PM Daily Market Commentary - 11/13/2014

davefairtex
By davefairtex on Thu, Nov 13, 2014 - 10:31pm

Gold was flat today, closing unchanged at 1161.80 on heavy volume.  Silver also was unchanged, at 15.65 on moderate volume.   Both metals traded in a relatively narrow range, and both metals printed dojis on the day.

The USD dropped -0.07 to 87.83.  It too had a narrow trading range, but closed down because the Euro rose.  Both USD and Euro are waiting for some sort of direction to emerge.  The Euro might be putting in a low here, it looks like the downside momentum for the euro is slowing somewhat.  This would encourage the buck to top out and perhaps even correct, which would help gold.

Mining shares had trouble today, with GDX closing down -1.64% on moderate volume, while GDXJ plunged through its ascending triangle dropping -3.63% on moderately heavy volume.  Mining shares were unusually weak today.  Although gold ended the day unchanged and the buck managed to drop, mining shares still had problems.  Perhaps miners didn't like the massive drop in oil - that's about all I can think of.

SPX rallied today but failed, then it sold off relatively briskly, but then the dip was bought.  By the close, SPX was mostly back where it started, up +1.08 to 2039.33 printing a doji.  VIX climbed +0.77 to 13.79.  SPX is overbought, and those put-buyers know it.

TLT moved up +0.24%, while JNK dropped hard, moving down -0.52% and breaking below its trading range.  I wonder, is the drop in JNK signaling something about risk for the larger market?

The Commodity index dropped -0.41% today, possibly egged on by the massive drop in oil.  WTIC blew through its previous low, dropping -2.61 closing at 74.29 on some very heavy volume.  I can't point to any single time or event that caused the move lower - it just happened in fits and starts over the course of the day, starting at around 0700 EST and finally hitting bottom in the afternoon at 74.07.  Brent did even worse, dropping -3.63 on very heavy volume as well, closing at 77.49.

Dropping oil prices do more than hint at deflation; this encourages weakness in commodities in general, which tends to drag PM lower.  How low must Brent go before it rallies?  Like gold, oil is now below cost of production for some oil producers.

To give you a sense of just how much oil has fallen, oil's drop since the 115 (Brent) June high was $37.50, or a 32.6% drop.  Gold's drop over that same period (from 1351 to 1160) is only 14%.  The commodity complex overall had a 16% drop during that same time period.  Right now, oil looks to be leading everything else lower - which is why I'm tracking it so closely.

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2 Comments

Adam Taggart's picture
Adam Taggart
Status: Peak Prosperity Co-founder (Online)
Joined: May 26 2009
Posts: 3105
Nice surprise

Well, I guess I'll be the first to post today about the positive developments in the PMs.

Gold and silver were falling out of bed per usual at the US market open, until James Bullard of the St. Louis Fed announced that inflation expectations have recovered since mid-Oct and that the Fed will likely indeed start raising rates in 2015. Then -- BANG!! -- the PMs started skyrocketing.

Adding fuel to the fire, a dawning recognition is taking place that if the Swiss Gold Initiative passes, Switzerland will have to purchase a lot more gold to meet its currency reserve requirements.

As of this writing, gold is up 2.26% to $1,187 and silver is up 3.25% to $16.14.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5464
gold technicals

To mark a "swing low" gold needed to close above 1179, which interestingly enough is the low that was hit June 2013.  Right now, gold is trading around 1186.  Silver needs to close above 16.00 and it is now at 16.30.

For me, the event that kicked off the metals rally today was when the dollar started dropping hard (0.27 in 5 minutes) at exactly 1000 - at the time of a relatively minor Business Inventories report.  Why did the dollar drop so hard at that time?  I have no idea.  But after that drop at 1000, PM started rallying steadily and just never looked back.

Let's hope the dollar remains weak and PM holds its gains into the close.  Breaking through resistance is an excellent start, and I'm especially happy that silver is leading gold by a big margin, GDXJ is leading GDX, and the miners are leading the metals.  Everything feels right for a change.

This has not been an easy low to trade.  We still aren't out of the woods yet, but if the dollar continues downhill, we should get a nice move higher as our reward.

 

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