PM Daily Market Commentary - 11/6/2014

davefairtex
By davefairtex on Fri, Nov 7, 2014 - 12:51am

Gold rose +1.30 closing at 1141.30 on moderately heavy volume, while silver rose +0.11 to 15.40 on moderate volume.  Both metals traded in a narrow range, avoiding making new lows but not rallying either.

The dollar had another great day, rising +0.67 to close at 88.21, seemingly unstoppable on its way to test the previous high at 89.  The buck started launching at 0830, at the same time as two different economic events occurred: one was the ECB policy statement, and the other was the US Jobless Claims report.  You get to pick which one caused the dollar to launch.  The fact that gold didn't just tip over and sink with the buck up this strongly is moderately good news.

Mining shares rallied today, with GDX up +3.74% on extremely heavy volume; GDXJ was up +2.99% on extremely heavy volume as well.  Both mining ETFs had very strong rallies through most of the day, but they both sold off hard 30 minutes before the close.  GDXJ even printed a gravestone doji, which indicates a failed rally.   Here's an intraday chart that shows what I mean: see how most of the losses happened literally minutes before trading ended.  This isn't a bullish sign.

SPX rallied again, closing up +7.64 to 2031.21, making yet another all time closing high.  VIX dropped -0.50 to 13.67.  The VIX is just now returning to more complacent levels.  The rebound off the 1820 low has been incredibly strong with very few red candles.

The long bond ETF TLT dropped -0.65%, moving to the lower end of its trading range.  JNK rallied +0.20%, also remaining within its range too.

Commodities rallied +0.16%.  WTIC dropped -1.10 to 77.83; Brent was down -0.09 to 82.86.  Although oil dropped, oil equities all rose - even in the midst of the oil downtrend, oil equities got a bid about three weeks ago.  This suggests to me that some serious money is looking to pick up oil stocks.  See the ratio OIH:$WTIC, similar to the GDX:$GOLD ratio we use to assess PM:

If this kind of thing happened in the PM space, I'd be a lot more bullish.  Take a look at GDX:$GOLD as a comparison:

Tomorrow we have the Nonfarm Payrolls report, another opportunity for the dollar to shoot higher and drive gold down.  Theoretically anyway.   COMEX buyers need to show up if gold is to move higher.  And while I'm wishing, it would be nice to see buyers actually hold gold mining shares into the close too...

Note: If you're reading this and are not yet a member of Peak Prosperity's Gold & Silver Group, please consider joining it now. It's where our active community of precious metals enthusiasts have focused discussions on the developments most likely to impact gold & silver. Simply go here and click the "Join Today" button.

8 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5416
positive sign tonight

At 1258 PM Shanghai time (that's "wee hours of the morning" to some of you) gold took a dump, making a new low to 1130.40 stopping out about 4000 longs.  About 100 minutes later, gold ripped back up again erasing its losses, and this time stopped out about 2500 short contracts.  Silver did much the same thing, only with a bit more gusto, hitting 15.04 in the process.

I haven't seen gold recover this quickly, or this completely from a drop in quite some time.  I think this is quite positive.  Perhaps the shorts saw something and decided to cover, or perhaps the longs have just decided prices are so cheap they just need to jump in.  This is one of the key signals I watch for.  Let's call this my Bullish 1-2-3 Combo:

We might have marked a low today in PM.  It needs confirmation, but it is definitely a positive signal for me.  We just have to close above 1140.

robie robinson's picture
robie robinson
Status: Diamond Member (Offline)
Joined: Aug 25 2009
Posts: 1182
another100 ozs.

gotta go milk, "Peanut" and "Chance" are lowing

Adam Taggart's picture
Adam Taggart
Status: Peak Prosperity Co-founder (Offline)
Joined: May 26 2009
Posts: 3077
The Buyers Have Arrived

Finally, the buyers are showing up.

Went to bed late last night right after silver hit $15.09, feeling quite depressed. Very happy to see buyers showed up (finally!) soonafter, and that the support is continuing to strengthen during US market hours.

I'll leave it to Dave to confirm for certain, but this is the event I've been waiting for over the past few weeks. Hopefully a near-term bottom (and perhaps a long-term one, as well) is being made here.

CrLaan's picture
CrLaan
Status: Bronze Member (Offline)
Joined: Sep 5 2010
Posts: 54
Adam Taggart wrote: Finally,
Adam Taggart wrote:

Finally, the buyers are showing up.

Went to bed late last night right after silver hit $15.09, feeling quite depressed. Very happy to see buyers showed up (finally!) soonafter, and that the support is continuing to strengthen during US market hours.

I'll leave it to Dave to confirm for certain, but this is the event I've been waiting for over the past few weeks. Hopefully a near-term bottom (and perhaps a long-term one, as well) is being made here.

 

a kilo is still a kilo, so what's the problem? 

sand_puppy's picture
sand_puppy
Status: Diamond Member (Offline)
Joined: Apr 13 2011
Posts: 1889
No buyer, no sellers, just pimply-faced traders

Hey Adam,

Let me see if I can articulate a contrarian position.  And that is, that there are no buyers and no sellers here.  Just traders playing a computer game. 

To conceive of this process as BUYING and SELLING of GOLD is to completely misunderstand what is going on.

If we look at the graph posted by DaveF in the #1 post above of the COMEX action last night, I'll bet that not one ounce of actual gold got put into a Brinks Armored Car or wrapped in brown paper for UPS pickup.

Furthermore, I'll bet that the people doing all this buying didn't even want any gold

No gold is desired, no gold delivered, no gold sold, no gold moved. There is nothing going on here concerning gold or buying or selling.  Anymore than if a big bank had purchased cotton or barley futures.  The bank certainly does not want any cotton!  And they don't want a caravan of barley trucks pulling up outside their main office in the financial district or even care where barley eventually goes.

There is just a paper game, played from the computer terminals of big financial institutions.

And what do we make of the utter disconnect from physical reality of the abstraction of "buying short."  This is a construct utterly divorced from the physical buying and selling of a real thing.  An abstraction possible only in "the game," played on computer terminals late at night by pimply-faced youngsters with fresh MBA degrees, after they tire of dungeons and dragons.

It is vitally important that we not in an anyway think that this has anything to do with the BUYING and SELLING of GOLD.

So, No.  No buyers showed up.  That is just not what is happening.  The multi-player computer game just took a turn.

 

 

 

 

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5416
no buyers showed up?

sand_puppy-

There are other participants in the market - those looking to hedge their inventory, or production.  They provide a grounding in reality for all of this.  Likewise, central banks or other big players looking to buy - and take delivery.

Price gets low enough, those people come out to play.  Miners cover their shorts once price drops far enough.  You can see this behavior in the COT report: producers cover as the price drops, and they also go short as the price rises.  I'd bet next week's COT report will show a bunch of short covering by the producer group.

Yes the traders play their games along the trend line, but past a certain point, enough real buyers appear and the traders games come to an end.

Without the ability to take delivery, things would be exactly as you say, trading unattached to the real world.  But that's not the case.

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

 I follow Ed Steer's daily column, with input from his friend Ted Butler.

I doubt anyone follows the PM commodities futures market like Ted, and Ed's column covers it as well or better than any daily column in my opinion.

Ted thinks the buyer of all those millions of ASE's [and Maples] is not a lot of small buyers, but an entity he calls "Mr. Big". It could be a commercial like JP Morgan. They know the future value of silver...which is also why they have become net long after being historically short. It could be foreign buyers. Another source who spoke with an APMEX executive said they are shipping to 55 countries.

Ed works three days a week in a Canadian bullion store and he says they are busy but NOT overrun with customers. Many are just trying to pay bills on declining family income, and the investing they are doing is that automatic paycheck or account deduction into their 401k or IRA.

However silver is so cheap even the middle class can get into it if they choose to. And checking a large online dealer I have experience with [a few minutes ago], not only have premiums gone up on ASE's & Maples, but also some generic...and some of that is out of stock.

So the "working stiff" buying isn't overwhelming, but there is a lot of physical buying.

thc0655's picture
thc0655
Status: Diamond Member (Offline)
Joined: Apr 27 2010
Posts: 1614
For sand_puppy

The only winning move is not to play.

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments