PM Daily Market Commentary - 1/22/2014

By davefairtex on Thu, Jan 23, 2014 - 12:34am

Gold closed down -4.10 to 1236.40 on moderately light volume, and silver dropped -0.07 to 19.79 on light volume.  The gold/silver ratio was basically unchanged, +0.01.  Both gold and silver traded sideways with a very modest downward bias from Asia through the close in NY.  Gold closed below its 50 MA, and silver did this yesterday.

The USD was up +0.06 to 81.29.  If the buck moves above its 200 day MA, which is only a few points away at 81.56, it will be a bullish signal for the dollar.  If this happens, it will probably cause difficulties for gold.  In addition, that particular price level is also a resistance level, and breaking through resistance often causes a big spike as shorts run for cover.

GDX today closed down -2.57% on heavy volume, while GDXJ was off -4.56% on very heavy volume.  This heavy down day on a day when gold is off just a few dollars tells me that the longs are ringing the cash register.  Volume is one clue - GDX volume today was about the same as yesterday's move up.  As a result, there may be more selling of PM shares in the next few days, and a further move lower in PM.

Of course the market moves in waves.  In any trend, after the fun moves up, there are always less-fun retracements.  The only question is, how far will the market retrace.  If the PM trend really has changed, a retracement is an excellent time to buy.  Certainly, you can get your miners cheaper today than yesterday.

The one concern I have is, gold didn't manage to break above its 1265 resistance level on the most recent gold uptrend, which tells me that the shorts still see the longer term gold downtrend as currently unbroken.  This will encourage them, and that's not a good thing.

So we must watch the ratios as well as price & volume to see how intense the selling becomes.  If juniors fare well, and if the miners don't start seriously underperforming gold the way they did in 2013, I think this move down is a buying opportunity, but we can't know in advance - all we can do is watch.

We have a FOMC meeting starting next Tuesday and concluding Wed at 1400 EST.



davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5738
buyers showing up

After the last few down days in PM, I have been thinking to myself, when will the buyers show up at COMEX?

Turns out, the answer is - "today".  Today they showed up.  There was a big spike down after the NY close/morning in asia that was slowly bought at first, and then more rapidly, with a series of short-covering breakouts.  At this moment, the COMEX buyers have pushed the price far above the original point of departure.

This is a bullish sign - buyers showed up at COMEX gold 1230.

And I'm just going to point out, although the short assault happened "in the dead of night" (i.e. around the time of the Tokyo open - ask the Japanese if it was the dead of night), after the big assault, the buyers started to appear in asia and by the end of asia's trading day, the buyers have the shorts scrambling for cover.  Now silver is above 20, and gold 1245.

That's why I say its not about the short assault, its always about the market's response to that assault.


davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5738
buyers showing up - in pictures

As I've mentioned before, I put a fair amount of faith in this particular type of intraday analysis.

Because we're still in a medium-term gold downtrend - gold hasn't closed above 1265 just yet - shorts get emboldened after a few days of downside action.  This morning in asia (about 1900 EST) the shorts struck, hammering gold down from 1237 all the way down to 1230.80.  About 1330 contracts were liquidated, most likely long side stops.  The shorts tried testing that low twice more, but each time, buyers appeared, pushing price higher.

At about 0200 EST (0700 GMT) there was a big temporary spike up, and then it was the shorts turn to liquidate (1700 contracts), and then finally at 0330 EST the market lifted more permanently above the point of departure and that's when (at least for me) the bullish signal was generated - the succeeding breakouts to 1247.9 were just gravy.

This was similar in behavior to that test of 1180 we had back in December.  Shorts hammered the price lower, they tried a few times to push it down further, failed, and then retreated - resulting in a bunch of short covering and ultimately generating a bullish signal.

The volume isn't nearly as strong on this signal, so the 1230 low isn't quite as significant, but - hey, I'll take it.  Its quite possible we will see a break through 1260 on the momentum from this action.

[The fact that the buck dropped -0.45% during that same period was helpful too - not instrumental, but certainly helpful]

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