PM Daily Market Commentary - 8/29/2018

By davefairtex on Thu, Aug 30, 2018 - 6:57am

Gold rose +5.13 [+0.42%] to 1213.76 on moderate volume while silver moved up +0.03 [+0.20%] to 14.80 on very heavy volume. The buck fell -0.13%, which accounted for some but not all of the move in the metals today.

Gold rallied slowly and steadily for most of the day, closing relatively near its high. Trading range was narrow; the white marubozu/NR7 candle was not rated, but the forecaster plunged -0.20 to -0.14, which is a sell signal for gold. A big drop yesterday + a small rally today = a sign that momentum is reversing, perhaps. Gold remains above its 9 MA; now in a daily and monthly downtrend, but an uptrend on the weekly timeframe.

COMEX GC open interest fell -4,972 contracts. Not sure what that's about.

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

Silver mostly just chopped sideways, the short white/spinning top candle being mildly bullish (33% bullish reversal); the forecaster didn't agree, dropping -0.42 to -0.37, issuing a sell signal for silver. I'm not sure what it saw, but it really isn't happy any longer. Silver is now in a downtrend in all 3 timeframes.

COMEX SI open interest fell -11,744 contracts. Silver had a contract roll yesterday; I suspect the sharp drop in OI involved the contract roll in some way.

The gold/silver ratio rose +0.18 to 82.01. That's somewhat bearish.

Miners were mixed, with GDX up +0.37% on moderately light volume, while GDXJ was unchanged on moderately light volume also. XAU rose +0.22%; its doji candle was unrated, and XAU forecaster plunged -0.42 to +0.03, which is right on the edge of a sell signal. A big drop, and no rally is not such good news, I suspect. XAU remains above its 9 MA, but it is in a downtrend in the weekly and monthly timeframes.

The GDX:$GOLD ratio fell -0.05%, while the GDXJ:GDX ratio dropped -0.37%. That's bearish.

Platinum rose +0.97%, palladium shot up +2.85%, while copper fell -0.59%. Copper's drop resulted in a forecaster sell signal, as did platinum's rally. Palladium remains in an uptrend – a really strong uptrend. Copper and platinum look a bit confused right now as to direction – but palladium appears to be on its way back up again.

The buck fell -0.12 [-0.13%] to 94.19. The buck tried to rally, but failed. The spinning top candle was a bearish continuation, and forecaster dipped -0.07 to -0.46. The buck remains in a downtrend on the daily and weekly timeframes, but is still clinging to an uptrend on the monthly. This month's candle is looking more and more like a gravestone doji, which is generally bearish.

TRY fell again today, down -3.08%, along with the Argentine Peso (-8.04%) and the Brazilian Real (-1.40%). After two weeks of respite, TRY is moving steadily back into trouble once more.

Armstrong suggests that Turkey will default on its external debt to the West:

The rumors running around the trading desks is that he will pull the plug and turn his back on the West. By doing so, he can then justify defaulting on the debt of the “corrupt” West who wants to subjugate Turkey will be the justification spin of things. It looks like this will remain volatile into October.

The secular military will not be pleased - but Erdogan's post-coup purges may have disarmed that particular bomb.  Whatever will he do with all that NATO military gear he purchased?  I'm guessing that Russia and China would be simply delighted to get their hands on the state-of-the-art US military hardware.  But once he pulls the trigger on this, he really can only do it once.  Nobody will trust him ever again.

Crude rose +1.12 [+1.64%] to 69.36. Crude started rallying in London, and moved higher for most of the day, getting a boost from the bullish EIA report (crude: -2.6m, gasoline: -1.6m, distillates: -0.8m) at 10:30 am. Crude closed quite near the highs for the day, and on the chart you can see it is starting to break out above the previous high set back in early July. Daily forecaster actually dropped, but crude remains in an uptrend in all 3 timeframes. Resistance from round number 70 is next.

SPX climbed +16.52 [+0.57%] to 2914.04, which is another new all time high. Long white candle was a bullish continuation, forecaster rose +0.19 to +0.76, which is a very strong uptrend. SPX is in an uptrend in all 3 timeframes. Sector map shows cyclicals (XLY:+1.12%) and tech (XLK:+0.91%) in the lead, with financials doing worst (XLF:-0.03%). Apart from the banks doing poorly, it is a relatively bullish sector map. And of course the new all time high is bullish too.  New highs tend to lead to new highs.  Not sure why that is, but that's what my models tell me.

VIX -0.25 to 12.25.

TLT rose +0.13%, making a new low but managing to bounce back. It was a reasonable performance on a day when SPX made a new all time high. TY dropped -0.04%, making a new low, but TY found support on its 50 MA. TY is in a downtrend in both the daily and weekly timeframes. The 10-year yield was unchanged at 2.88%.

JNK fell -0.06%, moving slightly lower just off its highs. It remains in an uptrend.

CRB rose +0.65%, regaining all of what it lost yesterday. 3 of 5 sectors rose, led by energy (+1.30%). CRB remains in a medium-term downtrend; it needs a break above the previous high at 196 to break the pattern.

Saw an interview on CNBC with Sec Treas Mnuchin who avoided saying he wanted a weaker dollar - "nice try guys" - and hinted that China was talking about being more flexible, that Canada was quite close to signing up for the new NAFTA (oops we can't call it NAFTA) - maybe Thursday or Friday - and that the US wasn't trying to hurt China's economy with tariffs, only protect itself from China's bad behavior.

Could we get a deal with Canada by end of week?  Quite possibly.  UK is a bit of mystery because of BRExit but they won't be "in the back of the queue" - the UK being a good friend, a staunch US ally, someone we like, should conclude a deal rapidly, etc.  All in all he sounded fairly positive about the progress we have been making on trade.

Is it possible that the Trump administration isn't simply crammed full of bumbling idiots?  It is possible.

The jury is still out on where PM goes next.  Crude seems much clearer - crude prices are going higher.  I can't tell you why they are going higher, just that's what all my models are saying.

And equities of course are continuing to break out.  Can't tell you why about equities either.  Because, capital flows, I suppose.

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Cold Rain's picture
Cold Rain
Status: Gold Member (Offline)
Joined: Jul 26 2016
Posts: 393
Plummeting Again

Well, PMs are plummeting again this morning.  Charles Nenner thinks we could see $850 before it turns.  I'm starting to think these low calls by some of these analysts are going to turn out to be correct, when it's all said and done.  I see so many more reasons why gold should be going up than why it should be dropping so rapidly.  It makes me wonder what's going to happen when things really do turn "traditionally bad" for gold/silver.  Funny how the traders on the COT report are always wrong when they expect gold to rise, but just happen to be right when they expect it to decline the most in history.  And the commrecials are caught with their pants down.  Obviously, we don't know how it will play out, but that's how it's playing right now.

davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5930
rumor: Turkey selling gold

Read an article at KWN where Rick Rule suggested that - rumor is - Turkey has sold 50-75% of its gold stash as a result of its currency crisis.

Which, he said, is a great argument for holding gold, but it is probably having an unfortunate impact on the current price of the metal.

Likewise, that gold mutual fund liquidation has probably resulted in some weakness in the mining shares too.

Turkey's total holdings as of May: 596 tons, or $23 billion in bullion.  Or in COMEX terms, that's 192k contracts, or roughly the size of the entire managed money short position (197k) as of last week.

The Turkey rumor would explain why gold is moving so counter-intuitively given the currency crisis in TRY.  Which, btw, is being pounded yet again today.  Its back up to 6.77 - up from 6.01 just 4 days ago.  How much fun would it be to do business when the currency moves are this volatile?  We might even see new highs before the weekend.  That rumor from Armstrong about the impending default on Turkish debt may well be driving the move in the currency.  Erdogan's setup is to blame the West for all Turkey's problems - which will explain away the default.  "It wasn't me, it was the evil Westerners that caused the problem."  Which Trump more or less walked right into with his tariffs.

Michael_Rudmin's picture
Status: Diamond Member (Offline)
Joined: Jun 25 2014
Posts: 1041
Turkey selling? it begins at the edges

I ironically don't think we're going farther down at the moment. However, I think we're going to get up to the 1350 flat roof, and then come back down.

But your Turkey theory may provide the mechanism for a lot of bouncing or even decline: as countries sell their gold to try to save that-which-shouldn't-be-saved, we'll probably see the gold come back down a number of times, proportional to the country's gold holdings.

Now, the good side is that this up-and-down could be great for making a whole bunch of money and gold in a very short order.

That is, there is more energy available in an AC signal (upn-down-n-upndown) than in a DC surge (uuuuppp! and peak and vacilate, then either crash or go up again) .

So maybe we should look at Argentina's gold holdings?

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