PM Daily Market Commentary - 6/13/2017

davefairtex
By davefairtex on Wed, Jun 14, 2017 - 5:42am

 

Gold rose +0.60 to 1268.50 on moderate volume, while silver dropped -0.13 to 16.82 on very heavy volume. While silver continued moving lower, gold managed to find buyers, and the mining shares actually did quite well.

Gold sold off in the early part of the day, making a new low to 1260.50 before buyers appeared pushing prices back to even. The intraday reversal resulted in a high wave print which the code found quite bullish: a 70% chance of marking a low here. Gold appears to have found support at 1260/the 50 MA the day before the FOMC announcement.

Open interest at COMEX for GC fell -1,301 contracts.

Rate rise chances (June 2017) remain at 99%.

Silver looked weaker than gold, bottoming later in the day at 16.70, with a less robust rebound that shaved just 10 cents off the drop. Candle print was an opening black marubozu which the code felt was actually relatively bullish, all things considered, yielding a 40% chance of a low.  Maybe it was the heavy volume coupled with the rebound.  The FOMC announcement tomorrow may have traders covering their shorts in advance.

Open interest at COMEX for SI fell -3,647 contracts.

The gold/silver ratio rose +0.61 to 75.44. The rising gold/silver ratio continues to be a bearish sign.

Miners had another good day, relatively speaking. GDX rallied +1.01% on moderate volume, while GDXJ was up +2.32% on moderate volume also. GDX printed a bullish engulfing, which has a 67% chance of marking a low. That's pretty good. GDX managed to move above its 50 MA, which is a good sign, and GDXJ actually broke out to new multi-month highs.  The GDXJ:GDX ratio is up 7 days of the last 8, with today being one of the better moves.  Junior miners appear to be back.

Platinum was hammered, down -2.0% on heavy volume, while palladium dropped -1.82%, and copper fell -0.57%. Platinum looks awful, and appears to be heading for new lows, while palladium remains near its multi-year high.

The buck fell -0.18 to 96.69, but the moves in the buck didn't seem to have much an effect on PM one way or the other. Buck is now back below its 9 EMA. The dollar rally I was expecting doesn't seem to be happening.  At this point, its more likely the dollar will end up making new lows.

Crude fell -0.04 to 46.08, trading in a wide range that ended up going nowhere. Crude did rally 60 cents ahead of the API report, but the report showed a crude inventory build, and that erased the 60 cent gain in about a minute right after the report came out. Still, crude avoided major losses, which suggests the market may have some decent support at 46. EIA report comes out tomorrow at 10:30.

SPX rallied, up +10.96 to 2440.35, which is a new all time closing high. All sectors rallied today, led by materials (XLB:+1.25%) and energy (XLE:+0.75%). Consumer staples (XLP:+0.165) were weakest. The tech sector printed a swing low, which appears as though it has probably marked a low here.

VIX fell -1.04 to 10.42.

TLT inched higher, up +0.02%. It has been treading water for the past 3 days just below its 200 MA. I think the future for bonds depends on the Fed's plans to reduce its balance sheet. A near-term substantive plan will probably send TLT plummeting – but that's just a guess. We'll know more after the press conference that happens tomorrow at 2:30 pm.

JNK rallied +0.13%, following through off yesterday's swing low. JNK is saying risk on.

CRB fell -0.06%, making a new multi-month low. 3 of 5 groups fell, led by industrial metals.

As mentioned, FOMC announces its “rate increase” tomorrow, but the real focus will be on what comes next: a balance sheet reduction, as well as any hints about subsequent actions the Fed plans to take.

In addition, in the morning, we also have Retail Sales at 8:30 am, which tends to move prices around too.

We also have the BOE on Thursday, and BOJ on Friday.

Gold is finding buyers ahead of the FOMC announcement, and was underscored today by rallies in the mining shares. Silver remains the red-headed stepchild (or rented mule, if you prefer). I'm not sure why the beatings in silver continue, but at least today's performance wasn't as bad as the previous 3 days.

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16 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
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ugly retail sales

Retail Sales fell by -0.3% vs last month, below the consensus range of -0.2..0.4%. 

This caused an immediate spike in gold and silver: gold +8.20, silver +0.30.

As I mentioned in my reports, Retail Sales can really move prices around, and this particular report looks as though it disappointed the market fairly substantially.

Not equities of course.  There was a time, long ago, when equities would sell off when retail sales disappointed, but not right now.  Not yet.

cmartenson's picture
cmartenson
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Posts: 5392
Of course not!
davefairtex wrote:

Retail Sales fell by -0.3% vs last month, below the consensus range of -0.2..0.4%. 

This caused an immediate spike in gold and silver: gold +8.20, silver +0.30.

As I mentioned in my reports, Retail Sales can really move prices around, and this particular report looks as though it disappointed the market fairly substantially.

Not equities of course.  There was a time, long ago, when equities would sell off when retail sales disappointed, but not right now.  Not yet.

Nothing in the 'news' can touch equities.  They care not.  Or rather, I should say that I sincerely hope that the people of Switzerland enjoy all the fine new equities the SNB has bought for them these past months.  Ditto the people of Japan.  

And may the people of Europe enjoy the process of paying for the ECB's losses on trash corporate paper.  

In the meantime, party on equities!  Nothing matters.   

Yet.

vadim_75's picture
vadim_75
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seems to be a profitable strategy.

OK, we all know what's gonna come next: gold is all the way up to 1290+, miners are on the lows.

Nowdays one should buy and sell miners opposite to what's happening with gold.

 

Cold Rain's picture
Cold Rain
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Yep
vadim_75 wrote:

OK, we all know what's gonna come next: gold is all the way up to 1290+, miners are on the lows.

Nowdays one should buy and sell miners opposite to what's happening with gold.

 

The action in the miners is saying this PM rally will reverse either immediately after the Fed or by Friday.  New lows are ahead.

vadim_75's picture
vadim_75
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I'm not sure miners are

I'm not sure miners are leading here. For me it more looks like some big player crashes retail by conterintuitive movements on an intraday basis.

PeakGold's picture
PeakGold
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Interesting day

Took as small loss on my DSLV position today. The pop went the wrong way....

 I bought a small entry position into USLV today, mostly holding cash incase ColdRain is right. We'll find out soon. 

davefairtex's picture
davefairtex
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press conf

Let's wait until the FOMC press conference.  If we don't hear anything concrete about a balance sheet reduction, it could be quite gold positive.

Lots of turbulence out there right now in the commodity space.  Oil plunged more than 3% on what seemed to be a less bearish outlook than yesterday's API report.

TLT broke to a new high.  It is suggesting good things ahead for gold.  Let's see how it plays out.  Certainly the weakness doesn't look all that transitory.

Today's miner swoon (and the gold pop that caused the gap-up) could have been engineered in order for the big guys to grab some quick bucks after the last few day's of miner rally.

cmartenson's picture
cmartenson
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Oil way oversupplied right now

Oil's trouble is that the economy is weak (low demand growth) and new supplies have come roaring back (Nigeria and Libya at 250,000 bpd each, and shale rebounding).

I think the tale of the lonely wandering supertanker provides the best and most easily grasped narrative:

The Lonely Drifting Oil Tanker That Signals OPEC's Struggle

If a single ship can capture the current state of the global oil market, it’s the supertanker Saiq, floating idly about 850 kilometers (530 miles) south of the Canary Islands.

Until a few days ago, the 330-meter-long tanker, chartered by Royal Dutch Shell Plc, was steaming at 13 knots toward the Chinese port of Tianjin after loading a 2-million-barrel cargo of North Sea oil at the Hound Point terminal near Edinburgh. Then, it suddenly stopped in the middle of the Atlantic Ocean, according to ship-tracking data compiled by Bloomberg.

Its problem: China isn’t buying much crude right now, leaving the tanker searching for a customer. While the vessel was floating near Africa last week, Shell offered to sell the cargo in a ship-to-ship transfer all the way back in Scotland. There weren’t any takers.

Across the world, the plight of the Saiq, now idling off the coast of Mauritania, reflects a broader trend in the physical oil market. After six months of oil-production cuts from the Organization of Petroleum Exporting Countries and 11 non-OPEC nations led by Russia, crude supply is surprisingly still plentiful, according to traders.

vadim_75's picture
vadim_75
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Dave, i'd argue that if gold

Dave, i'd argue that if gold doesn't perform well today, when condition is almost perfect (policy error etc.),

then... the goldwinter is coming.

 

Cold Rain's picture
Cold Rain
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Posts: 268
Lol

Complete round trip on gold today.  Pathetic performance, given the back-drop.  Bet equities finish green.

vadim_75's picture
vadim_75
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Posts: 48
CR, look like not today for

CR, look like not today for equities.

And yes, gold is a toast. Sell, sell, sell like Dave used to saying.

davefairtex's picture
davefairtex
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Posts: 4664
balance sheet reduction plan

Yellen said in her press conf that the balance sheet reduction plan will start at a rate of 10 billion per month, stepping up to a maximum of 50 billion per month.

The more real this gets, the less gold will like it.  That's my sense anyway.

Miners are back to looking absolutely horrid.  Candles today look really bearish.  Run, don't walk.  We got two days of fun, and now the party appears to be over.

Things that rallied off FOMC 2pm:  Financials (XLF)

Things that sold off: GDX, gold, silver, the buck, tech (XLK), cons discretionary (XLY), sickcare (XLV), cons staples (XLP), JNK,

 

PeakGold's picture
PeakGold
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Posts: 67
Wow what a day! I was able to

Wow what a day! I was able to jump out to all cash again before this dip. Looks like we are still on track for $16.60 this week or next.....

cmartenson's picture
cmartenson
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Posts: 5392
CB rescue number 723...

Yet again, a nipple bottom for no reason.

Other than, "because we can"

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 268
Easy
vadim_75 wrote:

CR, look like not today for equities.

And yes, gold is a toast. Sell, sell, sell like Dave used to saying.

Dow ended green and the others tried to follow.  Gold gave up the ghost and the miners were obliterated.  Today was so easy to see coming.  They don't even make it hard anymore.

Uncletommy's picture
Uncletommy
Status: Gold Member (Offline)
Joined: May 4 2014
Posts: 412
First Gold, then oil, then real estate!

It seems logical that the slide is upon us and it is just a matter of time how transformational it might be realized.  Ms. Yellen promised us that "belt tightening" would be good for us, but exactly who is "Us"? Worth reflecting on.

https://ourfiniteworld.com/2017/06/12/falling-interest-rates-have-postponed-peak-oil/

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