PM End of Week Market Commentary - 8/18/2017

davefairtex
By davefairtex on Sun, Aug 20, 2017 - 1:58am

On Friday gold fell -3.50 to 1290.10 on extremely heavy volume, while silver fell -0.07 to 16.95 on very heavy volume. Both metals shot to new highs during the European trading session, with gold hitting 1306.90 and silver 17.32, but then both metals ran into a wall of selling, which hammered prices right back down into the red where they ended the day.

The PM sector map looks bearish; silver fell more than gold, and the miners dropped more than the metals. The only two metals doing well are the industrial metals - palladium and copper.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Palladium $PALL 3.41% 29.81% rising rising rising rising ema9 on 2017-08-16 2017-08-18
Copper $COPPER 1.58% 35.78% rising rising rising rising ema9 on 2017-08-16 2017-08-18
Gold $GOLD -0.38% -4.94% rising rising rising rising ema9 on 2017-08-16 2017-08-18
Platinum $PLAT -0.56% -13.50% rising rising falling rising ema9 on 2017-08-16 2017-08-18
Junior Miners GDXJ -0.71% -35.42% rising rising falling rising ema9 on 2017-08-16 2017-08-18
Silver $SILVER -0.91% -14.18% rising falling falling falling ma200 on 2017-08-17 2017-08-18
Senior Miners GDX -0.95% -25.43% rising falling falling rising ema9 on 2017-08-16 2017-08-18
Silver Miners SIL -1.92% -37.70% falling falling falling falling ema9 on 2017-08-17 2017-08-18

Gold fell -4.90 [-0.38%] this week, dipping below the 9 EMA following the FOMC minutes release on Wednesday, rallying Thursday, and then trying to break out on Friday but failing. Candle print on Friday was a shooting star/dark cloud cover, which the code felt had a 43% chance of marking the top for gold. The rally on Friday did manage to break through round number 1300 – there were several high volume up-spikes that appeared to result in a lot of short-covering, but once the shorts were gone, the selling started, and it really didn't stop until gold was back safely into the red. Still, the gold forecaster jumped +0.22 points, and closed the week in bullish territory, with a positive reading of +0.35. Do we believe the forecaster or the candles? I have no idea.

The December rate-increase chances remain at 37%.

COMEX GC open interest rose +27,819 contracts this week.

Silver fell -0.16 [-0.91%] this week. Silver took 4 shots at moving through its 200 MA and failed each time. Friday's failure was substantially more dramatic, with higher volume as well as a new high to 17.32. Friday's candle print was a high wave, which the code felt was a 44% chance of marking the top. Forecaster was unchanged on Friday, reporting a slightly bearish rating of -0.07. Silver remains above its 9 EMA, but below the 200 – in a sort of no-mans-land, directionally speaking.

The gold/silver ratio rose +0.40 to 76.11.

COMEX SI open interest rose by +3,451 contracts.

Miners dropped to start the week, and then staged a sharp reversal following the FOMC minutes release on Wednesday. On Friday, miners made new highs, but then sold off for much of the day. GDX printed just a long black candle, which was seen as a continuation. GDXJ also printed a long black candle, but the candle code felt it was bearish: a 62% chance of a high. Both forecasters were little-changed, remaining just barely in positive territory. Both GDXJ and GDX remain above their 9 EMA lines, which says their short term uptrend remains in place.

The GDX:$GOLD ratio fell -0.77%, while the GDXJ:GDX ratio rose just +0.24%. Call the ratios neutral this week.

USD

The buck rose +0.38 [+0.41%] to 93.23 this week, making a new high but not quite managing to close above the 9 EMA. The new uptrend, such as it is, is not particularly dynamic – the buck appears to be struggling to move higher. This week's candle print looks a bit like a shooting star; its not particularly bullish. This tells us that the buck tried to rally this week, but mostly failed. The buck has yet to print a weekly swing low. The forecaster remains in bullish territory, with a reading of +0.26.

US Equities/SPX

SPX attempted to rally this week but failed, falling -15.77 [-0.65%] to 2425.55. On the daily chart, we see a clear lower high/lower low combination, which indicates SPX has moved into a downtrend. SPX is also below both the 50 MA as well as the 9 EMA, which are other signs of a downtrend. Friday's candle print was a high wave, which was probably not a reversal (only 24% chance). The SPX forecaster popped up briefly on Monday's strong rally, but sank once more into bearish territory by end of week, and now reads -0.49.

The equities sector map shows another mostly-bad week, with utilities, staples, and materials doing best; utilities and staples are typical risk-off sectors, while materials probably did well because of the week-long rally in industrial metals. Energy equities did worst, even though crude managed to turn in a flat performance this week.

VIX dropped -1.25 on the week to 14.26.

Gold in Other Currencies

Gold was mixed, plunging in Rubles, rallying in GBP, and moving down slightly in XDR: off -1.36.

Rates & Commodities

TLT took a hit early in the week, but rallied following the FOMC minutes release on Wednesday, along with gold. The gold/TLT correlation has returned. TLT moved up +0.15 on the week, making a new high on Friday but printing a long black candle which the code thinks might be a top (44% chance). The forecaster disagrees, closing the week at a bullish-looking +0.51. TLT is above all 3 moving averages and is in a clear uptrend.

JNK rallied for the first part of the week, but dropped hard on Thursday. Unlike SPX, it did not make a new low, however, and Friday's candle pattern was a “homing pigeon” (a sort of reverse bullish harami) which the code thinks could be a reversal (49% chance). JNK managed to avoid dropping below its 200 MA, ending the week just above it. The chart doesn't look great, but it does look better than SPX.

CRB fell -1.17%, mostly because of agriculture (-2.76%) and livestock (-2.07%). On Friday, CRB rallied strongly due to the big move in crude, jumping +0.92% and printing a swing low. I am not sure where CRB is headed next; it seemed to find support at the 200 MA so that's a plus.

Crude was unchanged on the week, rising +0.02 to 48.86. It spent the first 3 days plunging, inexplicably dropping after a bullish-looking EIA report (crude inventory draw: -8.9m barrels), but on Friday crude staged a strong rebound, jumping +1.83 and printing a swing low which the code felt had a 64% chance of marking the low here. That's a really high rating. Crude's forecaster agrees, jumping +0.81 points on Friday alone – and now reads a bullish +0.43. Crude ended the week back above its 9 EMA. Rig counts dropped on Friday – perhaps that was part of the reason for the rally. There are also hints that Wall Street is starting to pull away from financing the drill-regardless-of-profits approach of the shale industry; taking profitless shale out of the mix would – by itself – be enough to bring crude prices immediately back above 50.

http://oilprice.com/Energy/Oil-Prices/Are-Investors-Bailing-On-US-Shale.html

... there are some early signs that investors’ patience is starting to wear thin. A long list of shale companies saw their share prices savaged after the latest earnings reports, even as oil prices have regained ground. In a warning sign for the industry, Goldman Sachs reported that it has fielded calls from major investors looking to “reallocate capital across the energy industry” after souring on shale E&Ps.

Physical Supply Indicators

* No SGE data this week.

* The GLD ETF tonnage on hand rose +12.42 tons, with 799 tons in inventory.

* ETF Premium/Discount to NAV:

 PHYS 10.50 -0.32% to NAV [unch]
 PSLV 6.42 +0.49% to NAV [up]
 CEF 12.73 -7.3% 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 [1kg] 0.85% and silver [1000oz] 3.19%.

Futures Positioning/COT

COT report is through Aug 15th, when gold closed at 1277.00, and silver at 16.63.

This week in gold, the commercials net position fell by 37k contracts; they sold 3k longs, and added 34k shorts. My guess: the commercials went heavily short at the end of last week and effectively capped the rally below 1300. Managed money net position rose by 40k contracts, adding 31k longs and bailing out of 10k shorts. Managed money shorts are almost gone, and managed money longs are getting a bit extended. Commercial shorts are high enough for a top. I'm guessing that when we see next week's COT report, it will be even worse.

In silver, the commercial net position fell by 8.5k; shorts grew by 5.2k, while longs fell by 3.3k. This could be a top I suppose, but its not a very compelling one. Managed money net rose by 9.4k; it was mostly short covering, with managed money dropping 7.8k shorts and picking up 1.6k longs. While a large number of shorts have covered, its still not a likely top for silver.

Gold Manipulation Report

There was one US after-hours spike down in both gold and silver on Tuesday; it kicked off a two-day drop which was later unwound after the FOMC minutes were released.  There was another silver spike on Friday, which was eventually bought.  Neither spikes resulted in any sort of trend change.

Eurozone Status

Relative calm prevails.

  • German Elections; October 2017: Merkel has a 14 point lead over Shulz.

  • The so-far successful Italian crackdown on migration from Africa comes immediately following the June election in Italy where a “wave of anti-migrant mayors and local councilors were swept into office around the country.” Of course now the migrant path has moved to Spain.  Call it migrant-whack-a-mole. (sorry for the lack of political correctness on that last remark).  http://www.cnn.com/2017/08/17/europe/mediterranean-migrant-crisis-2017/index.html

  • Italian Elections: In national polls, anti-Euro M5S is slightly ahead of the PD: 27.5% to 26.75%. A combination of FI + LN (both semi-anti-Euro parties) continue to poll at 28%.

Summary

The risk off move continued from last week, spurred on somewhat by the contents of the FOMC minutes released on Wednesday, mixed with perhaps a dose of Trump Administration political uncertainty. SPX made a new low, bonds continue to rise, and the buck inched higher.   Commercials appear to have increased their short positions in gold, which almost certainly capped the rise of gold both this week and last. Gold did break above 1300, but only for a few hours.

The COT report for gold shows an increased possibility of a short-term top for gold; few managed money shorts remain, and the commercials have loaded up short. Silver has few managed money shorts left, but not so many longs too.

Gold and silver big bar shortage indicators shows no signs of shortage; premiums on big-bar silver remain slightly elevated, while premiums on gold remain normal. GLD tonnage rose, while ETF premiums were mixed.

Although the technical picture looks mixed for PM with some relatively disagreeable candle prints on Friday, there is one bit of good news: the gold/bonds correlation is back!  If SPX continues to correct and that gold/bonds correlation continues to hold, bonds should rally, and that should pull gold higher too, in spite of the positioning of the COT report.

The wildcard, as always, is the buck.

Trend-following code says:

Uptrend: copper, crude, USD.

Downtrend: gold, silver, platinum, natgas, treasury bonds.

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1 Comment

Eannao's picture
Eannao
Status: Silver Member (Offline)
Joined: Feb 28 2015
Posts: 167
'Gold in Other Currencies' Chart

Dave,

would it be possible to include this chart without the Ruble? (as it stretches the scale too much to display the other major currencies in a useful way)

Perhaps include the Ruble periodically?

Appreciate your work, E

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