PM Daily Market Commentary - 5/12/2014

By davefairtex on Mon, May 12, 2014 - 11:29pm

Gold was up +6.10 to 1295.50 on moderately heavy volume, while silver was up a much bigger +0.36, also on moderately heavy volume.  Gold was hit hard early in asia trading, spiking below 1280 support, stopping out 1500 long contracts, briefly hitting 1277.  After that, gold rallied solidly until just before NY open, touching 1305 and stopping out about 3700 shorts.  First one way, then the other, all in one day.  Yet for all the fuss, gold was unable to hold above 1300, and closed with only a modest gain.

Silver did much better - for a change - following gold's pattern but remaining above 19 support even at its lowest point of the day.  Silver also held onto a lot more of its gains at the close.  I treat this outperformance as bullish, since silver clearly isn't a "safe haven" play so this move isn't all just about geopolitics.  Perhaps the fact copper went a bit nuts today, up +0.06 [+1.83%] to 3.14 was a factor in silver's rally.

Today's move in silver was unexpected, and possibly bullish.  I like silver's possible "higher low" today at 19, and if silver can just move above 19.75, the whole complexion of the chart would change.  As a result, I think silver is a buy on any break above 19.75 - although its relatively high risk, given the longer term chart remains quite bearish.

The buck moved up +0.03 today, edging higher in a narrow daily trading range.

The one sour note today were the mining shares; GDX was up +0.84% on light volume, while GDXJ was up +1.12% on moderate volume.  I say sour note because the miners opened up, and were more or less gently sold all day long, and volume was light.  There seems to be little enthusiasm for buying mining shares right now.  If mining shares are supposed to be leading PM - right now, they are leading PM sideways with scant enthusiasm.

The US equity market broke out today; SPX was +18 to 1896, another all time closing high.  Volume was a bit light for a breakout, but I believe the odds are this is not just a headfake, since QQQ (Nasdaq), the small caps, technology, and many of the previous market leaders had decent-sized rallies also.  If you were short, I believe the best move today was to bail out and wait for your next opportunity, in spite of what you might believe about the economy, etc.  Too many "risk on" things rallied today to remain short, in my opinion.


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