PM Daily Market Commentary - 10/31/2013

By davefairtex on Thu, Oct 31, 2013 - 4:25pm

Gold closed down -18.90 to 1323.70 on moderately heavy volume, and silver closed down -0.86 to 21.87 on heavy volume.  The gold/silver ratio rose +1.45 to 60.53.  Both gold and silver were sold all day long, starting in asia, with both of them closing near the lows of the day.  Silver was particularly hard hit - it smashed through both its 50 day MA and the 20 day EMA.  This has pretty clearly resolved the uncertainty of the last few days - the new direction (short term) for PM is now down.

The buck rose all day, +0.49 [+0.62%] to 80.33, closing near the highs.  Mostly this was a euro-centric story; the euro dropped -1.54 [-1.12%], which is a massive move to make in one day.  The dollar is now rallying strongly, dollar shorts running for cover, euro traders selling like mad.

The whole "dollar rally" event we are seeing is a great example of ignoring what you think should be happening, and instead focusing on what the chart is saying.  Personally I think "No Taper" money printing should lead to the dollar going down, not up.  Unfortunately, not everyone in the marketplace agrees with me, so it doesn't always go the way I think it should.  What I saw was, the buck hit 79, refused to go lower, started slowly rallying, and then gradually gathered steam culminating in today's big move.  This had its expected effect on PM, which is now down for the third day in a row.  Don't ask me why we're having a USD rally, I don't know.  And the truth is, neither does anyone else really.  The market is the aggregate of all participants decisions, and nobody really knows for certain what that aggregate might be.

GDX closed the day down -4.29% on heavy volume, with GDXJ off -5.34% also on heavy volume.  GDX opened down at the start of the day, and slowly sold off through to the close.  GDX closed at its dead lows, and at a lower point than yesterday's low.  Naturally, this is bearish.

Every signal I watch looked bearish today.  Gold/silver ratio rose, GDXJ:GDX dropped, USD rose sharply, GDX:$GOLD dropped, GDX made a lower low, so did gold, so did silver - it was just a bad day all around.  And I suspect, as long as the dollar continues to rally, gold will suffer.

Be prepared for "evil bullion banks" to attack the gold market until enough buyers show up to cause a reversal.  This sort of behavior should be expected when all the signals turn bearish, as they have right now.

The price level to watch for USD is 80.85 - the most recent high.  A move above that level will break the USD downtrend, and likely cause a lot more USD short covering, likely leading to more selling in gold & silver. 

For the reversal signal in PM, we are watching for a "failed attack" - a big move down in PM that makes a newer low, and then is bought, rallying above its departure point.  Not all reversals require that to happen, but when it does occur, its a pretty reliable sign.  We saw this 2 weeks ago on Oct 15th.


1 Comment

davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5784
PM down, buck up again

Once again the buck is rallying hard today, up to 80.83 +0.70%, and not coincidentally gold is off again today, scoring another new low, a big spike down on the ISM report this morning on high volume.

I'm still looking for the gold downspike that gets bought.  So far, no luck.

Miners still getting crushed relative to gold.  Some are even breaking below the lows set 3 weeks ago.

In my estimation, the buck must stop rising for gold to recover, and we're approaching a mildly critical juncture of 80.86 - a strong move above that level might well drive gold below 1300.

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