been curious to see if bitcoin's candles behaved in the same way as the rest of the items, and so far it has been quite well-behaved (in terms of predictability). 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5422
COT report

E-

I agree the commercials are (almost) always right, but I've noticed that the near-term highs and lows tend to occur on COT highs and lows that are relative to recent overall levels.  In other words, you can't judge by an absolute level that silver is near a high.  Judge it against a long term moving average of the shorts.

For instance, in the chart below, the COT report suggests we should be closer to a low than a high for silver.  Theoretically anyway.  I'd guess the overall short level should be 150k-160k before we see a top.

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