PM Daily Market Commentary - 10/20/2014

By davefairtex on Mon, Oct 20, 2014 - 11:15pm

Gold closed up +8.90 to 1247.40 on moderately light volume; silver rose +0.15 to 17.42 on light volume.  Gold spiked modestly higher in Asia and London trading, and held its gains through the close in NY.  Silver rose in a similar pattern, but gave up half its gains by end of day in NY.  Gold's rally today stopped right at its 50 MA.

The dollar slowly sank all day long, closing near its low, off -0.24 to 85.05.  The slow dollar downtrend is definitely helping gold to move higher.

Mining shares rallied today, recovering some of their losses from Friday's big down day.  GDX was up +2.46% on moderate volume, while GDXJ was up only +1.05% on light volume.  One would expect mining shares to be doing better than this given gold's steady move higher - but that's not what is happening.  This suggests the GDX:$GOLD ratio is probably not doing so well...and looking at the chart, that's what we see.  In fact, the ratio looks destined to make new lows, unable to close above its EMA-9 for more than one brief day two weeks ago.

This chart looks terrible, and is bearish for PM.

SPX rallied from the opening bell through the close, up +17.25 to 1904.01 - the rally stopping right at its 200 MA and a key resistance level marking a previous low set in early August.  Volume was surprisingly light given the steady buying.  However, I am not sure the 200 MA resistance will hold given the current level of buy-side enthusiasm.

Long term treasuries (TLT) found support on its EMA-9 and rallied modestly, up +0.36%.  JNK had a third very strong day, up +0.90 on some heavy volume.  It also closed above its most recent lower high, which breaks the JNK downtrend.  If we use this as a "tell" for SPX, it suggests the SPX rally may have more gas left in the tank.  Perhaps the next reasonable short entry will be at the 50 MA.

Commodities fell today, down -0.69%, and are quite close to making fresh new lows for this cycle.  WTIC was off -0.24 to 82.72, while Brent was down -0.76 to 85.40.  Both oil contracts have found it impossible to close above their EMA-9, which means the oil downtrend remains in place.  Silver really doesn't like dropping commodities and falling oil prices.

Risk on continues for SPX after rallying off the 1820 low, with JNK supporting the picture.  The slowly weakening dollar is helping gold, but the continued oil and commodity downtrend is keeping silver from following suit.

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Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2391
Physical market indicators

Lots of news from the demand side of the market;

The SGE was closed from October 1 to 7, the latest SGE withdrawal numbers cover September 29 and 30, and October 8, 9 and 10. In these 5 days 68.4 tonnes were withdrawn from the SGE vaults (in the mainland and the Shanghai Free Trade Zone) 

Look at the associated chart in this article.. worth 1000 words!  Here's how I think about China;  They have created a lot of money.. and yeah, they have built a lot of cities and infrastructure with it.. but it has also leaked all over the place, including into US real estate.  But unlike in the US.. some of the money in China leaks into Gold and Silver, creating immense demand.  

China is not the only nation buying Gold, India has once again become very active, as are other BRICs nations;

Russia saw it's largest monthly purchase of gold in 15 years with 1.2 million ounces
Yes, these things are happening. 
And yes, most media people are not speaking about them, or pull a cloak of obfuscation and misdirection over them.    The media does not help the people, it handles the people.


As Jesse says,

Gold at these prices is steadily flowing from West to East. What is not sustainable will not be sustained. There will be a reckoning, and a revaluation.

I can't help you time when the day of reckoning will come.  I do not believe you will get a warning via the technical analysis of the fake price action on the Comex.  I do believe you will get some insight from the physical market... signs of stress.  Yesterday, GLD barfed up yet another large measure of Gold, which means to me that the shelves are bare elsewhere.  When GLD is gone, it is gone.  When Western Gold is gone, it is gone ;



davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5740
chinese demand

I've been seeing heavy demand from China over the past few weeks too.  As in, demand almost what it was after the 2013 gold crash, which was the heaviest on record.

The interesting thing to me is, gold is not in premium in Shanghai, which suggests gold supply is adequate at the moment.  How long that lasts is anyone's guess.  Once easy sources of supply run out at current prices, then its likely prices will have to rise - we should be able to see those supply pressures build in the Shanghai premiums when they occur.

Likewise too the dropping of tonnage in GLD.  In recent times, GLD tonnage has declined when the price of gold has dropped, but now we're seeing it drop when the price of gold is rising.  That's something new.

As to the belief that COMEX prices won't notice the premium action - Jim thinks it won't, while I think it will.  I believe that those bankers and hedge funds won't want to miss out on a chance to make money.

Fascinating analysis of silver.  Chinese physical buyers meet COMEX hedge fund momentum traders.

I say: watch those premiums!  I do.

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