PM Daily Market Commentary - 10/23/2013

By davefairtex on Thu, Oct 24, 2013 - 12:47am

Gold closed down -7.80 to 1332.50 on light volume, while silver dropped -0.13 to 22.57, also on light volume.  The gold/silver ratio was off -0.01, basically unchanged.  Gold and silver were both basically sold starting in asia through to the NY open, rallied briefly, and then sold off for the rest of the day, closing near the lows.  But the price action was pretty quiet, and the volume light.  A light volume sell-off coming a day after a heavy volume rally happens frequently, and as long as the price move is modest, nothing to worry about.

The buck moved up slightly, closing +0.04 [+0.05%] to 79.33.  No change in the buck's downtrend.

Unlike gold, GDX had a bad day; it opened down, tried rallying in the morning, and then just sold off, closing near the day lows.  GDX was down -3.23% on relatively heavy volume.  GDXJ was off -3.09%, but its volume was only average.  GDX lost almost all of yesterday's gains, and it appears that traders in the mining shares still have a very limited appetite for holding longer than a few days.  While gold's move down was only modest, GDX's price and volume action looked bearish and showed signs of distribution - the high volume meant that there was a large amount of selling, which likely includes the big money participants.  The fact that GDX closed below yesterday's lows is a bad sign and may indicate at least in the short term that the mining share rally is over.

Both copper [-2.02%] and oil [-1.00%] were hit on heavy volume.  SPX was down -0.47% as well.  Yesterday everything was being sold except bonds, so its not surprising gold & silver dropped a bit.  However the miner move was disagreeably severe, and suggests to me that traders - including the big money - are all too willing to cash out after a move up.

Does the big high volume move in GDX presage a drop in the price of PM?  It might.  Selling in gold today was quite modest, and support levels for gold are 1330 and 1323 - if those hold, the bull case for gold remains clearly intact.  After today's move in GDX, the shorts will likely try their luck and try to push the price down; the question is, will enough COMEX/GLD buyers show up at these price levels to keep gold moving higher.


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