PM Daily Market Commentary - 11/25/2013

davefairtex
By davefairtex on Mon, Nov 25, 2013 - 7:12pm

Gold closed up +8.40 to 1250.80 on heavy volume, while silver closed up +0.37 to 20.18 also on heavy volume.  The gold silver ratio dropped -0.73 to 61.97.  After suffering a high volume downspike in asia trading where gold dropped as far as 1226, gold started climbing strongly an hour before the NY open, repeatedly breaking higher and sending shorts running for cover.

The close above 1250 is - just barely - confirmation of last Thursday's rebound.  The fact gold hit a new low today, and rebounded off that low and was able to move above 1250 is a positive sign.  With the large volume on the day, this tells me not only did buyers appear, but they chased prices higher, and forced the shorts to cover several times.  Silver conclusively broke higher; if the bulls are to stage something now, silver should probably lead going forward.

The dollar rose +0.24 [+0.30%] to 80.96; the buck is still bouncing around that trading range from 80.50 to 81.50.  Buck needs to either break above 81.60 to be bullish, or below 80.50 to resume its downtrend.  Currently however, the dollar moves do not seem to be affecting PM at all.

GDX closed down -0.22% on moderately heavy volume, while GDXJ dropped -1.08% on heavy volume.  Both GDX and GDXJ opened down and sold off steadily for the first three hours of trading, GDX being down more than 3% at one point.  However at 11:25 something shifted, and both GDX and GDXJ started to recover, with GDX almost closing even on the day.

I see two outcomes:

1) gold has bottomed for this cycle, with 1226 as the low.  GDX did a head-fake today, a one-day drop through support that got a bunch of longs to capitulate and sell, whereupon it immediately reversed and moved back above support again.  Volume was good all around, price action was positive (I'm a big believer in rebounds), silver is leading gold - gold/silver ratio is dropping.

2) The move today in gold was just short covering, the downtrend is still in place, we're going to retest gold 1200, and GDX will be making new lows as a result.  We're in a downtrend, and it takes a lot to reverse the momentum.

Right now I'm leaning towards #1.

1 Comment

Adam Taggart's picture
Adam Taggart
Status: Peak Prosperity Co-founder (Offline)
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Rosenberg's reasons

BI reports that Gluskin Sheff's David Rosenberg gave the following reasons why he doesn't recommend buying gold at this time:

  1. Draghi pledging to save the euro area from breakup.
  2. China's ability to stabilize its growth and excite investors with its new ambitious plan.
  3. Abenomics breaking the back of Japan's economic slide.
  4. The U.S. government reaching, but not hitting the brink on the fiscal side last Fall.
  5. Continued low inflation readings globally.
  6. The Fed bracing the markets for the eventual tapering.
  7. The competition from other rival alternative currencies like Bitcoin.
  8. The selloff in long U.S. Treasuries which has re-established a positive real interest rate in the bond market.
  9. India's recession and government import curbs to cure the current account deficit have dampened gold demand in this key purchasing country.

Anyone care to take a crack at any of these? While I think each one of these individually is a weak pillar to lean on, I'd be very wary of counting on 1,3,4,6, or 9 to continue having much material depressive effect on PMs in 2014. Most of those are short-term band-aids/headfakes, at best.

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