PM Daily Market Commentary - 11/4/2014

davefairtex
By davefairtex on Tue, Nov 4, 2014 - 8:03pm

Gold rose +2.80 to 1168.20 on moderate volume, while silver fell -0.11 to 16.01 on moderate volume also.   Gold tried rallying today but largely failed, and silver closed at the lower end of its trading range.  No buyers showed up at the COMEX to push prices higher - with gold seriously oversold, one might have expected more.

The dollar traded lower today, with much of its drop coming after an apparently disagreeable Factory Orders report that was released at 1000 EDT.   Commentary around the report suggested that hard data on industrial production isn't showing any sort of expansion; this sort of economic data seems to be driving the dollar these days.  Good economic news = higher dollar, more disagreeable news = lower dollar.

However, the lower dollar didn't seem to provide much support for PM today.

Mining shares gave back all of their big gains from yesterday, with GDX down -3.91% on heavy volume, and GDXJ was hit for -5.40% on very heavy volume.  After a brief attempt to rally in the morning session, miners sold off for the rest of the day, closing quite near the lows.  While they haven't broken down just yet, miners are making life very difficult for any trader imagining that a bottom might be in.

Some mining companies have reported disappointing earnings - ANV had to write down the value of a big chunk of ore sitting on a leach pad because of the drop in gold prices.  That writedown went straight to the bottom line, resulting in a massive loss for the quarter.  I'm guessing this story will happen more than once in the mining space.  As a result, ANV was absolutely crushed today, and it has dropped around 75% over the past six weeks in total.  The miners that are in more precarious states will most likely have similar difficulty with their stock prices if gold stays below 1200 for too long.

SPX wasn't so happy about the Factory Orders report, dropping about 14 points after the release.  However the drop was short lived - the dip was mostly bought, and SPX closed down only -5.71 to 2012.10.  VIX was up +0.16 to 14.89.

In bonds, the long bond ETF TLT has been trading sideways for almost two weeks; today it was up +0.31% but remains within its recent trading range.  JNK looks much the same, today it was off -0.32% but it remains within its recent trading range.

Commodities made a new low today, dropping -0.85%.  WTIC also made a new low, losing -0.85 to 77.34, but printing a hammer candle (which is a possible low) on high volume.  Brent was down a big -1.96 to 82.82, and also made a new low.  Both oil contracts remain below their EMA-9 and remain bearish.

Once again, dropping oil and commodity prices will not help PM.

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6 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5694
mining shares signaling a possible low?

Capitulation today in PM at the COMEX - collapse of silver down to its day low of 15.12, daily RSI(7) values of 8, along with a reasonably strong (relative) performance from mining shares hint at a possible low in PM.

Gold & silver bugs are buying the ETFs - PSLV trading at a premium of +7.99% to NAV, OUNZ +1.84% to NAV, PHYS +1.11% to NAV.   Premiums are up across the board.

Hedge fund favorites SLW and GG are doing well.  SLW is up +2.32% after making a new low, and GG is up +0.49% on the day, which doesn't match up at all with the PM capitulation, and that's a bullish indicator.

Also, oil may be putting in a swing low today.

Of course it could all fall apart by end of day - as it has before - and we have hours to go until the close, but its positive so far.  Now we just need traders to take home their new purchases at end of day.

 

bwh1214's picture
bwh1214
Status: Bronze Member (Offline)
Joined: Jun 1 2011
Posts: 40
Capitulation

Gosh I hope so.  It was finally my turn to buy and I bought 100.3 ounces this morning at 15.29.  So far so good but it might be turning down again as I type.  

One bright spot that I have noted over the past few days is the posts on several of the pro silver sites I frequent have been more negative then positive.  Since I only started buying in 2009, I don't know what capitulation feels like when already having a big position on but this feels like it might be it.  When silver bugs start to sound like bears and desperate I'd say that's a good sign. 

Adam Taggart's picture
Adam Taggart
Status: Peak Prosperity Co-founder (Offline)
Joined: May 26 2009
Posts: 3214
Silver Eagles Sold Out at US Mint Due to Record Demand

From Reuters:

U.S. Mint temporarily sold out of Silver Eagles amid huge demand

Nov 5 (Reuters) - The U.S. Mint said on Wednesday it has temporarily sold out of its American Eagle silver bullion coins following "tremendous" demand in the past several weeks.

In a statement sent to its biggest U.S. coin wholesalers, the U.S. Mint says it will continue to produce 2014-dated coins. The Mint will advise when additional inventory will become available for sale without providing further details.

The announcement has not been made available to the public, but a U.S. Mint spokesman confirmed that it has sent the statement to its authorized participants.

A sharp break in gold prices to their lowest in more than four years last week has unleashed a surge in demand for silver and gold coins in North America and Europe.

 

KugsCheese's picture
KugsCheese
Status: Diamond Member (Offline)
Joined: Jan 2 2010
Posts: 1469
Exciting Times

The battle of reality vs fiction.  

bwh1214's picture
bwh1214
Status: Bronze Member (Offline)
Joined: Jun 1 2011
Posts: 40
We Know the Answer

Well PM's rolled back over into the close. Another bullish point though.  I just read an article from the silverseek technical analyst.  He never was one to believe in the manipulation story, and he might be right, but I have never seen any of his stories so irate and frankly panicked.  He was ranting on about gold bugs and how they must accept the fact we're in a bear market.  I have never seen such a bearish story on that silver bug site.  I wasn't sure what he was trying to say to readers who keep some of their savings in PM's. Sell, wait for a better entry point, buy?  Another reason to not be a big fan of the chartest. So its a bear market, so what, unless an asset has become obsolete all bear markets turn around eventually, and he never mentioned silver or gold becoming obsolete.   Either way, a ranting negative article on a silver bug site felt bullish to me. Just a glass if half full kinda guy I guess.

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5979
I agree with Paul Singer on This One

Found at ZH, was this recent gem from Paul Singer ( of Elliot Management) which aligns with Dave's trend views and which puts a light on all those showing up for their victory laps:

THE TREND IS YOUR FRIEND... MAYBE

When markets are trending, they can appear unstoppable. Every sale in a rising market feels like a bad one, and every purchase in a rapidly falling market is punished by losses within minutes or hours. It is so much less painful to go along with the trend than to buck the trend – at least in the short or possibly medium term.

Furthermore, in the modern world of super-leverage and group-think, valuations can go far beyond the estimates of every expert and practitioner. That is, of course, until they stop.

One of the main challenges of a long career in money management is that the distance (in terms of time and cost) between an intelligent conclusion that prices are massively wrong in either direction, and the actual reversal of valuations toward the range of “reasonableness,” can sometimes be too long to bear.

One could have easily become stridently bearish on stocks in 1995 (as we did), when in America equity prices passed all-time highs by nearly every measure, selling at 22 times earnings, a level that was previously reached in only September 1929 and March 1972 (both serious peaks).

But they did not top out until early 2000 at 40 times earnings. And, in October 2008, those who thought that markets had fallen as far as they possibly could, and backed that belief with massive buying, found themselves weeks or months away from what was an extraordinarily painful and confusing bottom, with horrifying losses mounting by the day.

Today, one could be bullish on the long-term value of gold and be not only sitting on losses but also experiencing incoming ridicule and schadenfreude.

In the same vein, based on the extraordinary monetary policy being practiced by the world’s central bankers, one could be completely convinced that medium- and long-term bonds are staggeringly overpriced, with nowhere to go but down in price (up in yield).

But watching bonds persist in their long-term uptrend regardless of money printing, and watching gold prices languish with no understanding by investors that throughout history gold has always been considered the only real money in a world of monetary fakery, is concerning to say the least. Maybe history has stopped.

We do not have a solution to the problem of assessing the outer boundaries of the price ranges of a host of financial assets, nor do we have a key to refining the timing of turning points in trends. The only appropriate answers are: “Who knows?” and, “Whenever they feel like turning.”

But we do have thoughts about survival as money managers, based on our own experience as well as observation and data. Every money manager with aspirations of a long career must govern his or her purchases to take into account the uncertainties we have described above. There must be a “Plan B” when purchasing or selling assets, so that capital is kept intact even if trends or turning points do not follow expectations.

Being “wrong” may (or may not) be a temporary thing, but money managers who want to stick with long or short positions must determine how they are going to trade, hedge, or increase or decrease their positions if the prices continue to go against them. It is surprising how few money managers ask themselves: “What if I am wrong, or early? What do I do then?”

These are particularly important issues at present, with bonds across the globe still absurdly treated as “safe havens.” They are not safe havens with the 30-year euro swap rate trading at 1.85%, or the Japanese 20-year swap rate at 1.35%.

 

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