PM Daily Market Commentary - 11/11/2013

By davefairtex on Mon, Nov 11, 2013 - 7:31pm

Gold closed down -7.90 to 1281.10 on light volume, and silver closed down -0.17 to 21.33 also on light volume.  The gold/silver ratio rose 0.09 to 60.05.  Today gold and silver both just slowly sold off throughout the day.  Gold did hit a new low of 1278, but managed to close above 1280 support.

No buyers appeared for PM in asia, which is bit of a troubling sign, especially with gold at these prices.

The buck dropped -0.13 [-0.15%] to 81.15, retreating a bit after the breakout last week.

GDX opened down, sold off for the first hour, and then rallied for the rest of the day, closing at the high, up +0.08% on light volume.  A move of 0.08% doesn't sound all that exciting, but GDX was off 2.3% at one point in the morning, and since gold was down today, it tells me that traders are stepping up to buy miners at these price levels.  This is a good sign.

This is the second day for GDX to perform well in the face of a down day in the metal.  Traders may not like COMEX futures right now, but the miners seem to be - surprisingly - more popular.



Hrunner's picture
Status: Gold Member (Offline)
Joined: Dec 28 2010
Posts: 256
Another $4 billion printed, another down day for gold.

Situation normal.

May we just step back for a moment and look at the big picture, as a brief pause from Dave's excellent daily commentary.

S&P 500 vritually straightline up from 1350 to 1750 over last 12 months.

On very little organic revenue growth.  Companies buying back shares and rolling over old debt at ever lower rates.

Gold straightline down (with the exception of a wild and fundamentals-ignoring monkey-hammer down in April)  from 1725 to 1280 over last 12 months.

$4 billion a day, $85 billion a month, month after month, business day after day.

All the major central banks doing the same, some like Japan even more so.

The S&P 500 makes a lot more sense to me from a pure math standpoint.

If gold had just mirrored the drip-drip-drip of the stock market going up due to the freshly printed bennies, then gold would be at 2240.

Don't even get me started on silver.

Have a good evening.  Play with your kids.



davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5739
another down day


It is a common frustration that a given market does not appear to follow fundamental motivations that we all hold dear.  "Money printing should make gold prices rise."  (Gold doesn't rise).  "Dammit, gold isn't following the (my) fundamentals!"

Well, perhaps it is manipulation (and as I've said before, I think there is definitely tactical manipulation), or perhaps the current market trend is because the market in aggregate is listening to a different fundamental drummer than we are.  It would seem from the evidence that the aggregate COMEX futures buyer (and GLD buyer) most likely has different motivations from you and me.

Why not?  Most of the world doesn't see things the way we do.  And that's ok.

In many markets, the storyline the market follows often doesn't make sense to us.  But if you can get inside its head, it will help you understand the whys of the price movements.  Understanding might bring you more peace - it certainly gives me a more relaxed state of mind than before, when I was upset that the market did not follow the storyline I happened to believe in.

That's my process today anyway.  I get outside my own head, leave my ego behind, and I try and intuit what the COMEX/GLD buyer is thinking, by watching what they do.  I try and do this for every participant, but the COMEX buyer has incredible leverage, so its a good idea to get a sense of what they are thinking.

I believe the COMEX/GLD holder is currently thinking 3 things [subject to change]:

1) gold is currently in a downtrend (200 MA), so when in doubt, SELL!  [And BUY again if it looks to be rallying in the short to medium term - we absolutely don't want to miss out on a rally]

2) whenever the Fed threatens to stop printing, that's bad for gold, so SELL!

3) we have bank credit deflation in europe since mid-2012, and worldwide commodity price deflation since 2011.  why do I hold this GLD share/COMEX contract if inflation is a no-show?  SELL!

Again, this is just what I think.  That's not the same as truth.  For what its worth.

Apologies if you know this already.

Hrunner's picture
Status: Gold Member (Offline)
Joined: Dec 28 2010
Posts: 256
It's all fun, until someone gets hurt

Honestly, I wasn't awake enough to watch and appreciate what was happen in 2000-2006 with respect to the housing market.  And I had no idea of the monstrosity that was the credit default swaps and the billions of synthetic i.e. backed by air debt securities. 

Kudos to those (Kyle Bass, Peter Schiff, et al.) who were smart enough.

And had the courage of their convictions to make money based on their analysis.

Perhaps, if I recall correctly my mindset, there was a slight questioning inside my head along the lines of "wow, housing keeps going up 8% a year, can this really go on forever?  Oh well, good for us, our house is worth so much more this year than last".  But I clearly wasn't paying attention.

Now, I am paying attention.

To wit,

With respect to the housing market in 2006, if one tried to "get inside its head" and "get outside my own head, leave my ego behind, and I try and intuit what the COMEX/GLD  buyer homeowner was thinking, by watching what they do", what should I have done in the fall of 2006?

(Graph intentionally truncated at 2006)

Gee, the "market" is telling me to buy houses, ignore the fundamentals that housing prices cannot go higher on flat or decreasing household income forever. 

There were a million 'good' explanations why this could go on forever.  Except that it could not.

(edit: is it just me, or are housing prices turning higher again, on no household income growth- wow, the half-life on lessons learned is so short these days).

FWIW, Dave, housing was a highly manipulated market by the Fed, in alliance with the commercial banking industry and the federal government.   High liquidity plus little to no regulation, no bankruptcy, no transparency

Money markets, i.e. the dollar and gold, are highly manipulated markets by the Fed, in alliance with the commercial banking industry.

What do we have today?  High liquidity with little to no regulation, no bankruptcy, no transparency.

And as we know, the real wreckage was caused by the connection between housing prices and the millions of highly leveraged and fraudulent financial instruments.  In isolation, we likely could have handled such a home price pullback, and we probably could have resolved this pullback fairly quickly with limited pain.

Someone once said "you can ignore reality, but you cannot ignore the consequences of ignoring reality".

As I observe the slow train wreck of the world economy, I'm see the role of propagandists, i.e. government officials, mainstream business shows, and used car salesmen, which is to simply get me to ignore reality, at least long enough to digest their propaganda and further their goals, sell me their garbage, do what's good for them, but clearly catastrophic for me.

Not me, not this time, Dave, my friend.  I may be a dumb doctorate-holding schlub, but I can learn, eventually.

davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5739
one small mistake


I agree with everything you said, except for one small but critical point:

Gee, the "market" is telling me to buy houses, ignore the fundamentals that housing prices cannot go higher on flat or decreasing household income forever.

When I say "get inside the market's head" I do NOT mean to go to the next step and FOLLOW the market and do whatever they do!  So to be clear - understanding the market and what trend it is in (and possibly even why) is not to be confused with blindly following the herd of lemmings off the cliff.  Especially in Real Estate, where getting out can be time-consuming, and where commissions and costs of sale are high.

Gaining understanding by letting my ego go and listening is then used to inform the timing of my buy/sell decisions.  Do I want to buy alongside the COMEX buyer when his thinking has shifted, or do I want to buy when he's in the middle of unloading?  One strategy is likely to be more successful than the other.

If we were massive mutual funds, we'd need to buy before the bottom, because we'd move the market because of our purchases.  But me - I don't move the market, ever.  So I don't need to worry about that.  Its our one advantage over the big money.

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