PM Daily Market Commentary - 10/1/2013

By davefairtex on Tue, Oct 1, 2013 - 5:58pm

Gold closed down -40.50 to 1287.60 on heavy volume, with silver down -0.53 to 21.17 also on heavy volume.  Surprisingly, the gold/silver ratio actually fell -0.48 to 60.74, which is quite unexpected; usually on a bad day in PM, silver gets hit harder than gold and in recent weeks, silver has pretty much continually underperformed gold as well.

Gold today tried rising in asia, but failed at 1338 - then starting about 0700 EST gold was sold first gradually, then more briskly, and then finally it was hammered in a series of moves down prior to the NY open.  The rally off the low of 1282 was anemic.

Silver also was hit hard prior to the NY open, but it managed a 50 cent rally off the lows - retracing a full 50% of its initial loss.  Silver didn't rally enough off the lows to generate a reversal candle, but the price action was definitely not as bearish as gold.

The dollar was down -0.05 [-0.07%] today to 80.26; during intraday trading it dropped briefly below 80 in asia trading, but then rallied back to more or less flat prior to the NY open.  While the peak in gold for the day corresponded with the dollar low in asia, I do not think the modest moves in the dollar were responsible for PM's big smash today.

Mining shares were down but not crushed - GDX was off -2.44% on heavy volume, while GDXJ was down -3.14% on moderate volume.  While the miners opened down, both GDX and GDXJ printed dojis on the day, which is a reversal candle, requiring confirmation tomorrow.  Many miners actually closed higher.  What's more, GDX outperformed gold.  My interpretation: there were a lot more buyers for the miners than for the metal today.  This is another curious outcome.  GDX printing a doji while gold itself prints a nasty red candle closing near the lows.  What's that about?

On the bearish side, selling totally overwhelmed the buyers today in gold; the price was hammered, and gold closed near the lows.  It also cracked 1300 support on heavy volume.  No catalyst seems to be in the offing to move gold higher.

On the bullish side, we have silver's 50% rebound off the lows today, the drop in the gold/silver ratio, and the buying in the miners.

So what caused this move down today?  No news that I could see.  It is these sorts of unexplained yet pretty clearly managed events that fuel charges of manipulation.  Harvey Organ pointed out yesterday that for the first notice day (the start of the delivery period for gold futures) there were a large number of gold futures contracts standing in line for delivery: 4287 contracts (428,700 ounces), with 768k ounces in the warehouse.  Today after the move down, the number of contracts dropped to 2125.  I haven't done any studies to show whether or not this occurs frequently on or about first notice days, but it might well be that the banks in charge of COMEX didn't want to pony up 428,700 ounces of gold so the price got hammered and now they only have to fork over 212,500 ounces.

The fact silver did uncharacteristically well adds a bit of weight to the whole thesis.

Real evidence would require a study showing a tendency of gold to get hammered on or about the first notice day in a delivery month with a moderately large open interest, resulting in a reduction of the open interest.  Something to add to my list of things to do.  This reminds me of the London AM/PM gold fix bias, which turned out to be "myth: confirmed" but not big enough to profit on.  If this particular thesis was confirmed, it would be a very interesting phenomenon to keep in mind.



petercastle's picture
Status: Member (Offline)
Joined: Sep 12 2013
Posts: 2
Good morning Dave!!

Good morning Dave!! Question: Do you follow Turd Ferguson?? Or have you read some of the things he's uncovered regarding the bullion banks? Very interesting stuff!! The prices of metals have been hit in basically a handful of days, during the months that JP Morgan was the main short issuer in futures, accounting for maybe 80 or 90% of short contracts issued. In these months, prices were smashed to oblivion. But the months where JPM has been the long/stopper of the futures arena, and taken delivery for their own, prices have rallied!! October is a delivery month at the Crimex.... what happens October 1st?? Price gets smashed!! Big short/issuer?? One JP Morgan.... Coincidence??? Not by a long shot!!! Again, he's got ssome great analisis in this whole ordeal. Be good Dave!! Lots of inner peace, health, and love to you and yours! God knows that when this whole thing comes unglued, even if we own precious metals, we are all gonna have a tough go at it. Take care!! Pete.

davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5739
hi peter

I have read Turd Ferguson occasionally but I don't follow him regularly.  Do you have any must-read links for me to look at?  Especially the stuff you talk about in your post here?

When you talk about short issuing, are you referring to delivery of metal, or the aggregate net change in the current futures position of the organization (i.e. increasing the net short position overall).

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