PM Daily Market Commentary - 9/30/2014

By davefairtex on Wed, Oct 1, 2014 - 3:46am

Gold closed down -6.60 to 1209.10 on very heavy volume, while silver was crushed falling -0.49 to close at 16.97 on very heavy volume as well.  Things looked more or less fine in PM until 0500 EDT, when Eurostat released the Eurozone inflation numbers, which were apparently lower than expected.  This caused the buck to scream higher and that encouraged PM to sell off.  A few hours later gold and silver both tried to rally off their interim lows, but were unable to hold onto the gains.  Gold avoided big losses, while silver just kept falling and falling until hitting a new low of 16.84 before bouncing slightly into the close.

The gold/silver ratio jumped higher, closing up +1.64 to 71.27, a really large one-day gain.  That's bearish for PM.

As mentioned, the buck rallied quite strongly following the EU inflation numbers release at 0500, which pointed at increasing levels of deflation in the eurozone.  I'm not quite sure why these numbers surprised the market, but they certainly seemed to do so given the reaction by prices.   The buck closed up +0.31 to 86.04; this was only half as high as it was at mid-day, with the buck hitting 86.33 (up +0.60) at one point.

Miners dropped, with GDX down -1.81% on heavy volume, continuing to fall after its drop through 22 support on Friday.  GDXJ dropped below its consolidation range, closing down -2.97% on heavy volume.  Ratios GDXJ:GDX and GDX:$GOLD continue to decay, with the miners leading gold lower.

SPX traded in a range but ended up closing lower, off -6 to 1972.29.  VIX continues to rise, +0.22 to 16.31.

Long term treasuries (TLT) dropped -0.56% today, while JNK rallied; this suggests some amount of strength remains in the "risk" trade.  Perhaps its just a brief bit of short-covering in JNK, its hard to say.

We only got one day out of our hopeful commodity rally; GCC was off -1.00% and is right back down at support.  WTIC was hit really hard, down -3.00 to 91.32 on massive volume, after failing to break out above 95 resistance.  Brent had a big bad day too, closing down -2.53 to 94.67 making a new cycle low.  So much for oil finding a low.

While gold remains looking reasonably strong all things considered, there is a risk right now; if gold falls through the 1180 lows, what happened to silver will also likely happen to gold, namely, a whole lot of selling on the break below support.  The higher the dollar moves, the more likely this is to happen.

I don't know when this all ends; this constantly rising dollar and dropping PM and commodity index.  It reminds me more than a little of 2008.  All we can do is watch, and wait for the buck to stop rallying, and for the buyers to show up at the COMEX.  At some point they will, but I can't tell you when that will be.  Yesterday I wrote that silver was "a good price" in the 17s.  Ha!  While it is certainly a better price in the 16s,  will it become even cheaper next week?  Who can say.  We need to wait for the buyers to actually appear rather than just hoping they will.  I say this so often because I'm reminding myself to exercise discipline.  Its not easy.  Sometimes prices get driven way below where "they should be" because of capital flows and deleveraging.  The good news is, if you don't jump in too soon when this sort of thing happens, you can get some real bargains.

But you must remain patient, and wait for the evidence of buying to appear before jumping in there yourself.

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1 Comment

Petey1's picture
Status: Bronze Member (Offline)
Joined: Sep 13 2012
Posts: 71
What is the real cost to mine silver?

After looking for the real cost of Silver to mine there are a lot of different values floating around on the internet. I understand every mining operation has different costs and a lot of Silver comes from a byproduct from mining for something else. At 17$ Silver looks like a good buy.  The mining cost does not take into account minting into a coin, middle men or the retail store. Thanks for the help.

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