PM Daily Market Commentary - 9/03/2013

By davefairtex on Wed, Sep 4, 2013 - 12:17am

Gold finished the day up $15.70 on heavy volume to 1411.90, with silver up $0.75 to 24.31 also on heavy volume.  The gold/silver ratio dropped to 58.06.  While NY trading didn't happen Monday due to Labor Day, gold and silver futures did trade much of the day; there was significant price movement especially in silver, although volume was light.

Gold was hammered early Monday morning in asia, possibly because of "Syria Off" sentiment resulted in all of the safe haven traders bailing out.  The intraday dip to 1373 was then bought rapidly and almost completely, suggesting to me at the time that the safe haven trade was not a major factor for futures and that there were buyers willing to step up and buy at that price level for other reasons.  Then came Tuesday and the "missile launch" near Syria - immediate spike up in gold, followed by a steady move up the rest of the trading day.  Even a great US Manufacturing ISM report which momentarily set gold back (good news = taper on) was not enough to derail the move up.  Lots of Syria-related newsflow may have been the cause - perhaps the safe haven trade really is responsible!

Silver was hammered hard early Monday also in asia down to support at 23.11, only to have its dip bought and then some, within hours reaching a high of 24.40.  Such a reversal and a rapid move higher is a bullish sign that's hard to ignore.  It seems that the silver futures buyers are back, independent of any geopolitics.  Tuesday silver traded in a range from 24 to 24.50.  Silver also seemed to respond to the trouble in the middle east, but to a lesser extent than gold.

Trying to untangle what news item was responsible for which move was tough, because there was so much news.  The Syria newsflow seemed to affect SPX and oil the most definitively, with oil moving up and SPX moving down.

The dollar was was up steadily both Monday and Tuesday, moving higher on the ISM report but eventually lost those gains, closing +0.31 [+0.38%] to 82.41.  The dollar closed above its 50 day MA for the first time in two months, although the "shooting star" candle it printed doesn't inspire confidence.   The fact that PM was able to move up against moderate dollar strength is a bullish sign.

Mining shares were noticeably weak, especially given the strength in PM.  GDX was up +0.96%, GDXJ up +0.96% as well on light volume.  Miners opened up perhaps 2%, traded higher briefly, and then sold off all day long.  How do I interpret light volume and all-day selling in miners on a day when metal was up strongly?  Its not a bullish setup for the mining shares.

So, Syria off, then Syria on moves PM lower, then higher, but doesn't help miners much at all.  Chart-wise, it appears that gold has bounced nicely off its 20 EMA and is setting up for a move through 1425 resistance.  Silver shows similar but stronger signs - now it needs to break 24.50 and then 25 would seem to be a relatively simple matter.  Will this come to pass?  Syria-related newsflow seems to be driving things at the moment, which adds a bit of confusion.  My gut says we move through resistance if Congress authorizes force and a strike takes place (apparently likely outcomes, as of this moment) but most likely the miners won't follow along.  What's more, that incredibly bullish move Monday morning in silver has me thinking that the strength in silver is driven by more than just Syria-related news.

So any way you slice it, the indications are that we make new highs in PM, and in the near term too, but the picture with respect to mining shares is considerably more confused.

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