PM Daily Market Commentary - 9/24/2018

davefairtex
By davefairtex on Tue, Sep 25, 2018 - 8:41am

Gold rose +0.05 [+0.00%] to 1205.99 on moderate volume, while silver fell -0.03 [-0.17%] to 14.29 on moderate volume also. The buck was largely unchanged, down -0.04%. It was a quiet day – well all except for crude, which shot up +1.61 after Russia and OPEC decided not to increase production after this weekend's OPEC meeting.

It was a quiet day in the gold market. Gold's doji candle was unrated, and gold forecaster moved down -0.14 to -0.48, deeper into downtrend. Gold remains in an uptrend in the weekly and monthly timeframes, however.

COMEX GC open interest fell -6,353 contracts.  That's a respectable amount of short-covering.

Rate rise chances (September 2018) fell to 94%. FOMC meeting starts tomorrow.

As with gold, silver basically went nowhere; the spinning top candle was unrated, and silver forecaster fell -0.34 to -0.04, which is a sell signal for silver. While silver remains above its 9 MA, it is now in a downtrend in both the daily and monthly timeframes.  Silver has yet to break above its downtrend line.

COMEX SI open interest fell -1,907 contracts.

The gold/silver ratio rose +0.12 to 84.28. The current level for the ratio suggests PM could be at or near a long term low.

Miners were mixed; they rallied early, but then sold off for much of the rest of the day. GDX moved up +0.11% on heavy volume, while GDXJ dropped -0.61% on heavy volume also. XAU rose +0.39%, but the candle looked a lot like a shooting star - a failed rally. Forecaster fell -0.02 to +0.10; that's still an uptrend on the daily. The move was enough to pull the weekly into a downtrend, assuming prices close here at end of week. XAU is now in a downtrend in both the weekly and monthly timeframes.

The GDX:$GOLD ratio rose +0.10%, and the GDXJ:GDX ratio fell -0.71%. That's bearish.

Platinum fell -0.13%, palladium rallied +0.69%, while copper fell -0.74%. It seems as though the other metals are taking a bit of a break after some strong moves higher.

The buck moved down -0.04 [-0.04%] to 93.75. The trading range was fairly wide, but the buck ended up going nowhere. The doji candle was unrated, and forecaster remained in a downtrend in both the daily and weekly timeframes.

Crude rose +1.61 [+2.29%] to 71.99. OPEC and Russia announced over the weekend that they were sticking to their June agreements, and decided not to increase production. This, allegedly because of projections that suggest oil demand will be declining over the next 2 quarters. Much of the gain on Monday came from a gap up open, which supports the weekend news as the driver for the price move. Price is slowly moving to re-test the 75 high set back in early July.

SPX fell -10.30 [-0.35%] to 2919.37. The swing high candle was mildly bearish (40% bearish reversal), and forecaster dropped -0.39 to +0.15. That's still an uptrend. In spite of today's drop, SPX remains in an uptrend in all 3 timeframes. Sector map had energy (XLE:+1.46%) doing best, while REITs (-1.96%) and industrials (XLI:-1.71%) led the overall market lower. Most sectors fell today; the sector map looked fairly bearish.

VIX rose +0.52 to 12.20.

TLT plunged -0.26%, trying to rally but failing. TY fell too, losing -0.13%, avoiding a new low but by no means putting in a bullish reversal. TY remains in a downtrend in all 3 timeframes. The 10-year yield rose +1 bp to 3.08%.  Either the equity market sell-off wasn't very convincing or bonds are looking pretty unhappy right now.  They should have managed a rally - at least - on a day when equities sold off.

JNK fell -0.11%; it looks to be moving slowly lower after failing to break out to new highs last week.

CRB rose +0.42%, with only 2 of 5 sectors rising, led by energy (+2.25%). CRB is now approaching its 200 MA, up fairly substantially since the lows set in mid-August.

In the leadup to the FOMC meeting, gold, silver, and the miners are doing a whole lot of nothing.  Should we expect anything more?  I don't know.  Rising equities aren't great for gold; could falling equities help?  They could.  At some point, rising rates will start to matter.  So far, they haven't.

The next rate-increase is a given, as are more in the future, as is the 50 billion per month (are we still watching paint dry?) in balance sheet roll-off.  Of course Trump doesn't want higher rates - no President does; Yellen waited until Obama's lame-duck last year before inflicting her tiny 25 bp rate increase on him.  In the chart below, you can see just how easy the Fed was on Obama.

A Friendly Fed keeps you in power by effectively printing money via low rates.  An Unfriendly Fed hands you a recession by yanking rates higher; good luck getting re-elected.

Note: If you're reading this and are not yet a member of Peak Prosperity's Gold & Silver Group, please consider joining it now. It's where our active community of precious metals enthusiasts have focused discussions on the developments most likely to impact gold & silver. Simply go here and click the "Join Today" button.

 

4 Comments

dragonfishy's picture
dragonfishy
Status: Member (Offline)
Joined: Jan 1 2011
Posts: 5
USD/CNY vs Gold in USD ... No longer the Yen but the CNY rules?

Hi Dave, Was wondering what you thought about the USD/CNY (inverse) correlation with the Gold price in USD?

How strong is the R value? Where do you see the Yuan going, and is this a better predictor of USD Gold price?

Great work, by the way. I'm a big fan.

Paul

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5585
gold & currency correlations

Its an interesting question.  Quick answer: using a 10-point weekly correlation, in recent months, correlation with the CNY been very high.

With all these things, I wonder why the various correlations come and go - and how I might make use of them in my own work.  Certainly, the CNY correlation didn't really exist until just recently.

dragonfishy's picture
dragonfishy
Status: Member (Offline)
Joined: Jan 1 2011
Posts: 5
The gold price in CNY pegged in a range

Thanks Dave, I've heard some mention of the Gold price in the IMF's Special Drawing Rights (SDR) being pegged in a range 900 +/- 50 since China's entry into the currency basket Oct 2016 (announced in Feb 2016), It appears to be managed in a band with respect to the Yuan. Gold is at the same level in Yuan now as it was in Feb 2016, with lots of touches on the current support line. If I could work out where to for the Yuan, maybe I'd have a better idea where gold in other currencies are travelling?

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5585
gold/CNY

I'm not seeing anything particularly special-looking about the gold/CNY chart.

I think the goldbugs tend to look breathlessly to China for signs that - any moment now - gold will be monetized by the Chinese.  Which makes no sense, if you think about it.  China really wants debt to pump up their economy, they've used it historically now for decades, and gold-backing the currency would act to limit how much debt they can create.

Gold in general acts as a constraint to government, and (I believe) that the Chinese are completely uninterested in having their monetary policy options constrained in any way.

Imagine for a moment if the CNY was gold-backed.  If China wanted to stimulate their economy and devalue the CNY, gold would flee China.  Would they like this?  They would not.

That's my sense anyway.

Governments will only be dragged back kicking and screaming to a gold standard.

Last point.  China has a huge debt problem.  If they were to gold-back their currency, they would take what is right now "fiat" debt (which could be printed away, disappeared onto the PBOC's balance sheet, etc) and turn it into gold debt, which basically cements it in place.  Borrow in fiat, but then have to repay in gold.

Doesn't that sound crazy to you?

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments