PM Daily Market Commentary - 9/24/2014

By davefairtex on Fri, Sep 26, 2014 - 1:17am

Gold closed up +5.20 to 1222.50 on very heavy volume; silver dropped -0.17 to 17.49 on heavy volume.  Gold dropped early, hitting 1206 in early trading in London and prices remained weak right into the US market open.  However after the open, gold then rallied, eventually closing near the high.  Silver was pounded harder, dropping to 17.27 at one point; it rallied back but not as strongly.  Silver's weakness sent the gold/silver ratio up +0.99 to 69.90.

The dollar was up again today hitting yet another new high; at one point it hit 85.61 (while the Euro hit a new low of 1.2696), but retreated off its high closing up only +0.19 to 85.35.  It was still a good day for the buck, but it was a whole lot less good than it might have been.  What's more, the fact that gold rallied in spite of the dollar strength suggests to me that gold may be getting ready to move higher.

Gold's chart looks especially hopeful.  I really like the new low that was bought; we had a good-sized drop, a nice rebound, and volume was heavy - any last few sellers were flushed out by that drop to 1206.  The RSI is showing a bullish divergence, and the MACD looks to be ready to turn up.  All we need is for gold to close above today's high of 1225 and the technical picture will be complete.  And given this happened on a day with the buck up, its a really good sign to me.  I don't want to go overboard here, but this is the strongest rebound signal I've seen in gold to date - which still needs confirmation.

If the buck happens to turn down as well, things could get pretty exciting.

Silver's chart doesn't look as good.  While the intraday selloff to 17.27 was rapidly bought, the silver buyers at COMEX couldn't push prices very high after that rebound, which means the resulting candle just wasn't bullish.  The market still needs to "show me the money" in silver; COMEX buyers need to step up and buy the way they did with gold for me to be convinced.

Miners rallied today, with GDX up +0.63% on moderately heavy volume, and GDXJ up +2.08% on heavy volume.   Miners opened low on gold's weakness at market open, but then followed the rise in gold, closing at the highs of the day.   While the GDX chart did not print quite as nice a candle as gold itself, it did seem to find support at its May low of 22.  I'm hopeful this marks the extent of the mining share correction.

SPX sold off hard in the first hour of trading, and continued dropping throughout the day, closing off -32 to 1965.99 right near the lows for the day.  Selling was strong, and it pushed SPX right through its 50 MA without really even stopping, forming a new low for this cycle.  VIX was up big, +2.37 to 15.64.

Long term treasuries (TLT) rose steadily all day, closing up +1.18% on the equity market weakness.  At the same time, JNK has been selling off hard for the past four days; that IEF:JNK trade was up +0.99% today alone.  Looks like a transfer of money from equities and junk bonds to the long bond.  I really should watch JNK more closely than I do, it seems to be giving a pretty good advance warning of equity market weakness. 

Commodities dropped -0.56% today; they are having a hard time sustaining a rally for longer than one day.  WTIC was off -0.43 to 92.44, Brent up +0.05 to 97.00.  Oil still looks iffy.  As a gold long, I would like to have more support from our friends in the commodity space.

One interesting pattern today was the timing of some of the moves.  As SPX dropped, gold and the mining shares rose.  It will be interesting to see if that relationship continues to hold.

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