PM Daily Market Commentary - 11/25/2014

davefairtex
By davefairtex on Tue, Nov 25, 2014 - 7:28pm

Gold rose +2.90 to 1200.60 on heavy volume, and silver rose +0.26 to 16.70 also on heavy volume.  Gold was hit for a $13 spike lower at 0830 after a revised 3Q GDP number came out that was unexpectedly high: a 3.9% growth rate vs a 3.5% estimate previously.  However, gold soon rallied back, and ended up closing near its highs for the day.  Silver did even better, spending its entire trading day in positive territory, and it too closed near the highs.  Silver also made a new cycle high as well.

Gold was initially sold most likely on the premise that good economic news meant no more money printing would be forthcoming from the Fed.  So why then did gold rally?  Simple answer: buyers showed up at the COMEX, and bought the dip.  I always like to see that - its definitely bullish, even more so with gold having already rallied almost $70 off its lows.  What's more, when a market rallies after what might be considered bad news - that's bullish too.

Here's an alternate analytical method; see if you can identify who I'm channeling: "our banker friends dumped a huge amount of non-backed paper gold at the COMEX right at 8:30 am in their daily attempt to suppress the price of our ancient metal of kings.  Initially their antics drove the price down to $1189, but then the physical buyers and the forces of goodness and light put paid to their manipulative games and drove the price right back up to 1200 an hour later..."

If gold can manage to close above its MA 50 (currently 1206.40), that would be simply awesome; the last time gold tried to do this, it failed, and that led directly to the 1130 lows.  This time, the volume on the rally has been higher, the gold/silver ratio has been falling, the GDX:$GOLD ratio is rising strongly - the indicators are substantially more bullish this time around.

 

The gold/silver ratio dropped a big -0.72 today, which is quite bullish.

The USD sold off again today, dropping -0.21 to 87.96, stopping right at its EMA-9.  While the dollar hasn't signaled a swing high just yet, even if the dollar just ends up moving sideways, it takes a bit of pressure off gold.

Mining shares broke higher today, with GDX up +4.08% on moderately heavy volume, closing just above its MA 50, which is a pretty big deal.  GDX also scored a new cycle high today as well.  Junior miners did less well, with GDXJ up 2.81% on moderate volume.  The GDX:$GOLD ratio also moved higher, which says to me that the PM rally still looks healthy.

SPX dropped -2.38 to 2067.03; it made a new high briefly after market open, but wasn't able to hold its gains.  In spite of the SPX drop, the VIX also dropped -0.37 to 12.25, lowest since early September.  VIX values under 12 seem to be decent buys for volatility, at least in recent times.

TLT finally decided on its direction today, breaking sharply higher out of its long consolidation and closing up +0.83%.  Are bonds sniffing out a top in SPX?  Perhaps.

The commodity index rose +0.41%, continuing a very gradual move higher.   Oil did not contribute to the rally; WTIC was off a big -1.58 to 73.88, threatening to break down once again.  My money is on a continuation of the trend - another break lower in oil.

There were lots of positive indications for me today: the rally in gold after the spike lower at 0830, a big drop in gold/silver ratio, a continuing rise in the GDX:$GOLD ratio, a breakout higher in silver and in the senior miners, and to top it off, GDX actually closed above its MA 50 for the first time since August 30.  Although we didn't get a $30 rally or have anything dramatic occur, it feels to me like it was a constructive day for PM.

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6 Comments

Penny551's picture
Penny551
Status: Silver Member (Offline)
Joined: Nov 8 2012
Posts: 149
Guess who...

Ed Steer or TF I'm guessing...?

thatchmo's picture
thatchmo
Status: Gold Member (Offline)
Joined: Dec 14 2008
Posts: 432
Now Dave......

I'm sure you're not trying to bait JimH with that alternative analytical model.  Who could it be....?  I really appreciate both your guys' posts on this PM business- I learn a lot from you both.  Aloha, Steve.

SPAM_johanalex's picture
SPAM_johanalex
Status: Member (Offline)
Joined: Nov 26 2014
Posts: 1
Your post about PM Daily

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Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2379
Why I never!....

Thatchmo... I am on my best behavior since it's Thanksgiving AND we are all busy moving forward on our inner walks following the podcast with Treebeard.   

I think Dave was probably channeling Harvey Organ.. but it also seems like a bit of a montage, since I don't know if Harvey is capable of using the words, "banker" and "friends" in the same sentence.  

Like Dave, I was watching how the miners were strong vs. Gold yesterday... a noteworthy divergence that might mean good things.  Silver has broken out of a down channel that it has been in for a long time... also very noteworthy. 

Speaking of modeling.. I got a kick out of Bron Suchecki's latest post.  For those who don't know of Bron, he is a rep. of the Perth Mint, maker of some of my favorite bullion coins.  I kinda went wild on 10 oz. 25 anniversary Kook's when Silver got smashed into the 16's and below.  Anyhoo.... Bron is certainly more connected to the Gold market than I, he does know a lot about it... but he is also representative of what is essentially a bullion bank of sorts in that Perth Mint will gladly sell you a certificate for an unallocated Gold account.  Don't worry, the Gold is there.  

Bron's latest post is another in a series of Gold (market) apologist writings that have as their underlying theme, "It's complicated, you wouldn't understand", regarding Gold and it's pricing.  I love this theme, because like so many memes in our world today, brought to us by our monetary, crony capitalist elite, it is the polar opposite of the truth.  Indeed, Gold, and the Gold "markets", are complicated and opaque by design, due to the many derivatives of Gold that exist;  Leases, forwards, swaps, unallocated accounts, warehouse receipts, Gold held for one sovereign (always non-US) by another sovereign (almost always the US), GLD with it's flimsy prospectus, etc.  The only thing that is for sure is that there is less actual Gold in existence than there are claims for Gold... 

Here is my favorite quote from Bron's piece, which I should note is not Bron's writing, only something he is referencing, but in doing so he is suggesting it applies to the Gold market as well;

      http://goldchat.blogspot.com/2014/11/the-answer.html

that "there is no Answer. In a structurally unstable market, there is no stable deterministic model of discrete market-exogenous factors like global supply/demand and monetary policy to 'explain'" gold prices.

See kids... you can't explain (model) the Gold price, so don't even try.  Bron and Jim H agree on that one!  If you are thinking that Gold is simply money that cannot be printed, and hence that it should be a fan favorite in a world where unbacked fiat currencies are being abused to the point of no return, with concomitant price increases... well... you just don't understand   : )

In the end, referring to the basis of the article, I don't disagree that Gold is a narrative-driven market to some extent, though we are approaching the breaking point of simple supply vs. demand soon I think (more on this when I get time).  One must understand that the TPTB control the narrative by controlling the price, not the other way around.  The price of Gold today is simply one player in the larger play that is being staged for us all with the following narrative that is being foisted on us by TPTB;  Recovery is around the corner (stock markets), deflation is a worry (too little money! and too much oil!) and Gold is a sell because you are not going to need it.  Apart from that Mrs. Sheeple, how did you enjoy the play?        

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
we have a winner

I think Dave was probably channeling Harvey Organ.. but it also seems like a bit of a montage, since I don't know if Harvey is capable of using the words, "banker" and "friends" in the same sentence.

Ding ding ding!  We have a winner!  Jim clearly has his finger on the pulse of mainstream goldbug analysis.

To find the answer, one must simply google "banker friends", antics, ancient metal of kings, and up will pop Harvey.  Try it!

Wildlife Tracker's picture
Wildlife Tracker
Status: Gold Member (Offline)
Joined: Jan 14 2012
Posts: 403
I googled "banker

I googled "banker friends."

Here is what popped up...

Do investment bankers have social lives?

http://www.askivy.net/articles/investment-banking/investment-banking-lif...

After reading a few lines, I learned that they apparently can have friends! Yay!

 

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