PM Daily Market Commentary - 1/07/2014

By davefairtex on Wed, Jan 8, 2014 - 1:14am

Gold closed down -6.00 to 1230.90 on moderately heavy volume, silver closed -0.33 to 19.83 on moderately heavy volume.  The gold/silver ratio rose +0.70 to 62.06. Gold tried rallying in asia and europe, only to sell off hard in the hour before the NY open.  The rebound during NY trading was modest, leaving gold to print a "spinning top" candle, a mark of indecision.

Silver on the other hand is looking distinctly less positive; since the new year, the gold/silver ratio has been steadily climbing, which is not bullish for PM, nor does it bode well for silver.  Perhaps this is because of the $6 drop in oil during that same timeframe.  The overall commodity complex is not faring so poorly, but oil is taking it on the chin.

The dollar rose +0.23 [+0.28%] to 81.01, at one point breaking through 81 resistance to make a new cycle high of 81.10, after which it backed off.  The chart formation suggests to me new highs to come; my sense is the buck will probably break 81 and test 81.50 in the coming days.  All else being equal, this will likely put some pressure on gold and PM.

GDX closed up +0.18% on light volume; it was down initially at the open because of the drop in gold, but it rallied all day long, most especially in the important last hour of trading when traders make the decision to either hold the position overnight or reduce risk and sell.  GDXJ was off -1.01% also on light volume.  Price action in the miners today was bullish, especially given the relative weakness in gold.  On a day where the miners should have sold off a bit, volume was light - and the modest early miner sell-off was bought.  These are both good signs.

The premiums in Shanghai have been climbing steadily since about mid-November; they are now at $13.70 over COMEX.  Additionally, since the new year, delivery volume in Shanghai has jumped too.  The pressure from the physical market seems unexpectedly intense to me, more than I would have thought given the move up in prices.  That seems bullish.

Miners, especially the senior miners, are looking strong.  GDX:$GOLD continues moving up, which is a bullish sign, as is the physical buying in China.  However, the gold/silver ratio is looking bearish, and the recent move up in gold may have peaked for the moment.  Its a mixed mood right now, and that downward pressure from the medium and long term downtrend will likely encourage the COMEX shorts to re-enter the market again soon.  The question in my mind is, at what price level will the COMEX buyers appear once the inevitable short assaults start happening?  All we can do is wait, and watch the market for clues.


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