PM Daily Market Commentary - 11/5/2014

By davefairtex on Wed, Nov 5, 2014 - 8:49pm

Gold was hammered again, dropping -28.20 to 1140.00 on extremely heavy volume, and silver was battered even more severely, dropping -0.72 to 15.30 on extremely heavy volume as well.  Both metals made new lows, managed to rally modestly as dip-buyers appeared prior to the NY open, but then sold off again towards end of day closing quite near the lows for the day.

Both gold and silver are quite oversold and are due for a bounce, but so far nobody at the COMEX has showed up to buy the heavily discounted PM.  That's not true at retail, but the disciplined COMEX traders usually wait for a low to be marked before jumping in to buy in volume.  Who wants to catch a falling knife?  And that's what PM is right now: a falling knife.

The gold/silver ratio jumped +1.57 to 74.53, yet another new high.  Silver is leading the whole PM complex lower.

The dollar rallied again today, up a brisk +0.45 to 87.54, hitting a new high intraday of 87.72.  Today it was the Yen (down -0.95%), the Euro (down -0.52%), and the AUD (down a big -1.60%) that provided the fuel for the buck's rise.  All roads seem to lead to the buck going higher, but even if it weren't, I'm not sure it would help gold all that much - gold is dropping in all currencies except the Yen and the Ruble.  Gold looks ok if you live in Russia.

Mining shares fell hard once again.  The miners rallied initially at the open looking like they might defy the dropping metal, but when the afternoon rolled around traders decided to dump the miners they bought earlier in the day.  As a result, GDX closed off -3.60% on very heavy volume, while GDXJ was down -7.34% on extremely heavy volume.  A number of miners report earnings today after market close, which might affect prices for tomorrow.

One issue possibly weighing on PM is end-of-year tax loss selling, which happens to stocks and other instruments that have lost value during the year.  This selling pressure pushes prices down even further; miners and PM might well be subject to this additional pressure now that November has arrived.  That's what happened in 2013, from what I saw - and we may well get a re-run this year too.  Pressure from tax loss selling lets up last week of December.  Typically anyway.

SPX rallied today, closing up +10.36 to 2022, scoring yet another all time closing high.  VIX dropped -0.46 to 44.43.

The long bond ETF TLT continued its sideways chop, closing down -0.10%.  JNK dropped -0.14%.  Both are range bound and seemingly waiting for direction.

Commodities dropped -0.61%, making yet another new low; the commodity downtrend remains firmly in place.  Oil on the other hand rallied with WTIC up +1.59 to 78.93.  It appears that WTIC has put in a swing low, and may have made a bottom.  While the intraday price action looked good and volume was heavy, I'll feel more confident in the low if WTIC can close above its EMA-9 at 80.   Brent was up only +0.13 to 82.95.

If commodities as a whole manage to rise, they should drag PM along with them.

Nothing in the PM charts are bullish right now.  While buyers appear here and there, all the intraday rallies are being sold before end of day.  As long as that continues, we will go lower still - the shorts will sell every rally until the longs step up and start seriously buying.

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Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2391
What if?

What if the "buyers" don't show up?  What if nobody wants to go long a Comex contract anymore?  The only folks that actually have to use these contracts (and these are shorts mind you) are coin dealers and others holding large Silver (or Gold) inventories that don't want the carry risk.. .otherwise it may end up just a bunch of banks playing with themselves.  This is how it looks to me.  It may just go lower and lower until the miners are destroyed and there is no physical metal to be had.  Who would play this game in their right mind anymore as a long?  

I look forward to it breaking.  It is an abhorrent system.

It is possible to suppress the price of gold despite rising demand, because the price is not determined in the physical market in which gold is actually purchased and carried away. Instead, the price of gold is determined in a speculative futures market in which bets are placed on the direction of the gold price. Practically all of the bets made in the futures market are settled in cash, not in gold. Cash settlement of the contracts serves to remove price determination from the physical market.

Cash settlement makes it possible for enormous amounts of uncovered or “naked” futures contracts — paper gold — to be printed and dumped all at once for sale in the futures market at times when trading is thin. By increasing the supply of paper gold, the enormous sales drive down the futures price, and it is the futures price that determines the price at which physical quantities of bullion can be purchased.

The fact that the price of gold is determined in a paper market, in which there is no limit to the supply of paper contracts that can be created, produces the strange result that the demand for physical bullion is at an all time high, outstripping world production, but the price continues to fall! Asian demand is heavy, especially from China, and silver and gold eagles are flying off the shelves of the US Mint in record quantities. Bullion stocks are being depleted; yet the prices of gold and silver fall day after day.....

The funny part is... eventually, the bullion banks themselves would have to take the long side and stifle the shorts, because they will not be able to keep up with the physical demand delivery requests.  Like I say, from here on forward the Comex looks to me like banks playing with themselves.  Bring on the $14 Silver... please, and I will buy some of the last Silver off the shelves tomorrow that is still available at a "normal" premium. 

December Comex deliveries should be very interesting. 


Michael_Rudmin's picture
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Joined: Jun 25 2014
Posts: 919
a good deal farther to fall

if you go with elliott wave theory, Gold has a good deal farther to fall before 4-year cycle 5/5 down is complete:

if you go with Russian sales, you can expect the price to fall through winter at least.

If you go with the election, the Republicans are famous for privatizing public costs, to goose the stock market.

On the down side, Europe is still falling apart.

By all means, I am bullish on gold -- once a huge shakeout happens. That shakeout might be $900 or $700: the longer the delay, the worse the fall.

Even once that happens, the ones to benefit might not be the investors, though; because once the stocks crash, the thieves are going to come looking for ways to steal.

But I fully consel: wait. Gold hasn't finished the crash.

jgritter's picture
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Joined: Dec 13 2011
Posts: 273

Any information on inventories?  While the futures traders may be able to push the price down further, it does little good for buyers if there  is no physical supply.  At some point miners and retailers are going to withdraw product from the market in self defense.

Or is that the point?  The paper price may trend downward following the inertia in the huge paper market while an increase in premiums will suggest a decoupling of price in the small physical one.  At some point manufacturers are going to need metal.  If the paper price is $10/oz.of silver but Apple is willing to pay $50/ keep assembly lines running, then $50/ the price, there may be a lot of shrieking and gnashing of teeth but, essentially, it will be a "put up or shut up" situation.  So, it will then be obvious to everyone with half an eye on the game that the paper market is now irrelevant, the price of PMs will rebound sharply seeking true market value, without the paper market to dampen the physical market the dollar may begin to fall.  With that, speculators will try to buy gold and find that the physical market is a tiny fraction of what the paper market was and that there is no room for them.  The price of physical will explode in a frenzy of panic buying.  At some point the general public will realize that something is wrong, but they won't be sure what, and the herd will begin to move, best to be able to stay out of the way.  There will then follow a noisy and chaotic period of disequalibrium and price finding as the entire world tries to figure out what things cost, how to buy and sell them, and what to buy and sell them with.

Did I miss something, or is this what we've been talking about all along?  Falling silver inventories begin to look to me like a burning fuse.  I feel like I should be concerned.  20 ounces of silver or 1/2 a ton of rice, hmmm.

John  G.

DisappearingCulture's picture
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Joined: Jun 21 2014
Posts: 38
Comex, etc.

"What if the "buyers" don't show up?  What if nobody wants to go long a Comex contract anymore?"

They already have gone long; the commercials like JP Morgan. There has to be longs to match/offset the shorts.

If one wants to understand the daily grind of the short/longs [and the manipulation] subscribe to Ed Steer's daily column which comes out Tuesday through Saturday. there is no better description out there on what is going on in the Comex. He corresponds daily with Ted Butler who is often quoted, and recently interviewed by Chris Martenson in  podcast. See his column and subscribe for free:


DisappearingCulture's picture
Status: Bronze Member (Offline)
Joined: Jun 21 2014
Posts: 38

JP Morgan [et al] is the largest long [historically a short], has been working on going long for many months.

Paper money losses are virtually meaningless to them in the short run. They are losing money as they corner the long positions.

At any time they can make the price go up and make the shorts pay more to cover their shorts [or lose their shirts].

In fact JPM et al could make the price go ballistic starting right now and make a fortune. But why would they crash the game they can play for a longer period of time and make more money than allowing a one-time moon shot?

Plus they have been allowed to break CFTC rules and anti-trust laws to do the dirty work of propping up fiat. Might not be smart to bite the hand that feeds them.


Jbarney's picture
Status: Silver Member (Offline)
Joined: Nov 25 2010
Posts: 233
Destroying the Miners

I have wondered if this is the motivation of the current price drop.  Is it possible the central banks have designed this collapse of silver and gold deliberately to take the producers out of the equation?  This decline just seems so beyond the natural ebbs and flows of a market.

The size of my purchase won't be as large as some of the others mentioned here....but boy I hope the price decline holds for another two weeks or so.  At that point I can accumulate a little more.

Peace fellow Preppers,


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