PM Daily Market Commentary - 4/21/2015

davefairtex
By davefairtex on Wed, Apr 22, 2015 - 8:35am

Gold rallied +6.00 to 1201.80 on moderate volume, while silver rose only +0.04 to 15.98 on heavy volume.  Gold continues to plod sideways in its trading range, while silver tried to rally but failed, printing an inverted hammer candle on the day.  Silver continues to underperform gold.

Gold's trading range has been narrowing steadily over the past month; the denoument of this pattern is not more than a few days away, but it is uncertain which direction it will take.

The miners might be providing a clue to gold's direction: GDX climbed +0.71% on light volume, while GDXJ climbed +1.13% on light volume as well.  Miners continue to inch higher, threatening a slow-motion breakout of their bullish ascending triangle pattern.  The bids under the miners seem steady.  I take this as a bullish sign for gold.  The GDX:$GOLD ratio continues to slowly (but steadily) improve.

The dollar rose +0.04 to 98.21 on the day.  The buck had a minor failed rally, climbing as high as 98.70 only to fall back after the NY market opened.  The bearish-looking candle (I'm not sure exactly what it is) is a modest warning to me that the dollar isn't behaving as strongly as it has in weeks past.  Key support lies at around that 50 MA at 97.16.  A close below that, and floodgates of dollar selling might just well open up.

SPX tried to rally today and failed; SPX closed down -3.11 to 2097.29.  It wasn't a particularly large move down, but the continued inability of the market to move to new highs suggests some significant selling strength is entering the market as we approach those old highs.  VIX fell -0.05 to 13.25.

Bond ETF TLT fell -0.45%; bonds are approaching the lower end of their trading range, and their weakness on a day where SPX too was weak isn't a great sign for bonds.

The CRB (commodity index) continued falling, dropping -0.75%.  CRB still remains in a short term uptrend.

WTIC sold off today, dropping -1.62 to 56.31.  WTIC marked a swing high today, which is a bearish pattern and it may indicate we have an oil correction ahead of us.  Of course WTIC has done that before during the recent 2-month rally, but this time oil is now overbought, and so to my mind, the likelihood of a correction increases.

That, plus my NN signaled a reversal in oil last week.

Gold is approaching a moment of decision, silver looks weak, and the miners inch higher and are looking relatively positive.  Which way will gold head - up along with the miners, or down with silver?  I have no idea.

Note: If you're reading this and are not yet a member of Peak Prosperity's Gold & Silver Group, please consider joining it now. It's where our active community of precious metals enthusiasts have focused discussions on the developments most likely to impact gold & silver. Simply go here and click the "Join Today" button.

7 Comments

agitating prop's picture
agitating prop
Status: Platinum Member (Offline)
Joined: May 28 2009
Posts: 864
Sell or hold

I am completely stumped. I would like to pay off my mortgage and a small line of credit. If I do I will still have 40% of my gold bullion left. I don't know whether to pull the trigger soon or not. I am not under the gun to do this, I just don't want to be carrying any debt at all. It makes life simpler. I no longer trust my intuition on this. I am getting mixed signals in that department. At the same time I have to ignore Elliot Wavers -- I don' think their analysis holds true for anything but the very very macro picture and macro time frames. 

Would appreciate any response at all. Also, any gut feelings about whether the Chinese central bank's efforts to make gold a tier one asset will impact prices...eventually?  Is it possible prices in Russia, China, India etc..could sky rocket but stay the same or deteriorate in other nations?

 

 

 

AaronMcKeon's picture
AaronMcKeon
Status: Bronze Member (Offline)
Joined: Apr 29 2014
Posts: 76
Re: Sell or Hold

For me it would come down to two things.  One, I'd look at the annual interest charges I was paying and compare that against what type of move it would take in the price of gold (or whatever else you're considering selling) to offset that charge.  The reason for keeping the debt of course is because you must feel there is some opportunity your other investments will go up in value relative to the debt.  If you feel that opportunity is shrinking then maybe that changes things.

Second, I would consider what would make me sleep better at night.  There's a certain peace of mind that comes along with being debt-free and there's also a lot of uncertainty in the market, so who knows if your portfolio will go up or down in value.  Personally, I don't like being stressed day-to-day wondering what may be.  Some things are within your control and some are not.

Maybe a part-way solution is to just pay down a large chunk but not the whole thing?

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5694
tough choice

agit-prop-

I think that there is a decent chance that things will come unglued in Europe in the next few months because of the Greek debt situation.  If this happens, its probably good for gold.  Probably not for silver, though.

I hear what you are saying about debt, and I respect it.

But if you aren't under stress and don't mind rolling the dice, I'd suggest waiting for the Greek kaboom and seeing what happens.  You might actually get to see gold $1350-$1400 if Greece actually leaves the zone with a lot of fuss and bother.

Not sure if China's gold revelations will cause gold to skyrocket.  I think they'll continue to keep a lid on gold's buy-side enthusiasm for as long as possible.  At least, I would, if I were them.

Is China ready to launch whatever grand plan they have in mind?  Hard to know.  Seems like they have a lot of chaos internally right now, and now may not be the ideal time to drop a new monetary system on the country.  I think its more likely it is just the internationalization of the RMB, and inclusion into the SDR, and gold will just be an adjunct to that.

 

Trun87114's picture
Trun87114
Status: Bronze Member (Offline)
Joined: Apr 28 2013
Posts: 80
Gold but not silver

Dave,

I'm curious.  You said trouble with Greek debt might push gold higher but not silver.  What led you to that conclusion?  They generally move in tandem and the gold:silver ratio is already historically high.

T.

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2391
Keeping a lid on China demand?

I'm sorry Dave... but you really lost me when you said, and I QUOTE;

Not sure if China's gold revelations will cause gold to skyrocket.  I think they'll continue to keep a lid on gold's buy-side enthusiasm for as long as possible.  At least, I would, if I were them.

Exactly where is the evidence for this, "lid" you mention?  I don't see it here;

Shanghai Gold Exchange SGE withdrawals delivery 2015 week 13 dips

Far from having a lid on it, this longer term chart seems to depict a fairly recent trend of Gold hoarding in China - so again, one must ask, what is this lid of which you speak Dave?;

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5694
stated poorly

Such pretty charts.

Not sure if China's gold revelations will cause gold to skyrocket.  I think they'll continue to keep a lid on gold's buy-side enthusiasm for as long as possible.  At least, I would, if I were them.

Yeah, I can see why you didn't understand what I was trying to say, because I said it badly.

Do we think China believes they have "enough gold" right now?  Or do they want more?

If they have enough gold already, then they'll encourage price to rise.  If they want more gold, then they will take actions that try to discourage gold's price from rising.

My guess: they don't have enough gold yet.  Therefore, they'll do what they can to discourage prices from rising.  They're perfectly happy with low prices.

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5694
gold and silver

trun-

I'm curious.  You said trouble with Greek debt might push gold higher but not silver.  What led you to that conclusion?  They generally move in tandem and the gold:silver ratio is already historically high.

I think the gold/silver ratio could go higher if we had a western "flight to safety" into gold, and at the same time, a big worry about bail-ins and "who's next" which caused a 2008-style deflationary move lower.  Commodities + silver vs gold could diverge sharply.

The gold/silver ratio has been climbing steadily since 2012.  Its in a strong uptrend.  If we had a 2008-style problem, it would probably spike higher, the same way it did back then.  At a minimum, I think silver would be largely left behind in the safe haven move.

I don't put all that much stock in "historically high" ratios to place a top on a violent move - ratios can get even more historically high under the right circumstances.  (That's how "historical highs" get made, after all).  Blowing up a currency union larger than the US: probably going to make all sorts of history in all sorts of instruments.

Highest g/s ratio in the modern era: 103:1 back in 1991.  Even if you do subscribe to historical limits, we have room to run higher still.

If such a move did happen, it might be a good time to sell your gold and buy silver!  :-)

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Login or Register to post comments