PM Daily Market Commentary - 9/24/2013

By davefairtex on Wed, Sep 25, 2013 - 12:11am

Gold closed basically flat, up +0.50 to 1323.00 on moderate volume, with silver up +0.05 to 21.71 also on moderate volume.  The gold/silver ratio dropped slightly -0.12 to 60.94.  Silver today tried to move above 22 in early asia trading but was rejected, after which it sold off all the way to the NY open almost making a new cycle low.  It rallied back weakly until the afternoon in NY, when someone came in and bought a bunch of contracts, spiking both gold and silver back to even.  I can't explain the move - there was no news at that time.  Let's call this a reaffirmation of silver support 21.25-21.50; not bullish, and not bearish.

Rallies in PM are still being sold, and have been ever since last Friday.  Gold needs a close above 1332 before the shorts start getting even mildly worried.  Traders keep doing stuff that works until it stops working, and right now, shorting rallies is what is working for them.

The dollar was up +0.12 [+0.16%] today to 80.69, continuing its weak rally after the post-Fed No Taper.  It is continuing to move up, but only slowly.

Mining shares were down but only modestly; GDX was off -0.36% on moderately heavy volume, while GDXJ  was actually up +0.15% on heavy volume.  The miners opened down, and then rallied modestly most of the day.  While GDX broke support again today, it managed to close above it once again, just barely.

To me the real news was the bond market: TLT (20 year treasurys) was up 1.08%, extending its breakout.  The 10 year yield fell to 2.65%, off 35 basis points from the high of 3% reached three weeks ago.  Money is definitely flowing more strongly into bonds, which means other things are likely to be less well supported, all else being equal.  I am certain that the Fed is quite happy with this outcome.

The US equity market has dropped 4 days running now, losing all its gains from Fed No Taper, with SPX dropping below 1700.  This could qualify as a "failed breakout", which often lead to selloffs.  Equities are at an inflection point right now.  There are several technical indicators in the weekly timeframe that suggest the broad market is getting tired, but until price moves below (about) 1630 it won't be confirmed.  The fact that the nasdaq (small caps) are doing so well is a vote against such an outcome.

If SPX drops on bad economic news, then likely that's good news for gold - reduced expectations for tapering and all that.  Remember it doesn't matter what we believe about the Fed and printing, the price is driven by what all those other people believe.


1 Comment

davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5737
gold breakout 1332

Gold just broke above its resistance level of 1332...if it can close above here today, the shorts will start to become nervous.  Silver is lagging a bit but it is also responding.

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