PM Daily Market Commentary - 12/12/2017

By davefairtex on Wed, Dec 13, 2017 - 2:19am


Gold rose +2.80 [+0.23%] to 1246.40 on moderate volume, and silver rose +0.02 [+0.16%] to 15.74 on moderate volume also. The buck rose +0.24%, which says that PM today was actually stronger than it appeared.

Gold fell along with the dropping Euro, making a new low to 1238.30 at around 11 am, but then buyers appeared pulling prices back up into the green by end of day. Print was a hammer candle, which had a 59% chance of being a bullish reversal. Forecaster jumped +0.18 to -0.18. Hmm, this is looking more promising. And just in time for the FOMC announcement tomorrow.

COMEX GC open interest fell by -4,086 contracts. That looks like cash-register-ringing by the commercials, here at the lows.

Rate rise chances (Dec 2017) remain at 88%.

Silver followed the same track as gold, dropping until about 11 am and making a new low to 15.63, but then reversing to close back in the green by end of day. Silver printed a bullish harami pattern which had a 42% chance of being a bullish reversal. Silver's forecaster jumped +0.19 to -0.08. The downtrend in silver is rapidly slowing down.

COMEX SI open interest rose by 2,906 contracts. I really hope this rising OI is a sign that managed money continues to pile in short, much as they did last week. If so, then those new shorts are fuel for the rebound, whenever it occurs.

The gold/silver ratio rose +0.05 to 79.16. That's slightly bearish.

The miners were mixed again today, with GDX down -0.42% on moderately heavy volume, while GDXJ rose +0.10% on very light volume. Even though GDX fell, its candle print was still pretty good; the southern doji had a 54% chance of being a bullish reversal. GDXJ's short white candle was a bullish continuation (GDXJ printed a swing low two days ago). GDXJ's forecaster rose +0.08 to -0.01 (very close to a buy signal), while GDX forecaster fell -0.02 to -0.21. HUI forecaster remains right on the edge of a buy, at -0.04.

Today, the GDXJ:GDX ratio rose, and the GDX:$GOLD ratio fell. That's neutral.

Platinum fell -0.84%, palladium rose +0.22%, while copper climbed +0.28%. Platinum plunged to a new low today, to 880, and unlike gold, the buyers weren't nearly as enthusiastic. The gold/platinum ratio has risen to 1.42, a level which hasn't been seen since 1982. If we're supposed to buy low and sell high, platinum might be a decent choice. Platinum monthly chart shows a low of 832 set back in December 2015, so if it gets down that low, that price level will probably act as support.

The buck rose +0.22 [+0.24%] to 93.72, making a new high to 93.85. It continues to move steadily higher. I'm just guessing, but the combination of tax cuts (and the anticipated repatriation) along with the impending rate increase by the Fed is probably pulling money into the buck. Dollar forecaster was flat, at +0.50. That's a reasonably strong uptrend.

Crude was all over the map today, first trying to rally, then selling off hard, then bouncing back somewhat to close down -0.58 [-1.00%] to 57.46. A strong API report (crude -7.4m, gasoline +2.3m, distillates +1.5m) at 4:30 pm looked bullish to me, but was only good for a 25 cent move. The bearish harami candle print had a 53% chance of being a bearish reversal. Forecaster fell -0.56 to -0.13. That's a sell signal. Crude has been back and forth several times – it appears that 58 is acting as a strong resistance level for crude. If the EIA report confirms the bullish API report and prices still don't move higher, that will be a bad sign for crude.

SPX moved up +4.12 [+0.15%] to 2664.11. SPX made a new all time high to 2669.72, but ended up losing 5 points by the close – candle print was a spinning top, which had a 44% chance of being a bearish reversal. SPX forecaster remains at +0.54, which is a strong uptrend. Sector map shows financials leading (XLF:+1.00%) while utilities were hammered (XLU:-1.41%). That's a big plunge for the normally quiet utility sector.

VIX rise +0.58 to 9.92.

TLT fell -0.04%, but it recovered from a much larger loss intraday, printing a hammer candle which has a 43% chance of being a bullish reversal. Forecaster remains at -0.41, which is a downtrend for TLT. TY was not so fortunate, dropping -0.10% and printing a bearish continuation. TY continues to look weak.

JNK was unchanged today, and its forecaster remains in a slight uptrend.

CRB plunged -1.12%, making a new low. 3 of 5 sectors fell, led by energy (-1.75%). CRB is not looking all that healthy right now, having dropped 5% from the highs set back in early November.

In spite of a slowly rising dollar and falling commodity prices, things do seem to be lining up for a PM low on or after the FOMC announcement that happens tomorrow at 2:00, with the press conference at 2:30 – Janet Yellen's last.  Today's candle prints look reasonable, intraday the buyers appeared – especially in silver, with strong support showing up at 15.65, PM is oversold enough for a trend reversal to appear, and the COT report from last week showed a great deal of short-covering by the commercials, again especially in silver. Also, the continued rise in open interest in silver suggests continued heavy shorting by managed money, who are usually wrong at the turning points.

Lastly, we also have buying in the junior miners in preference to the seniors, which is always a positive sign. And here's a fun one I just saw: the SIL:GDX ratio made its low back in mid-November, and has been rising since then. That tells us that traders have been buying silver miners in preference to the overall miner group for the past few weeks.

The stars and moons seem aligned.  Now let's see if prices will cooperate.

Its important to remember that molecules still have a place.  A whole bunch of silver molecules, for instance, are used in all those solar panels (60 million of them) that are currently powering bitcoin.  60% of new power generation in the US last year was solar.  I'm not sure when growth in silver use in solar panels will overtake the loss from photography, but once that happens, the silver price should do quite well, independently of investment/monetary demand.  I know its the perennial wish-story of goldbug press, but given the steep ramp in the solar buildout, within a few years (or months?) it will happen, and once the market realizes it, the psychology of the trade will turn in a flash.  Attempts to suppress the price simply will not work.

I'm not trying to "sell the hype" here.  Silver's price chart looks quite unfortunate.  The chart below is why managed money is piling in short - they see a breakdown of the monthly descending triangle, with silver apparently headed for a re-test of the 13.85 lows set back in 2015.

So why are the commercials covering like crazy?  And going long?  And we see signs of buying in the silver miners?  Why, if a 14% plunge in the price is about to strike?

Normally I go with the trend - and right now, silver's trend is down on the daily, weekly, and monthly timeframes.  But in spite of that horrible monthly chart, I'm seeing other technical signs of a low here.  Not sure that it's "the" low, but its quite possibly "a" low.

The commercials have the perfect setup for a massive spike higher following FOMC.  Will it happen?  I certainly can't say.  But that is how they appear to be positioned.

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Nate's picture
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Joined: May 5 2009
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From a recent CAF podcast with Greg Hunter:

So, what are the rich doing with their money?   Fitts says, “Gold is what it has always been and that is a real store of value.  I am a gold girl.  If you look at the smart money and central banks around the world . . . the smart money is buying gold, and the smart money is buying land.  If you read the land report, that’s the top holders of land in the United States.  Their holdings have doubled since 2008.  I see tremendous amounts of money moving into hard assets.”

thc0655's picture
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Posts: 1718
WAIT! Isn't gold supposed to drop when rates are raised?

Up $15.90 as of 3:32 pm.  Whatever.

brushhog's picture
Status: Bronze Member (Offline)
Joined: Oct 6 2015
Posts: 41
Thats a myth

I really think that is a popular misconception. Gold does not go up and down as a direct response to interest rates. It may rise or fall in preparation for rising or falling inflation levels but I dont believe that is a direct causal reaction either. Gold moves with sentiment and its function is primarily as a perceived safe haven.

So gold may move up with inflation, or it may move down with inflation. Just as it may move UP with deflation or down with deflation. It really depends on the perception of stability in the markets and institutions that support them.

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