PM Weekly Market Commentary - 4/12/2019

davefairtex
By davefairtex on Sat, Apr 13, 2019 - 8:11am

On Friday, gold fell -2.22 [-0.17%] to 1295.15 on moderate volume, while silver climbed +0.01 [+0.07%] to 14.93 on heavy volume. The buck fell [-0.23%] while crude [+0.19%] and SPX [+0.68%] rallied. Copper did especially well [+1.66%].

It was a down week for most of the metals; junior miners dropped more than seniors, silver dropped more than gold. That all looks relatively bearish.  Most items have dropped through both 9 and 50 MA lines, with silver looking weakest.  From the standpoint of the moving averages, platinum and copper look strongest.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Copper $COPPER 1.82% -3.92% rising rising falling rising ema9 on 2019-04-12 2019-04-12
Palladium $PALL 0.09% 40.13% falling rising rising falling ema9 on 2019-04-10 2019-04-12
Gold $GOLD -0.12% -3.28% rising falling rising falling ema9 on 2019-04-11 2019-04-12
Gold/Euro $GOLD:$XEU -0.39% 5.81% falling falling rising falling ema9 on 2019-04-11 2019-04-12
Senior Miners GDX -0.98% -1.16% rising falling rising falling ema9 on 2019-04-11 2019-04-12
Silver $SILVER -0.99% -9.21% falling falling falling falling ema9 on 2019-04-11 2019-04-12
Platinum $PLAT -1.07% -3.89% rising rising rising rising ema9 on 2019-04-02 2019-04-12
Junior Miners GDXJ -2.08% -5.24% rising falling falling falling ema9 on 2019-04-11 2019-04-12
Silver Miners SIL -2.99% -16.96% falling falling falling falling ema9 on 2019-04-11 2019-04-12

Gold fell -1.50 [-0.12%] this week, basically unchanged. Gold spent the first half of the week rallying, which was then offset by Thursday's big plunge. The weekly print was a gravestone doji, which was distinctly bearish, while forecaster ticked higher, but remains in a downtrend. Monthly forecaster issued a sell signal, which puts gold in a downtrend in all 3 timeframes.

The May 2019 rate-cut chance is now at 0%, and the Dec 2019 rate-cut chance is 32%, and just a 7% chance of 2 rate cuts. Recession? What recession? Last week's bearish outlook is mostly gone.

COMEX GC open interest rose +8,812 contracts this week.

The COT report shows a small change in the commercial net, dropping 15k contracts, while managed money net rose by 12k. That was 5k in short-covering, and 7k in new longs.  No turning point for gold right now from the perspective of the COT report.

Silver dropped -0.15 [-0.99%] on the week; silver rallied anemically in the first part of the week, and then dropped hard on Thursday, making a new low. The weekly spinning top candle was a bearish continuation, and forecaster moved sideways but remains in a mild downtrend. Silver is in a downtrend in both the daily and weekly timeframes.

The gold/silver ratio jumped +0.70 to 86.40. That's bearish.

COMEX SI open interest rose 12,762 contracts this week. Tht was 26 days of global production in new paper silver. Shorts are jumping in as price drops. That's almost certainly managed money; commercials tend to close out their shorts when prices drop.

Commercial net fell by -3k, which was 6k new longs, but 10k new shorts.  Managed money net fell by 808 contracts, which was 1.8k shorts covered, and 2.6k longs sold.  Silver backed off its turning point a bit this week.

Miners topped out early in the week, but avoided any large losses on Thursday's big move down. XAU dropped -1.38%, the weekly long black candle was a bearish continuation, and forecaster fell, resulting in a sell signal for the miners. XAU is now in a downtrend in both the daily and weekly timeframes, with the monthly right on the edge of a sell signal of its own.

GDX:$GOLD fell -0.87%, and the GDXJ:GDX ratio dropped -1.11%. That's bearish.

USD

The buck dropped -0.45 [-0.46%] to 96.42. The big move down happened on Monday. The short black candle was neutral, and the forecaster dropped, but remains in a mild uptrend. The buck remains in an uptrend in both the weekly and monthly timeframes. Overall, the buck could be topping out here – but it hasn't done so just yet.

The big currency moves: AUD [+1.10%], EUR [+0.73%], GBP [+0.56%], CAD [-0.43%].

SPX rose +14.67 [+0.51%] to 2907.41. The short white candle was a bullish continuation, and forecaster inched lower, but remains in a reasonably strong uptrend. SPX remains in an uptrend in all 3 timeframes.

Financials were on the top of the heap, along with telecom and tech, while sickcare, energy, and utilites brought up the rear. This was a fairly bullish sector map.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Financials XLF 2.03% -2.65% rising rising rising rising ma200 on 2019-04-11 2019-04-12
Telecom XTL 1.79% 3.56% rising rising rising rising ma200 on 2019-04-01 2019-04-12
Technology XLK 1.17% 15.43% rising rising rising rising ema9 on 2019-03-29 2019-04-12
Cons Staples XLP 1.10% 7.40% rising rising rising rising ema9 on 2019-04-08 2019-04-12
Cons Discretionary XLY 0.68% 16.24% rising rising rising rising ema9 on 2019-03-12 2019-04-12
Homebuilders XHB 0.64% 1.32% rising rising rising rising ema9 on 2019-03-25 2019-04-12
Materials XLB 0.52% -0.09% rising rising rising rising ma200 on 2019-04-01 2019-04-12
Industrials XLI 0.35% 4.19% rising rising rising rising ema9 on 2019-04-12 2019-04-12
Defense ITA 0.35% 2.34% rising rising rising rising ema9 on 2019-04-12 2019-04-12
REIT RWR 0.23% 18.02% rising rising rising rising ema9 on 2019-04-10 2019-04-12
Utilities XLU 0.19% 17.83% rising rising rising rising ema9 on 2019-04-11 2019-04-12
Energy XLE -0.07% -4.35% rising rising falling rising ema9 on 2019-04-04 2019-04-12
Gold Miners GDX -0.98% -1.16% rising falling rising falling ema9 on 2019-04-11 2019-04-12
Healthcare XLV -2.38% 9.64% falling falling rising falling ma200 on 2019-04-12 2019-04-12

The US equity market was in the middle of the pack this week.

VIX fell -0.81 to 12.01. Worry has all but disappeared. That's because SPX is just 34 points away from making a new all time high.

Rates & Commodities

TLT fell -1.10%, with most of those losses coming on Friday. TLT is in a clear downtrend. TY also plunged, losing -0.46%. The closing black marubozu was a bearish continuation, and forecaster fell, but it was not enough for a sell signal. While TY daily is now in a downtrend, TY remains in an uptrend in the weekly and monthly timeframes. The 10-year yield rose +5.9 bp to 2.56%.

JNK climbed +0.70%, a strong gain that moved JNK back above the previous high set in September 2018. BAA yields fell slightly, down 1 bp on the week. The BAA.AAA differential fell 2 bp, which continues to suggest a relaxing credit environment.

Crude rose +0.61 [+0.96%] to 63.94. While there were hints of bearishness on Thursday (daily forecaster issued a sell signal), crude remains in a strong uptrend in both the weekly and monthly timeframes, and the short white candle was a bullish continuation. This week's EIA report was mixed (crude: +7m, gasoline: -7.7m, distillates: -0.1m), and it did not seem to do more than cause some momentary volatility intraday. There were hints that OPEC may be starting to consider removing its production cuts; that caused some selling pressure on Thursday.  Even so, that weekly uptrend still looks remarkably strong.

Physical Supply Indicators

* The GLD ETF tonnage on hand fell -3.82 tons, with 758 tons remaining in inventory.

* ETF Discount to NAV:

 PHYS 10.40 -0.96% to NAV [increase]
 PSLV 5.45 -2.90% to NAV [increase]
 CEF 12.40 -4.05% to NAV [increase]

* Premium for physical (via Bullion Vault: https://www.bullionvault.com/gold_market.do#!/orderboard) vs spot gold (loco New York, via Kitco: https://www.kitco.com/charts/livegoldnewyork.html) shows a $2 premium for gold, and a 4 cent premium for silver.

* Gold dealer big bars premiums were: gold [1kg] 1.37% and silver [1000oz] 3.71%. That's a decent-sized increase in premiums for big-bar silver.

Grey Swans & Geopolitics

  • Ebola: total cases 1186, with 751 deaths, which is 86 new cases this week, a new high. The number of new cases have continued to move higher for three weeks in a row. If this were a financial chart, this would constitute a breakout to higher levels. That's not a good thing. A WHO Emergency Committee was convened on April 12 to consider whether the current outbreak constitutes a public health emergency of international concern, and to provide recommendations. https://www.who.int/csr/don/11-april-2019-ebola-drc/en/

  • EU – Elections are scheduled for May 23rd. The UK is now hastily gearing up for said elections, now that BRexit has been postponed yet again.  The UK is required to hold an EU election, as it will be kicked out of the EU with no deal on June 1 if it fails to hold such an election. According to the BBC, many people in the UK now view the EU elections as a proxy referendum on Brexit. Cost of these elections: 109 million pounds. Curiously, UKIP did much better in the EU elections than it did within the UK itself, because of a difference in the voting mechanism: the EU uses proportional representation vs the UK's system of first past the post. What would US political arena look like with proportional representation? We would have a lot more than just 2 parties. The takeaway: the structure of the voting mechanism drives the structure of the party political system. https://www.bbc.com/news/uk-politics-47871652

  • China – Trade: The US and China have agreed to a mechanism to monitor and enforce any trade deal by establishing enforcement offices. China will also have an enforcement office, so the agreement will be reciprocal rather than one-sided. This agreement was seen by one observer as a signal that both sides were close to sealing a deal. https://www.scmp.com/news/china/diplomacy/article/3005701/china-and-us-reach-milestone-agreement-road-trade-peace

  • BRExit: The new BRExit date: Halloween, 2019. What's next? A second referendum? (Keep voting until you get it right - an EU tradition). A Norway option? Some sort of pretend-BRExit that would delight the City of London? Now we get to wait another 6 months to find out. Its likely that the continuing uncertainty will harm the EU economy, especially Germany, which is now in recession.

  • Yield Curve Inversion: the 1-10 spread rose +5 bp to 12 bp. That's entirely because of a rise in 10-year yields this week.  Inversion is receding, which lines up with the declining chances of a December rate cut.

  • North Korea: KJU says he is only interested in meeting Trump again if the US comes “with the right attitude”, and says he will wait until the end of the year for the US to decide to be more flexible. https://www.reuters.com/article/us-northkorea-usa/north-koreas-kim-jong-un-gives-us-to-year-end-to-become-more-flexible-idUSKCN1RO2PI

Summary

All the safe havens declined this week; the 10-year, gold, miners, as well as the BAA.AAA differential.  Chances of a rate cut also declined.  SPX rose, the buck fell, junky debt rallied.  SPX is approaching a breakout to new all time highs.  The overall picture is a return to risk on.  Not even a falling dollar could get the metals to rally.  That's not a great sign.

Big bar gold premiums on gold remain low, the premiums on silver jumped higher, while the ETF discounts increased. There is no shortage of gold or silver at these prices, although I'm keeping an eye on those big silver bars.

The COT reports don't show gold at any sort of turning point, silver is not there yet either, and there was not much change in positioning this week - given the 3 day delay in the COT reporting.

Silver is the weakest of the PM group right now.  Shorts are piling in, likely Managed Money, hoping to force a more serious breakdown to the previous low at 13.85.  Its hard to know if the dip buyers will be strong enough for silver to avoid this fate.  Most likely the commercials will cover their short positions as prices fall - what happens with silver probably depends on just how enthusiastically they do so.  If last week's strong bid doesn't show up next week, the next stop for silver is probably down around 14.

Weekly trends (in order of strength):

Uptrend: BAA bonds, crude, platinum, SPX, 10-year Treasury, copper, USD.

Downtrend: gold, miners, silver, gold/Euros.

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