PM End of Week Market Commentary - 7/21/2017

davefairtex
By davefairtex on Sat, Jul 22, 2017 - 8:15pm

 

On Friday gold rose +10.60 [+0.85%] to 1261.10 on heavy volume, while silver climbed +0.20 [+1.20%] to 16.50 on moderate volume. The buck continued to plunge; on Friday it was down -0.47%, which says that more than half of gold's move was a currency effect.

Looking at the metals sector map, we see another relatively bullish week in PM, but the pattern is not as clear as it was last week. Silver is leading gold, which is bullish, but the miners are not leading the metals. Also, seniors are leading juniors, which is not ideal either. Many components have managed to cross back above the 50 MA, and gold is even back above its 200, which are all good signs. While silver led the complex higher this week, over the longer term, silver remains an under-performer – silver (and the silver miners) have yet to make it back back above the 50.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Silver $SILVER 3.48% -16.81% rising rising falling rising ema9 on 2017-07-14 2017-07-21
Silver Miners SIL 3.04% -27.96% rising rising falling rising ema9 on 2017-07-14 2017-07-21
Senior Miners GDX 2.80% -22.38% rising rising falling rising ema9 on 2017-07-14 2017-07-21
Gold $GOLD 2.70% -5.27% rising rising falling rising ma50 on 2017-07-20 2017-07-21
Junior Miners GDXJ 2.28% -28.45% rising rising falling rising ma50 on 2017-07-17 2017-07-21
Platinum $PLAT 1.53% -15.38% rising rising falling rising ma50 on 2017-07-21 2017-07-21
Copper $COPPER 1.00% 20.47% rising rising rising rising ema9 on 2017-07-14 2017-07-21
Palladium $PALL -1.56% 23.06% falling rising rising rising ema9 on 2017-07-20 2017-07-21

Gold rose +33.10 [+2.70%] on the week, rising 4 days out of 5. When viewed in dollars, the speed of gold's rally is beginning to pick up. However, half of gold's gains were due to the -1.34% plunge in the buck (and/or the +1.65% rise in the Euro), along with the GC contract roll. When viewed in Euros, gold just managed to inch higher on the week. In fact, the gold/EUR chart looks as though it is repeating the sideways chop that happened back in May – just before gold staged its big sell-off in June.

Friday's candle print was a long white candle, which the candle code felt was a continuation. The gold forecaster is now very bullish, reading +0.86. Gold's RSI-7 is at 77, which is a bit overbought. The technical picture – in USD - remains bullish.

The December rate-increase chances remain at 43%.

COMEX GC open interest fell -17,706 contracts this week. It looks as though there was a fair amount of short-covering going on.

In the chart below, you can see that gold in USD looks pretty strong.

Now contrast that with gold in Euros.  The forecaster only has an +0.18 rating, which is only mildly bullish, and the uptrend looks pretty similar to what happened in May/June, immediately before the hefty June sell-off.  If history repeats, maybe we get one more week before we correct.  And gold is only just barely above its 9 EMA.

Silver rose +0.55 [+3.48%] on the week, the best performing component in the PM group. That said, silver has yet to recover from the big losses it suffered back in late June/early July, and it remains below its 50 MA. Silver's candle print on Friday was a short white candle, which the candle code thinks might be a top (43% chance).  Silver's forecaster remains bullish, but looks substantially less bullish than gold.

The gold/silver ratio fell -0.58 to 76.43. That's bullish.

COMEX SI open interest rose by +929 contracts. No short covering yet in silver.

The miners moved slowly higher this week, enduring a fair amount of selling pressure as the metals appeared to be doing the heavy lifting for the group.  3 days out of 5 were days where GDX opened up initially, but then sold off during the trading day.  Friday's print for GDX was a spinning top, but the candle code felt it was a continuation rather marking a top. GDXJ also printed a spinning top/continuation too. Both miner ETFs managed to regain their 50 MA lines this week. GDX forecaster ended the week with an +0.33 rating, which is just somewhat bullish, while the GDXJ forecaster closed the week with a +0.12 rating – just barely above stall speed.

The GDX:$GOLD ratio rose this week, but the GDXJ:GDX ratio fell. Call it neutral.

USD

This week the buck was hammered, dropping -1.27 [-1.34%] to 93.62, touching levels last seen in June 2016. Mostly this was about the Euro, which climbed +1.94 [+1.69%] to 116.61. My sense: its a combination of Draghi's plan to start tapering ECB money printing alongside the increased political uncertainty surrounding the Trump presidency. In addition, the inability of the Republicans to repeal Obamacare is (probably) being read by the market as an indication that Trump's reflation plan is not likely to succeed either. Friday's long black candle was seen by the code as a continuation. The USD forecaster is very bearish, with a rating of -0.90. While the buck is quite oversold in both the daily and weekly timeframes, so far there is no technical indication that we've reached a low just yet.

US Equities/SPX

SPX continued moving higher, up +13.27 to 2472.54. SPX made another all time closing high again this week.

The equities sector map was led by utilities and telecom, with financials and industrials trailing. It looks like sector rotation to me – out of Trump reflation and back into search for yield. Tech has managed to recover from its June dip, with XLK making a new high this week. FANG is back, with a 17% move by NFLX this week.

VIX fell -0.15 to 9.36. Is this an all time low? I don't know, it might be.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Gold Miners GDX 2.80% -22.38% rising rising falling rising ema9 on 2017-07-14 2017-07-21
Utilities XLU 2.64% 2.34% rising rising rising rising ma50 on 2017-07-20 2017-07-21
Telecom XTL 1.87% 18.74% rising rising rising falling ema9 on 2017-07-19 2017-07-21
Healthcare XLV 1.07% 8.22% rising rising rising rising ema9 on 2017-07-12 2017-07-21
Technology XLK 1.07% 26.14% rising rising rising falling ma50 on 2017-07-12 2017-07-21
Cons Discretionary XLY 1.04% 12.15% rising rising rising falling ma50 on 2017-07-14 2017-07-21
REIT RWR 0.79% -8.72% rising rising falling rising ma200 on 2017-07-17 2017-07-21
Cons Staples XLP 0.66% -0.29% rising rising rising falling ema9 on 2017-07-14 2017-07-21
Materials XLB 0.02% 13.87% rising rising rising rising ema9 on 2017-07-07 2017-07-21
Homebuilders XHB -0.41% 9.39% rising rising rising falling ema9 on 2017-07-21 2017-07-21
Energy XLE -0.44% -4.40% falling falling falling falling ema9 on 2017-07-21 2017-07-21
Financials XLF -0.48% 29.80% falling rising rising falling ema9 on 2017-07-17 2017-07-21
Industrials XLI -0.94% 18.22% falling rising rising falling ema9 on 2017-07-20 2017-07-21

Gold in Other Currencies

Gold rallied in all currencies this week, with gold in XDR up +30.64.  Gold was weakest in euros.

Rates & Commodities

TLT rose +1.91% on the week, a big move that brought TLT back above all 3 moving averages and back into an uptrend once again. TLT forecaster has a +0.59 rating, which is fairly bullish. Candle print for Friday was a northern doji, which the code felt was a continuation – not bearish. Given the heavy selling in the USD this week as well as the new highs in SPX, the move higher in bonds was pretty impressive. Perhaps its a hunt for yield? That would align with the rally in utility-equities.

JNK rose +0.35% this week, moving closer to a breakout above the previous high set in late May. JNK is signaling risk on.

CRB rose +0.21% on the week, moving higher for much of the week, but then selling off on Thursday and Friday. While CRB managed to close above its 50 MA for the week, it also printed a swing high Friday – mostly because of crude oil.

Crude fell this week, dropping -1.21 [-2.58%] to 45.60. All of the damage came on Friday, when crude fell after a report estimated that OPEC production rose 145k barrels/day this month, calling into question the ability of OPEC to actually limit production. Production gains came from Saudi Arabia, the OAE and Nigeria. Candle print on Friday was a swing high, which has a 69% chance of marking a top here. Ouch. The plunge took crude back below all 3 moving averages. Crude forecaster moved back into bearish territory, now reading -0.24. Saudi exports to the US dropped to a 7-year low; the thought is, Saudis are restricting oil exports to the US in order to help “paint the tape” on the weekly EIA inventory report, which have been strongly bullish over the past few weeks.

Physical Supply Indicators

* No SGE data this week.

* The GLD ETF tonnage on hand fell -15.08, with 814 tons in inventory.

* ETF Premium/Discount to NAV; gold closing of 1228.00 and silver closing of 15.95:

 PHYS 10.23 -0.68% to NAV [down]
 PSLV 6.29 +0.41% to NAV [up]
 CEF 12.30 -6.90% to NAV [down]

* Bullion Vault gold (https://www.bullionvault.com/gold_market.do#!/orderboard) showed a discount for gold, and no premium for silver.

* Big bars premiums were: gold [400oz] 1.70% and silver [1000oz] 3.63%.

Futures Positioning/COT

COT report is through July 18th, when gold closed at 1241.90, and silver at 16.26.

This week in gold, the commercials net position did not change; they added 5k longs, but also 5k shorts leaving the net position the same. Managed money had only a small change, closing -2k shorts and adding 3k longs. Positioning remains bullish for gold.

In silver, commercials closed -1.7k shorts, and added 881 longs – another small change. It is interesting that the commercials actually are closing short positions as price moves higher, but the changes this week are very minor. Managed money added 3.1k longs, but also 3.8k shorts, resulting in a very small change to then net position. Managed money remains in a net short position; the last time that happened was back in 2015, and it didn't last very long; it usually marks the low. Positioning for silver remains very bullish.

Gold Manipulation Report

There were no after-hours spikes this week.

Eurozone Status

  • German Elections; October 2017: Merkel's lead is slowly increasing; it is now a 14.75 point lead.

  • ECB met this week, tried to be dovish by announcing they stood ready to print even more if the economy turned down, but during the press conference Draghi said that the ECB would debate the details of tapering at its next (September) meeting. Market responded with a big Euro rally.

  • Italy is considering giving 200,000 migrants “temporary humanitarian EU visas” – so they can leave Italy and go somewhere else in Europe where they can get a better deal. Austria has threatened to close its border with Italy. Other EU countries feel that Italy is being too soft-hearted with all the migrant rescues. More migrants have landed in Italy this year than last. This problem isn't going away. https://www.economist.com/news/europe/21725327-economic-migrants-piling-...

  • Turkey & the migrants: the latest diplomatic row involves Turkey arresting some international rights activists on terrorism charges; Merkel is now suggesting suspending payments to Turkey in response. If she does this, the migrant deal may unravel as a side effect.

  • Italian Elections: no progress on a new electoral law in Italy. In national polls, M5S has a 1 point lead over the PD at 27.5%.

Summary

Metals continued moving higher, with silver in the lead. The miners lagged, with the trend forecaster giving us hints that the move higher in the miners was tepid at best. Forecasters are essentially projecting the expected slope of the near-term trend – and for the miners, its a pretty shallow upward slope. The moves in PM were overshadowed by the large move higher in the Euro, and the continued drop in USD.

The COT reports show no material change in the positioning for either gold or silver. Both remain bullish, with silver more so than gold.

Gold and silver big bar shortage indicators shows a mixed picture in the West; premiums on big-bar silver remain slightly elevated, while premiums on gold remain normal. ETF premiums were mixed, and GLD tonnage fell again. The falling GLD tonnage is a bit odd; it usually rises when the price of gold is rallying, but right now its going the other way.

While gold did manage to rally in every currency, gold in Euros looks anemic, as do the mining shares. The COT reports both look bullish, with large concentrations of short positions for managed money, especially in silver. What's more, the buck continues to plunge, with no end in sight. Trump's troubles and Draghi's taper plans could well continue driving the buck further downhill. Things in motion tend to stay in motion, and that's bullish for PM, at least when measured in dollars.

Next week we have the FOMC meeting, with the announcement happening at 2pm Wednesday; no rate increase is expected, but they could talk more about running off the balance sheet, and there is an outside chance they could even decide to kick off the program. This would probably be dollar-positive. Certainly the recent sell-off in the buck will give them some extra run room to actually start the process. There is no press conference scheduled for this coming meeting, however, so I suspect they'll just talk about it some more and actually wait another 6 weeks before pulling the trigger. https://www.fxstreet.com/analysis/fomc-members-divided-over-balance-sheet-reduction-schedule-201707060901

Trend-following code says:

Uptrend: gold, silver, copper, platinum, treasury bonds.

Downtrend: natgas, crude, USD.

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3 Comments

Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 327
Miners Lagging

Probably not a good sign for PM prices ahead.  NOBODY wants miners these days.  All it takes is a good stiff breeze to knock them off 5%.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
agree

Yes I agree, the miners sure do look unhappy right now.  Gold goes up, miners struggle.  Gold moves sideways, miners sell off.  They've been giving off hints of this for a couple of weeks.  Best not to own them right now.

Looks like swing highs for GDX and GDXJ today.

FOMC Wednesday.  That may be playing a part in the drama.

 

lambertad's picture
lambertad
Status: Silver Member (Offline)
Joined: Aug 31 2013
Posts: 172
Da FED

Fed announcement this week, therefore, stocks up, gold down. How could it be any other way?

It's like the big banks front running the FED to buy treasury bonds. They've conditioned the market to react in a certain way, and that's usually dump gold or miners prior to fed announcements because it nearly always happens to go down. You know, ""markets"". 

On another note, check out this chart by Hussman. Seems we truly did miss that correction moment Chris was talking about in early 2016, but perhaps another one is coming. 

 

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