PM Daily Market Commentary - 3/11/2015

davefairtex
By davefairtex on Thu, Mar 12, 2015 - 12:34am

Gold dropped -7.60 to 1153.40 on moderately heavy volume, while silver dropped -0.15 to 15.47 on moderate volume.  Gold traded sideways in Asia, but then fell during London and NY sessions, hitting a low of 1146.50 before noon in NY, then rebounding modestly into the close.  Silver followed a similar pattern.   Both gold and silver made new lows for the day.

Gold is quite oversold, and even if the dollar just stops rising, it should rally, at least for a time.  Whether that rally leads to a sustained move higher, or just a three-day bounce like we had late February, I can't say.  We have to see how the buyers react.

Miners sold off for the first hour, but then started a rally which didn't stop until end of day.  GDX closed up +3.00% on heavy volume, while GDXJ was up +5.21% on extremely heavy volume.  Junior miners almost signaled a swing low today. 

The buyers showed up big time for miners today.  Perhaps the rally was caused by shorts ringing the cash register, or maybe it was longs unable to resist the low prices.  It is an important difference.  If miners rally tomorrow - if the buyers continue to show up - then it suggests the low for gold may be quite near.

The USD raced higher again today, climbing an incredible +1.15 to close at 99.75.  The dollar is up almost 6% in the past 3 weeks, which is a very large move for the reserve currency.  The Euro made a new low, closing down -1.40 to 105.40.  It is down 8% over that same time period.  Both currencies are very stretched in market terms: the buck is overbought, and the Euro oversold.  At some point there "should be" a snap back - some kind of reversal.  That's what markets usually do.  But we are living in historic times, so who really knows what massive forces are at work in terms of international capital flows.

A drop in the buck should help PM and the commodity index considerably.  Right now, the buck and gold have a very strong inverse correlation: buck rises, gold falls.

US equities (SPX) traded in a narrow range today, but ended up dropping -3.92 to 2040.24.  No bid yet for equities.  Not long ago a rising dollar led to a rising equity market, but that is no longer true.  VIX rose +0.18 to 16.87.

Long bond ETF TLT continued to rally, up +0.73% and is now back above its 9 EMA.  It looks to be the beneficiary of equity market weakness once again - which is the normal situation in bonds.  Bonds and equities usually have an inverse correlation.

The CRB (commodity index) was mostly unchanged, closing down -0.07% and printing a small doji candle on the day.  Given how strong the dollar was today, this was a great performance for commodities: it suggests that if the buck tops out, commodities should rally.

WTIC dropped -0.34 to 48.42, breaking briefly below its recent trading range on another Petroleum Status report at 1030 EDT which had another inventory build.  However oil rallied soon afterwards, which suggests to me that traders largely expected the build.  Like commodities, for oil to drop relatively modestly on such a strong day for the buck is a positive sign.

Miner strength today was a very positive sign, and if it continues into tomorrow it is signaling that a low for gold is coming soon.  Probably, gold won't bottom until the buck tops out.  When that happens is anyone's guess, but prices are very stretched out for the buck, and a correction could come any day now.

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