PM Daily Market Commentary - 8/11/2014

By davefairtex on Tue, Aug 12, 2014 - 2:12am

Gold closed down -1.20 to 1309.04 on very light volume, while silver was up +0.09 to 20.01 on moderately light volume.  For a change, silver outperformed gold, dropping the gold/silver ratio -0.37 to 65.44.

The USD rose slightly, closing up +0.06 to 81.51, a modest rebound from Friday's drop.  The dollar appears to have lost momentum on its move higher, which should help PM as long as it lasts.

The miners were up today, with GDX closing +0.71% on light volume while GDXJ was up +1.55% on moderate volume.  Today's move pulled GDXJ back above its 20 EMA, repairing the junior miner chart a bit from last week's selloff.  The senior miner charts are still looking the best, as GDX will execute a breakout above resistance if it can manage to rally a little bit more, although the current low volume reduces confidence.

SPX continued its rebound today, closing up +5 to 1937.  SPX actually was up +12 at its peak during the first few hours of trading, but it sold off as the day wore on, finally printing a hammer candle for the day.  Hammer candles are generally bearish - not what you want to see if you're a bull.  Still, the VIX did not like to see SPX moving higher, and it dropped -1.54, closing at 14.23.

Long term treasuries (TLT) were off very slightly, down -0.01%, remaining quite close to their latest cycle high.  They still look strong.

Crude oil is bouncing along the bottom as it has for over a week now; today WTIC was up +0.50 to 97.85, while Brent was down -0.34 to 104.68.  The WTIC chart looks slightly more constructive, but they are both trying to find a low.

A rebound in oil would probably encourage SPX to move up as well, based on a loose relationship between the two that I have seen recently.



Michael_Rudmin's picture
Status: Platinum Member (Offline)
Joined: Jun 25 2014
Posts: 922
Gold, Silver, Platinum, palladium

It should not surprise that Gold is outperformed by silver.  Gold is on a 1-year horizontal correction inside a preceding (likely continued) downstroke.  Silver, too, is in a similar 1- 1/2 year horizontal correction inside a preceding downstroke.  As such, it should be possible to look through the last year and a half, and find many times in which silver outperformed gold.

The basic problem with Gold and Silver prices is that the stocks and real estate bubbles keep getting goosed.  As long as they are held in continuous inflation and don't pop, the gold and silver are not going to perform very well.  (I say problem, but it isn't a problem so much as a situation to recognize.) 

Platinum is similar, but while there is a horizontal correction in Gold and Silver, Platinum's curve actually rises even as the buys and sells mimic the corrections of Gold and Silver. 

One precious metal that doesn't match the situation is that of palladium, possibly for the reason that its use in the automotive industry keeps a general drain on the material, while its supply -- Russia -- is threatened by the shoving match between Putin the EU, and the US.  So it seems that as long as the shoving match continues, and the automotive industry keeps going, then paladium should do moderately well.  However, watch what happens to the price as North American Palladium succeeds in ramping up their second mine at Thunder Bay.

davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5687
GDX breakout

We're seeing both US equity market weakness, and a breakout of GDX, led from what I can tell by some steady strength in COMEX gold futures.  Silver is back to its old tricks again - underperforming gold.

While you can see the breakout on the GDX chart for yourself, I thought I'd share a particularly pretty cup & handle pattern I saw on AUY - Yamana Gold.  Two points you can buy this pattern - if you are a real believer in AUY and gold, you would buy around 8.00, at the bottom of the "handle" after it establishes the pattern by moving sideways for a while.  If you are less of a believer, and want to wait for the market to "show you the money", you buy AUY as it breaks above top of the handle - that orange line - around 8.80.  Stop is placed below 8.00.

Not a recommendation, just an explanation of the pattern!

Michael_Rudmin's picture
Status: Platinum Member (Offline)
Joined: Jun 25 2014
Posts: 922
big question: is that a bull moose cup? Or a bull MOUSE?

What you say may be all very nice and well, but it ignores the horizontal correction of the past year, and the preceeding downstroke.

I too was quite bullish on gold, as business was doing worse, back half a year ago. Therefore, I was expectinge gold to go up. However, when it didn't, but just jiggled in place along with new vanishing of talk of the the end of bailouts, that spoke to me of a false, but very present, market strenagth in stocks and a resurgence of weakness in gold. And really, that is the weakness of gold: it is subject to decisions by politicians to rob the real economy to make payments to the investment economy.

So now, having re-evaluated, I instead think that there was an elliott wave down that started

Down-1, Feb 2012 - may 2012
Full retrace A, may 2012-October 2012
Down-2, extended, oct 2012-july 2013
Horizontal correction B, with a narrowing cone from july 2013 until sometime in the future, maybe november.

If that is the case, we well may see a resumption of Down-5 at that time.

So then the question is, is your cup and handle a bull moose or a bull mouse? Because if your cup and handle breaks us out, then it was a moose, and one can do quite well by switching to Gold. But on the other hand, if this is just going to break us free into the next squiggle of the narrowing cone, the profit margin on the buy-sell won't cover the cost of the transaction.

Anyhow, as a result, I think I'll sit this one out.

When I googled 'Elliott Wave cup and handle' the first non-video link was below, where the author also recognized your cup and handle, but also had his doubts.

Oh, and there's another action our politicians may take to goose the stock markets (which would also dump gold). It's called war. Round up all the farmers and workers you've robbed who have lost their jobs, and have them slaughter each other in Eastern Europe so that you don't have the problem back home.

At the moment, Gold is looking extremely weak to me...

Bheithir's picture
Status: Member (Offline)
Joined: Nov 2 2008
Posts: 24

One thing I keep in mind with Gold and Silver, is that it shouldn't be treated as an investment. As you stated the price manipulation keeps it from being something you can use fundamentals for buying decisions. To me there aren't any. I buy it as a hedge. Unless we have a Nuclear War, then it would never have no value, and if you are trading it for Federal Reserve Notes it will never be worth Zero. Even with Nuclear War it would eventually come back and have a value to the survivors. 

With all of that said, there WILL be a point in the future that Banksters and Politicians will not be able to suppress the "Price" against FRN. It will break out. I am happy to buy these metals at their current prices, because it's cheap, relatively speaking. I have have a 100 Trillion Dollar Zimbabwe in my wallet right now to remind me, that the U.S. isn't immune to this type of thing.

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