PM Daily Market Commentary - 10/22/2014

davefairtex
By davefairtex on Wed, Oct 22, 2014 - 7:23pm

Gold dropped -8.40 to 1241.30 on moderate volume; silver dropped -0.34 to 17.16 also on moderate volume.  Gold traded more or less sideways until 0830 EDT, when the CPI release (showing softer than expected inflation) caused gold to drop $8.  Gold never really recovered from that drop.  Silver just sold off all day long, closing at the lows of the day.  The gold/silver ratio jumped +0.95 to a new multi-year high of 72.34.

The picture for PM does not look great - only gold remains in an uptrend, and only a short term uptrend at that.  The rest of the indicators are distinctly bearish.

The dollar traded higher today, ending up +0.41 to 85.85, closing well above its EMA-9 and looking as though it is ready to start moving higher again.  This is mainly a Euro phenomenon, with the Euro off -0.71 today.  The dollar spiked higher at the time of the CPI release.

Mining shares sold off all day long, with GDX down -3.13% on moderately heavy volume, and GDXJ off a big -5.33% on heavy volume.  Both mining ETfs closed at the dead lows of the day.  Gold mining shares are back in 2013 mode - traders just don't want miners anymore.  Gold goes up: miners sell off.  Gold drops: miners sell off even harder!  Unless trader sentiment changes significantly, miners look certain to make new lows in the very near future.  The GDX:$GOLD ratio is a hair away from making a new low:

SPX tried rallying over yesterday's high but failed, closing off -14.17 to 1927.11.  After three strong days up, it looks like SPX needed to take a rest.  VIX rose +1.79 to 17.87.

Long term treasuries (TLT) were up only +0.07%.   JNK sold off hard, losing -0.69% wiping out yesterday's gains and then some, forming a "bearish engulfing" candle pattern.

Commodities were down today, off -0.65%. WTIC was hit hard for a loss of -2.22 closing at 80.33; the drop today was kicked off by an unexpectedly high "oil inventories" report at 1030 EDT.  Brent was off -1.51 to 84.71.  It appears that the oil market is still selling off on bad news - this suggests the oil downtrend remains in place.  Oil equities sold off hard as a result, forming bearish engulfing patterns of their own.  Based on this activity, I think we'll see further lows in oil; this probably won't help silver at all.

The picture - low inflation, dropping oil prices caused by an oil oversupply and a rising dollar encouraged silver to drop hard, and the miners to sell off even harder.  Gold remains in an uptrend and its loss today was modest; can this continue if the dollar moves higher and the oil and commodity downtrend remains in place?  Maybe.  But it won't be easy.  And silver will probably continue underperforming, pushing the gold/silver ratio ever higher.

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