PM Daily Market Commentary - 2/9/2015

davefairtex
By davefairtex on Tue, Feb 10, 2015 - 1:49am

Gold rose +5.40 to 1238.70 on light volume, while silver was up +0.25 to 16.97 on moderately light volume.  Silver had a nice rally during the London session but sold off at end of day in NY.  Gold more or less tracked sideways, but moved slightly higher.  Given the big sell-off on Friday, it wasn't much of a rally.

The USD dropped -0.11 to 94.66, a small change that saw the buck close above its EMA-9.  It remains in a strong uptrend, but has been chopping sideways for the past two weeks.

Mining shares moved higher, with GDX closing up +1.69% on very light volume, while GDXJ rose +2.29%.  The GDX:$GOLD ratio is continuing a slow move higher, miners remain within a consolidation range - it all seemed pretty quiet today, but mildly positive from the viewpoint of the mining shares.

SPX marked its swing high today, closing down -8.73 to 2046.74.  No fireworks emerged, and SPX remains above its 50 MA.  VIX continued higher, +1.26 to 18.55.  I believe the equity market may be on a precipice right now.

Long bond ETF TLT fell -0.16%, more or less just tracking sideways.   JNK too moved very little, down -0.10%.

The action for today was mostly in commodities, with CRB up +1.36%.  CRB has climbed steadily higher after its breakout on January 30th.  This seems to be helping silver, at least somewhat.

WTIC was mostly unchanged today, closing up +0.09 to 52.43.  In truth, that conceals a failed rally, with oil having reached 53.99 in the afternoon in NY.  Volume was heavy, and a failed rally on heavy volume is never a good sign.  Today, Sandridge Energy (a shale driller) reported it would cut its drilling program by 75%; this big cut by a driller with a fair amount of cash should have been good news for oil prices, and it did result in an initial spike higher for oil.  However, the rally failed, as I said before.  Based on this, I'm not sure oil will move too much higher on dropping rig count news or plans to cut capex.

I believe rising oil and commodity prices have put a floor underneath silver.

For gold, I believe the market is awaiting the next steps from Greece.  The calendar of events over there: Eurogroup FinMin meeting on Wed Feb 11th, and an EU summit on Thursday Feb 12th.  The way I see it, there are two near term outcomes:

1) Greece settles for tinkering around the edges.  Debt repayment terms don't change, but austerity is relaxed slightly.  The primary surplus that Greece is required to run is reduced, money used to spend on social programs, and some specific requirements from the Troika are relaxed.  This is probably agreeable to the Euro-masters in the near term.  Summarized: Syriza gets to spend an additional 2.6 billion Euros/year.  Can successfully kicked down the road.

I believe there is pressure from every government in the West focused on achieving this outcome.  "Don't rock the boat too much, here's a treat which you can give to the people who elected you, now join our club and have fun."

2) Greece holds out for debt repayment term changes: GDP-linked bonds, perpetual (i.e. no need to repay) bonds buried on the balance sheet of the ECB.  This will involve brinksmanship, running Greece right to the edge of running out of money and a possible chaotic default.

Outcome #1 is gold-negative, outcome #2 is gold positive at least in the near term.

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3 Comments

theordore's picture
theordore
Status: Bronze Member (Offline)
Joined: Aug 29 2013
Posts: 48
Sources of PM price volatility in the weeks ahead

     This is *very* helpful.  Thanks a lot DaveFairTex.  Question:  What do you hypothesize from your research is the most useful answer to the question of whether Ukraine will be a source of gold-supporting fears in the weeks ahead?
     I also ask for your help on the following:  I read recurrent expressions of concert about the build-up of huge short positions in paper PMs based on COT data.  Have you seen analyses that try to estimate the range of percentage price changes that seem attributable to the said huge short positions?  In the stock world, such short-position build-ups often do not point to trend-changing price movements, and their price effects are temporary volatility that can be good opportunities for the attentive and nimble traders among us.  If this is also true in PMs, then I would welcome those short-position build-ups, shown by COT data.

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2379
Nothing to see here.. just move along

How to interpret?  It's taking more naked short paper to keep price contained. 

http://www.zerohedge.com/contributed/2014-01-21/potential-exists-epic-sh...

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5065
how to interpret?

I see 7.2 million ounces in the "eligible" category.  That's how much actual gold in the right bar form is in the vaults at COMEX, owned by various people.

I also see 805k oz in the registered category, not 370k.  Here's my link:

http://www.24hgold.com/english/interactive_chart.aspx?title=COMEX+WAREHOUSES+REGISTERED+GOLD&etfcode=COMEX+WAREHOUSES+REGISTERED&etfcodecom=GOLD

I wish the author provided a link to his sources.  But that would spoil the fun, wouldn't it?  Because we could fact-check his article.

Notice how the registered gold has not changed dramatically in the past year?  Article makes it sound like the COMEX is on fire and going down.  If so, it's been that way for at least a year now.  What has changed recently?

So let's see if I'm clear on this: a goldbug, not providing information sources or context, but instead clearly trying to push the panic button to motivate people to run out and buy gold now now now because a comex default is imminent?

Say it ain't so.

 

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