PM Daily Market Commentary - 11/14/2013

By davefairtex on Thu, Nov 14, 2013 - 7:10pm

Gold closed up 5.40 to 1286.80 on moderately heavy volume, and silver closed up +0.15 to 20.75 on heavy volume.  The gold silver ratio retreated -0.17 to 62.03.  Gold traded sideways with an upward bias for most of the day.  It made one attempt to break higher, which failed, but it managed to trip a bunch of short stops as it made a new high of 1293.80.

While this does confirm yesterday's rebound in gold, as confirmations of rebounds go, this one was pretty lackluster.  That failed attempt to push higher was a bit of a danger signal to me.  The fact that silver's chart is still quite anemic - its only 25 cents above its danger zone - says to me that caution is still warranted.  The gold/silver ratio hasn't really turned around just yet, only showing modest improvement today.

The dollar rallied today, hitting 81.27 at one point regaining most of what was lost yesterday, but it was unable to maintain that level, closing up only +0.18 [+0.23%] to 81.03.  Rallies that fail to top previous highs are a bearish sign; traders believe that which cannot go up must go down.  Odds are the buck continues moving lower, but that's just a guess of course.

GDX did relatively well today, up +2.68% on relatively heavy volume, first opening up and then it was bought all day long.  GDXJ's intraday chart looked similar if somewhat less energetic; although it was up +2.85% on heavy volume, it didn't close at the high and the buying wasn't quite as convincing to me.

The most bullish thing right now in PM is GDX; it is outperforming gold, and has done so for the past week, minus one day where it had issues.  This outperformance can be seen in the GDX:$GOLD ratio chart.  I interpret this to mean that big money is accumulating mining shares.  Sometimes that behavior isn't visible just looking at a GDX price chart, but if you know GDX was flat on a day when gold dropped, that counts as an up-day for GDX, and you can see that much more easily on the ratio chart.

The whole point of this exercise is to detect when big money is accumulating, so you can buy at the same time.  If you want to buy miners (even given their myriad issues of country risk, execution risk, energy prices, and declining ore grades) then its best to buy at a time when the big guys are accumulating - as opposed to buying when big money is selling like crazy.

Likewise, if big money is distributing, as they were back on Aug 19th and especially Aug 27th, then perhaps it is time for you to lighten up on your miners - and buy back in once the selling stops.

Right now, GDX is showing moderately bullish signs, while gold is looking hesitant, and silver is only very reluctantly being dragged off the lows.  To me this doesn't signal "everyone into the water" - but it is cautiously bullish.  For the picture to be more classically bullish, silver should be leading, up at least 2-3% per day, gold should be climbing relentlessly forcing the shorts to cover again and again, and miners should be up 4-5% rather than 2.6%.  Currently, volume is there, but the price action just isn't.


1 Comment

Hrunner's picture
Status: Gold Member (Offline)
Joined: Dec 28 2010
Posts: 256
Nice Gold and Silver Post, Dave


Very comprehensive.  Thank you.

This feels like to me a PM market this is waiting for a catalyst.

As you know, I believe the price is suppressed intentionally below where it "should" be, at least 2200 and higher for gold.

The nomination of Yellen has not been such a catalyst thus far.

To move the bullion banks aside from the manipulation and trading range will take something big.

Besides the usual list of natural and made-made disasters such as war, which are completely unpredictable for timing, I am looking for things like:

A whistle-blower from either JPM or CFTC that provides solid proof of PM price manipulation

A "surprise" announcement from the newly-confirmed Yellen at the next FOMC meeting that QE will be increased to $100 billion per month

A financial crisis in Europe or in Japan (or in U.S.A., but I put that at lower probability) such as a missed debt payment by one of the peripheries, probably a bigger one like Spain or Italy (Greece is so 2012), and the subsequent chaos in the bailout plan discussions.

A collapse of an EU commercial bank (Deutsche Bank is always on the rumor list).

Collapse of the housing market when Blackstone et al. stop buying houses and the market realizes that no traditional buyers are actually buying houses.

Good weekend, Dave and all PM watchers,


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