PM Daily Market Commentary - 4/24/2014

By davefairtex on Thu, Apr 24, 2014 - 9:26pm

Gold closed up +9.80 to 1293.70 on very heavy volume, silver was up +0.31 to 19.64 on extremely heavy volume.  Gold and silver were pounded steadily down in London around the time of the AM fix, both making new cycle lows (gold: 1268, silver 18.93) and tripping some long stops, however buyers quickly appeared and the metals rallied steadily into the NY open.  Right after the NY open, some really massive upside spikes occurred, and large numbers of shorts were stopped out as both gold and silver ripped far higher than it had previously dropped.

Trading range for gold was relatively wide, and the trading range for silver was truly massive, about 5% on the day.  Volume too on the upside spikes far outweighed those on the downside.  I interpret this to mean that the shorts really ended up taking a bath.   (FWIW chart below is in PDT, so the timescale shows NY market open at 0630)

I keep looking at this chart.  There are not many days like this - a probe down which is met with buying, and then the shorts get their faces ripped clean off.  As I like to say, this is a day where the buyers definitely showed up.

Some commentary I read attributed gold's move to issues in the Ukraine.  I don't have the timeline so I can't say if the moves match the price action.

The buck tried rallying today, touched its 50 day MA and then retreated, closing off -0.07 to 79.88.  To my mind, the buck looks weak, which should aid gold.  But I have to say, gold's crazy price action today had little or nothing to do with currencies as far as I could tell.

Part of the fun was either caused by, or was concurrent with a good-sized rally in copper.  Copper broke out of its month-long sideways track, up +0.07 [+2.3%] on decent volume.  Copper rallied pretty much from the start in asia and just climbed all day long. 

GDX was a puzzle today - with all the excitement in the metals, GDX was off -1.38% on moderate volume, while GDXJ closed down -2.82% on moderately heavy volume.  GDX rallied initially along with gold at the open, but lost it all by the end of the first hour, trading sideways for most of the day closing near the lows.

So I'm perplexed.  Last few days the miners did well, now gold and silver both seem to have put in lows, but so far they aren't acting together, which makes this situation a bit hard to read.  I'd say on balance things still look bullish for PM.  Perhaps the mining shares were just taking a rest.

As a side note: premiums in Shanghai are now around $12 above COMEX.  That's a level I like to see, since it seems to have acted as a "floor indicator" for gold frequently enough to be interesting.

The chart below is a bit noisy - red line is gold, black line are premiums.  Above the $12 level (a relatively arbitrary level I picked) seems to be a good "local minimum" buy point, except for the one time right before a certain gold crash...

Interestingly enough, when the premium turns into a discount, that can also be a good time to sell, although the "sell" indicator isn't quite as good.  Although selling if the discount was < -10 would have kept you out of the crash.  Perhaps a combination of shanghai premium for buying and a moving average for selling would make for an interesting trading system for gold.  Hmm....perhaps worth a few hours and a backtest...


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