PM Daily Market Commentary - 10/24/2013

By davefairtex on Fri, Oct 25, 2013 - 12:11am

Gold closed up +13.80 to 1346.30 on moderate volume, and silver closed up +0.14 to 22.71 also on moderate volume.  The gold/silver ratio was up +0.23 to 59.28.  The question yesterday was: will buyers bid gold higher at these price levels?  They did.  From the moment asia opened, both gold and silver rallied all the way through mid-day in NY moving to new highs, and then sold off a bit into the close.  Gold closed just above its 50 MA today, which is bullish, and its overall performance today was stronger than silver.  Gold outperforming silver isn't bullish - but since silver rose too, I can't complain too loudly.

The buck dropped -0.10 [-0.13%] to 79.23.  It hit a new low of 79.13 in asia, but managed to close a bit above that by end of day in NY.  The buck is continuing its move down to test 79, which is not far away.  On the other side of the currency pair, the euro made a new high, closing at 138.01.

It turns out that yesterday's big move down in GDX was a head-fake.  GDX closed up today +3.77% on heavy volume, and GDXJ was up +4.15% also on heavy volume.  GDX opened today as if yesterday's move down simply hadn't happened, and rallied through noon, closing relatively close to its high for the day.  Today's volume was slightly higher than yesterday's, and GDX managed to make a new high also, as did GDXJ, which is all bullish.  GDX is a tough one to figure out right now; my only guess is that it will follow gold, but with a much higher degree of volatility.  I'm still on alert given the sell-off yesterday, but GDX making new highs on good volume may have scared the new shorts that entered yesterday enough to keep things moving up.

Oil might have put in a reversal today, touching 96 and rebounding back, printing a doji candle, with some decent volume.  Trader Dan had some interesting perspective on related commodity price movements, macro funds as well as currency-driven money flows.  Gold doesn't move in a vacuum; while it isn't a typical commodity, nor is it exactly a currency.  It is thus affected by both markets, silver even more so.

Reading the tea leaves, gold is having progressively lower volume on its up-days, although down-day volumes still remains relatively light which is bullish.  Silver is showing much the same pattern.  The move up appears to be slowing, however I have not seen any signs of distribution yet in either PM - the big money isn't bailing out - so the momentum remains up.  Gold has had problems before at 1350 resistance, which is where it is at right now.  A convincing move through 1350 would be a strong bullish sign.  We will see if the COMEX buyers show up and make it happen.  Miner traders seem nervous, there are some signs of distribution, but the trend remains up there as well.

My sense is, if the dollar remains in a downtrend, and economic news remains neutral-to-bad, that will likely provide continued pressure for COMEX and GLD buyers to increase their positions.  If gold can remain above its 50 MA that will likely help convince more western money to jump on board.  Resistance levels are 1353 for gold and 23.50 for silver.


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