PM Daily Market Commentary - 12/03/2014

By davefairtex on Thu, Dec 4, 2014 - 1:55am

Gold rose +11.20 to 1209.20 on moderate volume, while silver dropped -0.03 to 16.43 on light volume.  Gold moved steadily higher while silver traded sideways - a relatively pleasant outcome given another day of dollar rally.

The USD continued higher, up +0.33 to 89.01, closing right at the 89 resistance level.  Those rallies I hoped to see in the other currencies just didn't happen; Euro made new lows (-0.74 to 123.09), dollar/yen rose further (+0.47% to 119.77) which is a new high. AUD fell as well, down -0.57%.  With crazy money printing in Japan, and deflation in the Eurozone, the core economy seems to be the favorite place to be.  The USD uptrend appears to be unstoppable, at least for now.  We are right at resistance at 89.

The miners moved higher today, with GDX closing up perhaps 2% on moderate volume, and GDXJ rose +1.82% on moderately heavy volume.  The seniors climbed during the day briefly touching the 50 MA, only to fall back at the close.  Miners are a tough trade right now - lots of volatility, and the junior miners are not leading us higher.

TLT rose +0.39% today, still in an uptrend, but just barely.   JNK was flat.

Commodities made new lows today, off -0.42%.  So far, all we see is a commodity downtrend.   That oil rebound on Friday has yet to be confirmed - WTIC closed off -0.24 to 67.41, while Brent dropped -0.62 to 69.92.  A seemingly never-ending dollar rally makes it extremely difficult for commodities to move higher, from the viewpoint of us here in the US.  That's why I think its a minor miracle every time gold or silver moves higher on a "dollar rally day."

Let me show you why.

First, gold as we know and love it here in the US: we have yet to break the pattern of "lower highs", which is one popular definition of a downtrend.  We're doing better than a month ago, but have yet to snap the longer term downtrend pattern.

Now look at gold priced in Yen.  Come to Papa!  Gold, viewed in Yen, looks dramatically different: gold traded mostly sideways for more than three months, and just last month it staged a breakout and now it is just a rocket ship moving higher.

Same thing happens with commodities in general.  The overall commodity index, priced in yen, has rallied sharply over the past two months, and have generally been in a steady uptrend since 2012.  The gold bear market is mostly recovered by now in Japan.

Why does this matter?  Simply put, if gold stays flat, and the dollar rallies, people in Japan make money (in their local currencies) on gold.  I have heard some people wonder, "how can gold drop, when Japan is printing money?"  From the Japanese viewpoint, gold is rising, not dropping.

Just some food for thought.

PM still looks relatively strong to me.  Miners less so.  Will the dollar ever stop rising?

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