PM Daily Market Commentary - 1/08/2014

davefairtex
By davefairtex on Wed, Jan 8, 2014 - 11:44pm

Gold closed down -5.90 to 1225.00 on heavy volume, silver closed down -0.32 to 19.51 also on heavy volume.  The gold/silver ratio continued rising, up +0.73 to 62.79.  Gold started dropping in asia, and hit a low of 1217 in NY after the release of the FOMC meeting minutes at 1400 EST, but managed to rally back before the close keeping the day's loss modest.  Silver's loss was substantially less modest.

The continued rise in the gold/silver ratio is concerning; ever since it has started rising, PM has had problems.  Silver seems to have found some support at 19.40.  Curiously though, many silver mining shares I watch continue to perform relatively well.

The dollar rose +0.17 [+0.21%] to 81.18, at one point hitting a high of 81.33 in afternoon NY trading.  The steady move up in the buck looks set to continue, with the next target being the top of the current trading range, 81.50.  Dollar collapse?  What dollar collapse?  If you want to see a currency that looks unhappy, look at the Canadian Dollar - its down 9% since the start of 2013, and it dropped 1.5% just in the past few days.  My observation: CAD has been tracking commodity prices.  Not perfectly, but they definitely seem correlated.

GDX closed down -1.64% on moderate volume; it opened down because of the drop in gold, and it traded in a narrow range all day long, printing a doji - indicating it closed the day basically at the same place it opened.  GDXJ was off -2.31% on light volume, but it sold off right at the end of the day.  Miners continue to perform relatively well, they remain above their respective EMA 20s.  Selling pressure seems minimal.  Perhaps all the people who wanted to dump their miners did so in December.

We have not seen any real high volume test of support just yet in either gold or silver since December 31st.  Absent that, I have a hard time knowing where the actual support is for PM above 1180.  It could be that 1220 will hold and gold will continue its move up, but the continued move down in oil ($WTIC is now 92.55) likely isn't helping the case for PM too much.

Gold Flash Crash

The gold "flash crash" as gold was moving towards 1250 is now looking more significant to me.  In my observation of the markets intraday, most normal "short assaults" that end up causing large spikes down don't happen during times when the market is rising.  That's a very unusual pattern - in fact I can't remember a time when I've seen that happen.  I've never seen one happen on a breakout.  Usually, they happen when the intraday chart pattern looks weak, and the market appears vulnerable to a breakdown - a descending triangle or something like that close to a support level.  Then bang, the shorts come in big and try and force the market through the support level to collect on all those stops hanging out just below support.

Yet this gold flash crash happened immediately after a breakout.  Curious timing, certainly.

While the dip was initially bought, and it most likely cost somebody some money to do this, it also definitely stopped the upward momentum of gold.  It makes me wonder if the gang buying the gold miners and who are also net long COMEX don't want PM to rally too rapidly.  I know that sounds like conspiracy talk, but in my world, the conspiracy isn't about keeping the price of gold down per se.  My theory is, the goal was to accumulate mining shares cheaply, and if gold rallies too fast, the shares will rise rapidly making the accumulation more expensive.

The evidence for my suspicions: I'm trying to understand why a bid remains on the shares (especially silver mining shares) while the metal itself is doing relatively poorly.  When the puzzle pieces don't fit together neatly, when the ratios aren't behaving as they usually do, I get suspicious.

So if this is the case, a dip in the price of mining shares is a buying opportunity.  Accumulation of shares by big players is the signal to jump in.

Of course, the flash crash could also be a mistaken trade.  We've all bought when we should have sold; its possible that someone who was intending to "buy the breakout" accidentally sold it instead.

Somebody knows for sure, but they aren't telling.  All we can do from the outside is just guess.

 

1 Comment

KennethPollinger's picture
KennethPollinger
Status: Platinum Member (Offline)
Joined: Sep 22 2010
Posts: 653
Gold/Silver Miners Investigations

Hi Dave.  Curiosity always gets to me when you write something that we all might profit from.  As you all know by now I am still trying to create a SET of TARGETS (4 components), and with gold/silver mining companies being one, I spotted this:

 
 "Silver seems to have found some support at 19.40.  Curiously though, many silver mining shares I watch continue to perform relatively well."
 If I may ask how many and which do you follow--might help me make a few investing decisions, without blaming you if they do not work out.  Like some in our community I am a neophite in these matters and can use all the help I can get from more knowledgeable folks.
 
I also wonder if www.PP could use another specific Category, something like:
 
Gold/Silver Miners Investigations
 
with daily information, analysis, interpretation on seniors and juniors--specific stocks!!! (as there thousands)
 
 
 
"While the dip was initially bought, and it most likely cost somebody some money to do this, it also definitely stopped the upward momentum of gold.  It makes me wonder if the gang buying the gold miners and who are also net long COMEX don't want PM to rally too rapidly.  I know that sounds like conspiracy talk, but in my world, the conspiracy isn't about keeping the price of gold down per se.  My theory is, the goal was to accumulate mining shares cheaply, and if gold rallies too fast, the shares will rise rapidly making the accumulation more expensive."
 
I continue to thank you for what has to take up a LOT of your time and brain power.
Truly much appreciated and exceedingly educational.
 
Ken

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