PM Daily Market Commentary - 10/21/2013

By davefairtex on Tue, Oct 22, 2013 - 5:35am

Gold closed down -0.40 to 1312.80 on light volume, while silver closed up +0.30 to 22.23 on moderately light volume.  That dropped the gold/silver ratio -0.83 to 59.20, a pretty big move given the low volume.  Perhaps it was silver just playing catch-up to Friday's big gold move, but it definitely was in the lead today as it broke to a new high at 22.33 just before the NY open, and it closed holding on to most of its gains.  To me its always a bullish picture if silver is in the lead, and the silver chart is looking fairly strong to me at this point.

The buck moved up slightly, closing +0.07 to 79.75; the fact it has not rallied after breaking below 80 seems relatively bearish to me.  My guess: it will take some Unpleasant Event happening in either the Eurozone or Japan to get the dollar moving back up steadily again.  We know taper is off the board for a while.

Something of note: oil broke below 100 today on pretty heavy volume, continuing a steady downward move in oil that has gone on since peaking at $112 back in late August.  I would normally think this move in oil would be bearish for silver, but perhaps its just the Syria premium being slowly removed from the price.

The gold miners were surprisingly strong today, with GDX +2.26% on light volume, and GDXJ +3.96% on heavy volume.  GIven that gold was flat, this move was a bit surprising; gold miners even closed at the highs.  What comes next, cats & dogs living together?  Peace in the Middle East?

My only conclusion: GDX has decided it needs to catch up to the price of gold.  Gold has managed to hold onto 1300, and so the ever-nervous mining stock traders actually have started to think that this rebound might be real.  I leave you with the following "weekly" ratio chart, which shows just how much catching-up the gold mining shares have to do.  There is still so much pessimism in the mining shares, any move back to even a "less pessimistic" ratio should move GDX up quite a surprising distance.  If this ratio moves back to even 2012 levels, GDX will rise 50%.

Miners: very volatile, currently with terrible sentiment.  Likely quite cheap too.  The Most Unloved Sector Ever.  Just crossed the 20 EMA to the upside - on the daily chart.

Gold/silver ratio dropping, miners doing well, juniors advancing faster than senior miners, light volume on the down days for gold, the buck in a downtrend - I'd say indicators right now are bullish.


davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5739
gold spike through 1331

A Nonfarm Payrolls report caused gold to spike through the magic 1331 level to 1337.90 this morning at 0830 EST on a magnificant 8000-contract-volume one-minute short-covering extravaganza.  (That's 24 tonnes of gold of "upside manipulation" changing hands in 60 seconds, for those keeping score).  Never say the bots have never done anything for you.  The report didn't look all that bad to me - 148k - but it was below the expected 155k-240k range.  Silver also broke upside resistance to 22.80, and the USD dropped a healthy 0.40 points all at the same time.  Now gold just needs to hold this through to the close.

Here I thought "no taper" was baked into the cake, but I guess not; if the market still can be surprised by bad payroll numbers, then it still sees tapering as a possibility.

jcat3022's picture
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Joined: May 9 2012
Posts: 78
Jeez Dave, you still buy the

Jeez Dave, you still buy the #'s the gov't is feeding us?  per ZH this AM -

Seems to me that just about everything is rigged and the propaganda will probably only get worse.  While I am a gold & silver bull, I realize the market goes up and down based on what the powers that be want.  Gold won't matter until the Comex is cleaned out and the ability of the paper manipulators to control the nonsense that goes on ceases.  Until then, the gold price in USD is what it is and it will fluctuate.

Re: the taper.... yeah, I'm just not seeing it happen.  What happens to bond market?  And at what point do the bond vigilantes start showing up?

The Fed is soooooo screwed that even a casual observer like me sees the writing on the wall. 


davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5739
government numbers, rigging markets vs price fixing


Jeez Dave, you still buy the #'s the gov't is feeding us?  per ZH this AM -

I'm neutral on what the government is feeding us.  I just look at the market's reaction to what the government is feeding us, and judge from that reaction to see what the market expected or didn't expect.

While I am a gold & silver bull, I realize the market goes up and down based on what the powers that be want.

There are 3 schools of thought out there:

1) the Fed has allocated an infinite line of printed-money credit to a gold suppression scheme being executed by the banking establishment.

2) banker prop desks execute raids - in both directions - ignored by regulators, at times when those bankers feel it presents the least risk for the most gain, but other than lining their pockets through tactical manipulation, are generally neutral on direction.

3) the market is completely fair and honest.

I'm for #2.  The violent price actions that some judge to be a sustained suppression campaign I interpret as tactical manipulation in line with the trend that actually happens in both directions, and is designed for the express purpose of making banker prop desks tons of money and adding to their quarterly bonuses.

As I mentioned before, market rigging is not the same as fixing prices.  Rigging a market by moving it temporarily (lying about rates in order to rig LIBOR, hammering the close to rig exchange rates, and many other similar shenanigans) is cheap and cost-effective, directly additive to banker bottom lines.  Price fixing, on the other hand (China pegging their CNY to the buck: price tag $3.5 trillion, Fed trying to peg long term bond rates: price tag $3 trillion) is quite risky, and extremely expensive.

Those who conflate the two by saying "everything is rigged" - and by which they mean, "bankers can set gold to be any price, anytime they want" most likely do not understand just how expensive it would be to execute such a program, and how it would not make bankers money at all.  If "the powers that be" actually try to set gold prices, it would have to be a multi-trillion dollar program, similar to Chinese pegging the CNY, or the Fed trying to peg long term rates low.

And I just don't see either the motivation or the evidence for such a program.  The Fed really, really cares about long rates - so they manipulate them, right out there in the open.  Occam's Razor suggests to me: greedy bankers manipulate the gold & silver market, short term, in line with the trend, in order to make money. It requires no secret Fed plot with infinite money that somehow allowed a massive bull market from 2000-2011 and then suddenly started working properly from 2011-2013.

Explanation #2 is the simplest explanation that fits the evidence we have.

If new evidence arises, I'm happy to change my opinion.

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