PM Daily Market Commentary - 8/13/2018

davefairtex
By davefairtex on Tue, Aug 14, 2018 - 8:43am

Gold plunged -18.61 [-1.53%] to 1201.20 on extremely heavy volume, while silver dropped -0.33 [-2.15%] to 14.98 on very heavy volume. The buck was virtually unchanged, copper just edged slightly lower – only the precious metals group was hit today. And of that group, it was platinum that was hit worst of all, driven down -2.99% on very heavy volume.

So why platinum? Is there a solid-platinum asteroid being towed into earth orbit?  Will there soon be platinum enough to pave the streets?  Perhaps let's look at the open interest changes, along with the percentage change in OI this resulted in:

  • gold OI +10,840 [+2.27%] price -1.53%

  • silver OI +2,646 [+1.09%] price -2.15%

  • copper OI -827 [-0.29%] price -0.38%

  • palladium OI +256 [+1.04%] price -1.88%

  • platinum OI +3,647 [+4.41%] price -2.99%

So platinum's price was hit hardest, and it also had by far the largest change in the open interest. From this evidence, I deduce that the price moves today were not about longs bailing out for some fundamental reason, the moves were about a large increase in short positions, and by far the largest increase in short positions (as a percentage of total open interest) came in platinum.

Notice too that copper actually saw some short-covering today – and its price move was relatively mild. Both copper and platinum tend to move on economic events; copper is very closely correlated with moves in platinum, as is silver, and aluminum.  When copper drifts lower, and platinum craters, it doesn't make all that much sense.

And the only meaningful event on the radar today was the problem in Turkey. The USD/TRY bounced around in a very large 11% trading range, from 6.40 to 7.11, ending the day relatively near the highs.

So why would concerns over contagion from the Turkish currency crisis result in a massive increase in the platinum short interest, resulting in a huge plunge in platinum prices, while copper's move was relatively mild – as was the entire industrial metals group?

Only platinum was singled out for the beating by the shorts, with some additional pressure on gold and silver. To me, this is all about manipulation. However, I believe that the manipulation is being done more cleverly now - instead of hitting the gold price directly, they hit the whole PM group, because its more cost-effective to do so. And I also am starting to think it is no longer the “commercials” that do this; I think this manipulation may be showing up in the “managed money” category.

To me, the platinum pounding down here practically at the dead lows says two things. First, our central planners are terrified of what is going on in Turkey. They are so scared for the system in Europe, they want to make 1000% sure that there is no flight to safety into gold, so they pre-emptively pound the PM group in the futures markets (with gold just barely above triple-RSI-accumulate!) to make sure nobody gets the idea that gold could ever be a safe haven.

This panicky behavior reinforces my belief that the Turkish problem is very serious indeed – quite possibly leading to a banking crisis in Europe.

Second, gold remains a safe haven in physical form for “the little people.” Ask people in Turkey if they'd prefer the TRY over a little gold bar at this point. I showed you that graph over the weekend. Gold in TRY has just screamed higher. I'm guessing there aren't any gold bars left at retail in Turkey at this point – unless Erdogan managed to convince his loyal followers to sell their gold in exchange for the failing Lira.

Isn't it interesting? On Friday, gold was showing clear signs of safe haven behavior over in Europe. But Monday, after the central planners had time to sort through their reaction to the situation, platinum gets hit with a flood of short-selling, and gold's safe haven behavior apparently vanishes.

Gold fell all day long, starting in Asia and stopping in the afternoon in the US session. Gold made a new low to 1198.60, bouncing off a previous low that dates back to March 2017. The strong line candle was bearish. Forecaster dropped just -0.02 to -0.16, which is a relatively weak downtrend. If 1199.30 breaks, the next support level for gold is in the 1130 range. Gold is now back into the triple-RSI accumulate state. Somewhat surprisingly, gold in Euros remains in an uptrend; unlike gold in USD, it has not broken down.

COMEX GC open interest rose 10,840 contracts. Gold fell due to pressure from increasing short interest.

Rate rise chances (September 2018) remains at 96%.

Silver fell a bit more slowly initially, but then sold off more abruptly after about 9:30 in the US, making a new low to 14.97 in the early afternoon. Silver forecaster fell -0.25 to -0.36; silver's downtrend is back on again. You can see the breakdown below support on the chart. Next major support for silver is...I guess...down at the previous low of 14.34.

COMEX SI open interest rose 2,646 contracts.

The gold/silver ratio rose +0.51 to 80.16. That's bearish.

Miners sold off for most of the day; GDX plunged -2.82% on extremely heavy volume, while GDXJ fell -3.40% on extremely heavy volume also. XAU was in the middle, losing -3.05%. That resulted in new lows, a plunging forecaster (-0.21 to -0.35) and a break of support. The next major support level is about 30% lower, and dates back to early 2016. Traders no longer want to be holding the mining shares.

The GDXJ:GDX ratio fell -0.59%, and the GDX:$GOLD ratio fell -2.15%. That's quite bearish.

While platinum cratered, and palladium moved lower, copper ended the day with only minor losses. Copper has avoided any serious selling pressure, which suggests the selling pressure the rest of the metals are seeing has little to do with any fundamental economic cause. i.e. the beating on platinum is just trickery by our central planners.

Crude edged lower until about 11 am, at which point it cratered, dropping about $1.70 in a couple of hours. It then rebounded just as strongly, regaining all of its losses, ending the day down just -0.36 [-0.54%] to 66.55. This momentary plunge may have been the result of China deciding to impose a 25% tariff on all US oil imports. The takuri line candle print was bullish (34% bullish reversal) and forecaster jumped +0.39 to +0.25, which is a buy signal for crude. This might mark the low for the 7-week crude correction.  Sometimes the market rallies on bad news - when it does, that's really bullish.

SPX fell -11.35 [-0.40%] to 2821.93. Selling pressure started about 11am, fell for a few hours, then bounced around through end of day. Forecaster issued a sell signal, dropping -0.40 to -0.35. Sector map had utilities leading (+0.13%) while energy did worst (-1.28%). It was a relatively bearish sector map.

VIX rose +1.62 to 14.78.

TLT fell -0.21%, encountering a bit of selling after the recent large move higher. TY edged lower also, losing just -0.02%. TY is now in an uptrend in all 3 timeframes.

JNK also crept lower, down -0.03%, more or less no change at all. JNK remains in a downtrend, but not a very strong one.

CRB fell -0.73%, with all 5 sectors moving down, led by PM (-1.68%).

Not much more to conclude, really, than what I laid out at the start. I believe our central planners whacked platinum really hard in order to make it easier to push the price of gold lower. Which worked, of course. However, the miners were the primary casualties: they are marginally profitable at gold $1250, and another 4% drop in the price of their product, that pushes them further into negative earnings territory.

I'll leave you with my RSI table for the PM group; it shows gold, silver, and platinum in the triple-RSI accumulate state, with the junior and senior miners not far behind. Silver miners look in deepest discount.

name symbol last RSI-D RSI-W RSI-M
Palladium PA.V 884.40 30.1 30.1 38.4
Gold/Euro GC.EUR 1052.79 48.0 31.2 35.3
Copper HG.V 2.73 40.5 27.7 33.9
Junior Miners GDXJ.N 29.56 12.2 16.2 32.4
Senior Miners GDX.N 19.98 16.2 13.9 30.4
Gold GC.V 1200.50 24.3 11.0 28.5
Silver SI.V 14.98 24.9 14.7 25.4
Platinum PL.V 804.00 30.0 13.3 24.9
Silver Miners SIL.N 25.65 19.7 11.9 21.9

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6 Comments

New_Life's picture
New_Life
Status: Gold Member (Offline)
Joined: Apr 18 2011
Posts: 366
RSI figures, please explain...

Dave can you eloborate on why you view the RSI figures as green.? What is a Triple-RSI-accumulate??

In addition to RSI being less than 30% on multiple timeframes what strong standard bullish divergences are you also seeing and on which timeframes?

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5530
simple RSI system

The triple RSI accumulate signal came from an old financial blog I used to read.  I did a study and found out that it actually worked fairly well; for holding periods of 1-2 years, you ended up doing generally pretty well if you bought something when daily, weekly, and monthly RSI values were < 30 - but you had to wait for the "daily" RSI to move back above 30 before actually executing your trade.  The triple < 30 state was called "accumulate" and when the daily popped over 30, that's the time to buy.

It doesn't always work, but more often than not, it does.  Sometimes things go to zero; try to avoid buying those things if you can.  :)

At one level, it is just a marker of "being really oversold" - it takes a lot of down move to put things into this state.  Gold has only been in this state a fairly limited number of times over the last 10 years.  IIRC it was something like 7-8 times.

Also, there's the COT report, and the cost of production at around $1250.  For longer term buyers, I think its a pretty valid time to get some more gold.  We're heading into banking crisis time - things are melting at the fringes: Argentina, Venezuela, now Turkey.   Greece, Cyprus.  Who is next?  ECB had to destroy the bond market to prevent it from happening back in 2012.  Rates will be negative over there until the sun goes dark.

Perhaps the current timing is less critical for people in the US, since we're the reserve currency, so we get hit last.

sand_puppy's picture
sand_puppy
Status: Diamond Member (Offline)
Joined: Apr 13 2011
Posts: 1962
Warning of ATM cyberattacks by FBI

FBI has reportedly issued a warning that criminals are planning on stealing millions from ATM machines soon in a coordinated world wide attack.

This warning opens a rationale for authorities to shut down ATMs (and banks and electronic commerce?) "to protect the public" from theft in the event of a banking crisis.

I do read way to many spy novels....

New_Life's picture
New_Life
Status: Gold Member (Offline)
Joined: Apr 18 2011
Posts: 366
Interesting RSI theory

Dave great coverage over the last week, the Turkish issue is hardly on the MSM here in the UK

Honestly not heard of that before, shall go and research thanks.

It could well be useful combining with divergences on multiple timeframes, to paraphrase the inventor of the RSI, if you're not using divergences you're not using the most important part of what RSI was created for,...

 "Divergence is the single most indicative characteristic of the Relative Strength Index."  

A useful point I've learnt is that he never mentioned that below 30% confirms oversold, but yes rising back above 30% inconjuntion with a failure swing point is a potentially good reversal sign

It appears the Daily & 2 Day (weak) RSI bullish divergence that is trying to form could tell us a tale if this reverses here or not, its not exactly looking strong as yet, so $1180 could be the next support...

ps if any PM HODLers are hurting with these drops, take heart you didnt buy into crypto earlier this year...

Michael_Rudmin's picture
Michael_Rudmin
Status: Platinum Member (Offline)
Joined: Jun 25 2014
Posts: 879
Actually, they've already been doing that

http://amp.timeinc.net/fortune/2018/03/26/carbanak-europol-arrest-spain-...

Correct me if I'm wrong, but aren't the tools the hackers used CIA/NSA tools such as were used to install STUXNET to the iranian cyclotrons? And what's the timeline of the hacking, versus the CIA tools getting out "into the wild"?

And who would be most likely to employ russian mules as these did?

So the bank heists that the fbi is warning of are already ongoing. But the circumstantial evidence is only circumstantial. We have the mules, that's it.

And yes, it appears that they are already operating in Virginia.

https://krebsonsecurity.com/2018/07/hackers-breached-virginia-bank-twice...

Michael_Rudmin's picture
Michael_Rudmin
Status: Platinum Member (Offline)
Joined: Jun 25 2014
Posts: 879
Let me add something

Quick question: who is more likely to know how to properly use CIA / NSA tools, then the CIA/NSA employees?

And who is more likely to have the government backing to develop more such tools, than the NSN/CIA?

And who is more likely to have the patience and means of a government, to do the heists right, than the CIA/NSA?

Honestly, I hope the FBI does their job and finds the perpetrators. Not just the mules. Claiming "we have the ringleader" was nonsense. If they had the ringleader, they wouldn't have had to announce that more was coming.

They had a mule, and it was Russian mules they had.

As big as "the swamp" is on "everybody look at Russia", I suspect the criminal CIA/NSA are active on this. But I don't know. Umm... I also suspect them of treason. But I don't know.

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