PM Daily Market Commentary - 3/4/2015

davefairtex
By davefairtex on Thu, Mar 5, 2015 - 12:33am

Gold fell -3.20 to 1200.30 on moderately light volume, while silver dropped -0.06 to 16.22 on light volume.  PM traded in a relatively narrow range all day long, suffering a modest selling spell after market open in NY.  The shorts tried to pound gold lower, but only managed to push it down to 1197.70 before it found support.

While there seems to be a decently strong bid for gold every time the price drops/is forced below 1200, there apears to be much less enthusiasm to move price higher once price moves back above the 1200 level.  And each day the highs are getting lower and lower.  If that bid remains, gold should be fine.

Miners sold off again today, with GDX off -1.67% on moderately light volume.  GDXJ dropped -2.36% also on moderately light volume.  Both junior and senior miners have fallen below their previous low, and are in a state of free fall now, with no natural support level or moving average to act as a support zone.

GDX continues to dramatically underperform gold, which tells me that traders are still unloading miner positions.  Selling is now also picking up in the junior miners also.  While the selling is still relatively modest (1-2 percent per day isn't the end of the world), gold's losses have been quite small by comparison.  My concern is, if gold loses 1200, the selling could really accelerate.  For a long time, GDX:$GOLD ratio has been hugging its 9 EMA, but three days ago it broke below the 9 EMA, and hasn't looked back.  Once the ratio puts in a low, that will signal that the miner liquidation may be at an end, but we just aren't there yet..

The USD broke sharply higher today, closing up +0.54 to 95.99, making a new closing high for this long move up in the buck.  The Euro fell, dropping below the previous low that was set on the day after the Syriza election victory.  The Euro closed down -0.93 to 110.82.  The fact that gold held relatively steady given the dollar's large move up tells me that gold rallied in Euros - and if you look at the $GOLD:$XEU chart, you will see gold comfortably above its 9 EMA.  In fact, if I constructed one of those boxes for $GOLD:$XEU, you'd see three greens and a gold.  Perhaps that's where the bid in gold is coming from: Europe.

US equities (SPX) dropped again today, selling off in the morning but rebounding by afternoon.  SPX closed down -9.25 to 2098.53, closing below its 9 EMA for the first time in a month.  VIX rose +0.37 to 14.23.  The VIX move seems quite modest - it doesn't look like anyone is particularly worried about the SPX sell-off.

Long bond ETF TLT was mostly unchanged, closing up +0.03%.  Bonds did not seem to benefit at all from the equity market selling, or the strong move higher in the buck.  This suggests to me that we have more downside left in the long bond correction.

In fact, US assets prices do not seem to be benefitting from the breakout in the buck.

The CRB (commodity index) rallied, moving up +0.53% and closing back above its 9 EMA.  CRB looks to be consolidating in a relatively tight range, right underneath its flattening 50 MA.  I'm not sure this means "inflation is imminent" but if the deflation symptoms start to moderate, that should help PM.

WTIC broke sharply higher, up +0.95 to 51.60, closing above its 50 MA for the second day in a row.  The 50 MA for oil is now starting to look flat, which is a bullish change.  Even better was the market's reaction to an unexpectedly high build in inventories reported today in the weekly Petroleum Status report; this caused a momentary sell-off in oil that was then bought.  When market ends up rising on bad news, that's bullish.

The continued move lower in the GDX:$GOLD ratio has me "sitting on my hands" in PM, as a friend of mine puts it.  That means not taking a position, waiting for the selling to stop.  Even if prices are getting cheaper, its best to wait for the full momentum of the storm to pass and for some good news to show up - kind of like what is happening in oil.  Too bad this isn't a Crude Oil Daily Market Commentary.  I'd definitely have happier news to report if it were!

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2 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5418
anatomy of financial repression

When things get bad for a currency, the government starts banning a whole collection of formerly legal transactions.  Mish has a report on Ukraine's latest governmental prohibitions:

http://globaleconomicanalysis.blogspot.com/2015/03/ukraine-bans-gold-transactions-over-125.html

  • gold transactions over $125
  • currency transfers of over $625
  • withdrawal of foreign stock dividends of any sort

It probably would have been a good idea to buy your gold prior to today's announcement, if you lived in the Ukraine.

Jbarney's picture
Jbarney
Status: Silver Member (Offline)
Joined: Nov 26 2010
Posts: 233
Question About Resolution 160

First, thanks for posting this.  It is important to take a look at what is happening within other countries during a crisis.  And Dave, I appreciate the very detailed availability of information you provide.

Specific on the banking issues, I see that Resolution 160 is valid until June 3rd of 2015.  I am not a big fan of some of the stuff they did, but at least there is a proposed end date.  Of course, when something has been put in place, it is very easy to end it.  Unfortunately it is easy to keep it in place as well.

My bigger concern is the situation in Ukraine with respect to gold.  Not a fan.  I wasn't sure from the layout of information if the ban on gold transactions will also end on June 3rd of this year...or if this is something different.

Thanks!

Jason

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