PM Daily Market Commentary - 9/27/2017

davefairtex
By davefairtex on Thu, Sep 28, 2017 - 4:38am

Gold fell -11.60 to 1285.60 on very heavy volume, and silver fell -0.05 to 16.79 on moderately heavy volume. More unwind today; gold and bonds both fell hard, while silver's drop was actually fairly modest. A third strong day for the buck didn't help. Trump finally announced his tax reform plan, and that seemed to spur a risk on theme.

Gold made a new low to 1284.10. Candle print was a long black, which the code felt was a bearish continuation. Forecaster fell hard, dropping -0.31 to read -0.40. (I updated the forecaster last night to include a few more inputs; the new version shows that gold entered a downtrend yesterday). Gold has now fallen below the 50 MA. Gold is back below the 9 EMA.

COMEX GC open interest fell -7,688 contracts. (Updated OI from yesterday: -8,713 vs the preliminary OI drop of -1,786). It appears to be commercials ringing the cash register. I get my data here: http://www.cmegroup.com/market-data/volume-open-interest/metals-volume.html

Rate rise chances (Dec 2017) remains at 76%.

Silver fell alongside gold making a new low to 16.75, but the trading range for the day was actually quite narrow. Candle print was a short black candle, which the code found bullish: a 65% chance of a reversal. Forecaster kept dropping, however, losing -0.14 to -0.59. Silver's RSI7 is now 28, which is starting to approach oversold territory.

Open interest in COMEX SI contracts fell by -1,820 contracts.

The gold/silver ratio fell -0.44 to 76.57. That's bullish.

Miners gapped down hard at the open, and then mostly traded sideways through the close. GDX fell -1.54% on heavy volume, while GDXJ dropped -1.55% on moderate volume. Print for GDX was a short black candle, and for GDXJ it was a spinning top; both candles were bearish continuations. Forecasters: GDX -0.59 to -0.33, GDXJ -0.54 to -0.43. Both have resumed their downtrends.

Today, the GDXJ:GDX ratio was unchanged, while the GDX:$GOLD ratio fell. That's somewhat bearish.

Platinum rose +0.02%, palladium climbed +1.57%, and copper rose +0.27%. Today was the 7th day of massive volume in platinum; its spinning top candle was a 49% chance of marking a low here. Platinum's forecaster ticked up +0.09 to -0.25 – maybe the downtrend is slowing. That should help gold, if true. Sometimes I wonder if they beat on platinum to assist gold in moving lower. Palladium's rally probably does mark a low – the confirmed NR7 had a 54% chance, and the forecaster jumped +0.42 to +0.35, and palladium is now back above its 9 EMA. 3 happy signals for palladium. Copper remains in a downtrend.

I include the 3 “other” metals in the report because they're all (to varying degrees) correlated with gold. Correlation order is platinum, palladium, and then copper.

USD rose +0.39 [+0.42%] to 93.17, the third strong day for the buck in a row. Today's rally took the buck through the 50 MA for the first time since April. That's a bullish sign. The dollar forecaster moved up +0.14 to +0.60, which puts the buck into a strong uptrend. Candle print was a long white candle, which the code felt could be a top: 50%. Buck's RSI7 is at 71, which is just starting to hint at being overbought. 

Crude moved sideways again, down -0.06 to 52.03. Today's print was a doji, which the code had no opinion on. Forecaster didn't like it, dropping -0.17 to +0.37. The EIA report seemed neutral; crude: -1.8m, gas: +1.1m, distillates: -0.8m. After the report, crude bounced around for a time, but then ended up going nowhere. It looks as though crude is taking a rest after the breakout above 51.

SPX climbed +10.20 to 2507.04, rallying on the announcement of Trump's tax cut. Financials led (XLF:+1.22%) along with tech (XLK:+1.02%), while utilities were hammered (XLU:-1.34%). My guess: those are the winners & losers from the tax plan as the market sees it so far.

VIX fell -0.30 to 9.87. Single digits again.

TLT was crushed today, with TLT losing -1.51% and making a new low. All of the losses came in the bond futures markets overnight; candle print was a gap down doji, which was a bearish continuation. The forecaster plunged by a huge -1.06 to read -0.57. TLT has resumed its downtrend.  If you were long bonds, you probably shouldn't be anymore. 

JNK rose +0.05%, creeping higher, making a new closing high. JNK remains in a slow but fairly steady uptrend.

CRB rose +0.25%, popping back above its 200 MA. 4 of 5 groups rallied, led by livestock (+1.67%). PM was the sole declining sector today (-0.99%).

The dollar rally is starting to look more like a real thing; whether its a weak German government leading to lowered expectations regarding “More Europe” (and thus decreasing confidence in the Euro), or a Trump tax plan that might actually end up doing something – Euro is being pulled lower, and the dollar higher.

The rising buck is naturally hurting gold, but gold is also falling in Euro terms, which makes matters worse. Short term, there are no technical signs yet of a low for the metals today – perhaps the selling pressure has reached a maximum in platinum, but that's about the only positive note I see.

The major medium-term risk I see to gold right now is an extended dollar rally, and if Trump can actually make progress on his tax plan, I suspect that's what will happen.  Will this Make America Great Again?  I'm not sure how it could address the raft of fundamental issues we currently have facing us, but it certainly could cause the buck to move higher over the next 3 months or so.

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2 Comments

Nate's picture
Nate
Status: Platinum Member (Offline)
Joined: May 5 2009
Posts: 605
relative valuations

Several years ago one of Dave's posts compared tangible assets with each other.  I think he compared oil, real estate, and farmland to gold.  Recently platinum has gotten cheap compared to gold:

mickey_20170207_4.png

http://www.kitco.com/commentaries/2017-02-07/The-46-Year-Record-of-Platinum-Gold-R atios.html

The current Pt:Au ratio is 0.72.  I think this represents the lowest ratio since1971.  What does the peak prosperity community think about owning platinum as part of your precious metal holdings?

hammer6166's picture
hammer6166
Status: Bronze Member (Offline)
Joined: Apr 30 2010
Posts: 32
Owning Platinum as PM

Hi Nate,

I've been skeptical about owning Platinum long term because its primary industrial use is in the automotive sector. Shorter term, it may make sense. I think your graph highlights a possible opportunity.

Some highlights from the World Platinum Investment Council:

  • Total platinum supply expected to decrease by 2% year-on-year to 7,795 koz
  • The full-year forecast for the automotive sector is 3,360 koz, down just 2% on 2016 (3,435 koz)
  • Global platinum jewelry consumption is estimated to fall 1% to 2,590 koz in 2017
  • Overall supply is expected to contract further in 2017, due to closures of uneconomic mining at current market prices

https://www.platinuminvestment.com/supply-and-demand/platinum-quarterly

Supply may continue to decline because of lack of investment caused by low prices. I think both Dave and Chris have mentioned the lack of investment in commodities will eventually show up in the price.

Hammer

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