PM End of Week Market Commentary - 4/24/2015

davefairtex
By davefairtex on Sat, Apr 25, 2015 - 8:03am

On Friday, gold fell -13.40 to 1179.90 on heavy volume, while silver dropped -0.14 to 15.72 on heavy volume too.  Today gold's weakness wasn't about currencies - it was just about traders selling gold: gold priced in Euros was down -1.57%.  For a change, silver outperformed gold, hinting that silver might be nearing a low.

On the week, gold ended down -23.90 [-1.99%], silver fell -0.53 [-3.26%], GDX dropped -1.83% and GDXJ fell -1.67%.

At the end of last week, gold looked like it was preparing to rally, but after a series of distribution days during the week, gold eventually weakened and made new cycle lows on Friday.

Silver had a pretty bad week, underperforming gold every day except for Friday.  The surprisingly positive (on a relative basis) performance for silver on Friday suggests to me that we may be nearing a low point for silver.  Possibly, traders are unwinding some kind of "long gold short silver" trades now that silver is approaching support.  Certainly the high volume hammer candle indicates there is some buying going on.

A PP Member wrote to me perhaps a month ago and asked, "will I be able to get silver at 15.50 in the next few months?"  I didn't know the answer - but isn't it interesting where silver may be finding support?  Right around that 15.50 price level, which has been a pretty strong support going back to December 2014.  Of course, to be a bit more certain, we should wait until silver marks a swing low,which it can by closing above 15.89 on Monday.

The USD

The buck continued dropping this week, falling -0.61 [-0.62%] to 97.10, closing below its 50 MA for the first time since July 2014.  The fact that the dollar fell and gold dropped underlines the weakness in the yellow metal right now.

Greece raided the bank accounts of its cities, which has staved off Grexit for maybe another month.  Perhaps this is leading to both gold's weakness as well as reduced interest in the dollar.  I know I promised you a higher gold price if the dollar were to fall, but when gold drops in all currencies, there's not much I can do!

Miners

Miners found some decent support this week even though gold was weak, resulting in a modestly rising GDX:$GOLD ratio.  Although gold fell, which led to a small drop in the mining shares, the miner's bullish ascending triangle pattern remains in play.

Regardless of the modestly positive short term outlook, most miners have a long way to go to regain upward momentum.

This week, Newmont Mining reported a positive earnings surprise, having cut expenses to the point where they are actually making money mining gold.  They are one of the few miners with a relatively hopeful-looking chart.

Here is a post I found describing a number of miners, and each miner's costs of producing gold - its a really good article for people looking to get a sense as to where various companies as well as the overall industry is in terms of expenses.  Bottom line: they are saying "buy gold, not miners."  Also, they help highlight the risk of owning mining companies that may be on the edge of bankruptcy.

http://seekingalpha.com/article/3087186-full-2014-industry-gold-production-and-all-in-costs-show-gold-is-an-excellent-investment-for-patient-investors

Mining shares are still mostly in a medium and long term downtrend, with NEM the lone exception.

Name Chart Change 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Newmont Mining NEM 6.52% -1.58% rising rising falling rising ma50 on 2015-04-24 2015-04-24
Kinross Gold KGC -0.43% -43.77% falling falling falling falling ema9 on 2015-04-24 2015-04-24
Barrick Gold ABX -0.95% -27.34% falling rising falling rising ema9 on 2015-04-24 2015-04-24
Silver Wheaton SLW -0.98% -12.87% falling falling falling falling ema9 on 2015-04-24 2015-04-24
Fortuna Silver FSM -1.08% -6.41% rising falling falling falling ema9 on 2015-04-23 2015-04-24
Iamgold IAG -1.40% -38.90% falling falling falling rising ema9 on 2015-04-24 2015-04-24
Pan American PAAS -1.61% -25.43% falling falling falling falling ema9 on 2015-04-24 2015-04-24
First Majestic AG -1.64% -49.10% falling falling falling rising ema9 on 2015-04-16 2015-04-24
Hecla Mining HL -1.94% -0.65% falling falling falling falling ema9 on 2015-04-21 2015-04-24
Randgold GOLD -2.02% -3.36% rising falling falling rising ma50 on 2015-04-15 2015-04-24
Franco-Nevada FNV -2.13% 7.30% falling falling falling rising ema9 on 2015-04-24 2015-04-24
Newcrest Mining NCMGY -2.14% 14.75% falling rising rising rising ema9 on 2015-04-24 2015-04-24
Pretium Gold PVG -2.31% -10.13% falling falling falling falling ma50 on 2015-04-22 2015-04-24
Agnico Eagle AEM -2.36% 6.20% falling falling falling rising ema9 on 2015-04-24 2015-04-24
Yamana Gold AUY -2.54% -48.45% falling falling falling rising ema9 on 2015-04-24 2015-04-24
Goldcorp GG -2.61% -20.69% falling falling falling falling ema9 on 2015-04-24 2015-04-24
Royal Gold RGLD -2.75% -3.08% falling falling falling falling ema9 on 2015-04-24 2015-04-24
New Gold NGD -3.03% -35.74% falling falling falling rising ema9 on 2015-04-20 2015-04-24
Aurico Gold AUQ -3.11% -15.52% rising falling falling rising ma200 on 2015-04-22 2015-04-24
Silver Standard SSRI -3.50% -45.47% falling falling falling rising ema9 on 2015-04-24 2015-04-24
Eldorado Gold EGO -4.08% -18.97% falling falling falling rising ema9 on 2015-04-24 2015-04-24
Anglogold Ashanti AU -4.23% -40.27% falling falling falling rising ema9 on 2015-04-24 2015-04-24
Gold Fields GFI -4.43% 2.50% falling falling rising falling ema9 on 2015-04-24 2015-04-24
Coeur Mining CDE -7.01% -40.02% falling falling falling falling ema9 on 2015-04-24 2015-04-24

US Equities/SPX

This week, the equity market erased any hopes of a near term correction by breaking to new highs, closing up +36.51 to 2117.69.  Although we have a strong dollar, and dropping exports, and earnings misses at some companies, it does not seem to be bothering the equity market.  VIX dropped -1.60 to 12.29.

An update to a critical timeseries, the total outstanding US NYSE Margin debt, came in this week.  It showed a big uptick in the margin debt outstanding, which broke to a new high in March of $476 billion, up $11 billion.  Margin debt is a key driver for equity prices - all else being equal, rising margin debt results in rising stock prices.  Thus we have at least some explanation for higher equity prices - more money flowing into the market.  It may not make sense from a "stock fundamentals" viewpoint, but it does from a money flow viewpoint.

As a result of these updates, my "macro data" NN is now suggesting a smaller correction (only 5%).

Gold in Other Currencies

Gold was down in every currency I watch this week.  You can see that gold is looking much weaker than it did even just two weeks ago.  This tells us that gold's weakness isn't a currency effect, it really is about less money flowing into the gold market.

Rates & Commodities

Bonds (TLT) fell this week, dropping -1.81% and briefly falling below its 50 MA prior to rallying to close out the week.  Bonds broke lower out of their recent consolidation, which is bearish.

Junk bonds (JNK) climbed this week, up +0.43% crawling slowly higher.  Rising junk bond prices support the bullish story for equities.  So far, shale driller companies appear immune to lower oil prices.  Shale driller company earnings in May should prove interesting.

The CRB (commodity index) rose +0.11%; mostly CRB moved sideways this week.  CRB continues in its short term uptrend, and remains above its 50 MA.

WTIC moved sideways this week, after 5 weeks straight of moving higher, closing down -0.24 to 57.42.  WTIC printed a doji on the weekly chart, which could be the sign of a top.

Rig counts dropped again this week, with the total US land rigs down -22 to 895 rigs.  Losses in rigs were in the Bakken, Permian, and EagleFord regions.  The backlog of half-completed wells, called the "fracklog", is a dam of oil waiting to burst upon rising oil prices.  Likewise, at some point the drillers will start hedging again once price rises far enough; currently, oil for sale in December 2015 is $62, a premium of $5 over the current spot price.

My NN is still suggesting we've hit an interim high point for WTIC.  Actually, two different algorithms agree on this prediction.  I'm not sure the reversal will be particularly dramatic, but we might drop 10% from current levels.

Physical Supply Indicators

* Shanghai premiums rose slightly, up 2.57 to +4.45 over COMEX.

* The GLD ETF gained +3.29 tons, with 742.35 tons remaining.

* GC futures moved deeper into backwardation; the spread of the two front month contracts is now -0.40.

* ETF Premium/Discount to NAV; gold closing (15:59 close price on April 24th) of 1177.50 and silver 15.68:

 PHYS 9.74 -0.21% to NAV [up]
 PSLV 6.15 +1.43% to NAV [up]
 CEF 11.80 -6.65% to NAV [up]
 GTU 41.78 -3.89% to NAV [up]

ETF premiums were universally up.  However, a good chunk of GTU and CEF's increase was due to a hostile takeover bid from Eric Sprott - he's attempting to buy the gold & silver stored inside CEF & GTU at a discount.  No doubt, that's going to prove disagreeable to the current managers of GTU and CEF who will be off the gravy train, but for the shareholders of CEF, it seems like a good thing.

* Bullion Vault gold (https://www.bullionvault.com/gold_market.do#!/orderboard) shows no signficant premiums in any one of its five (London, Toronto, Zurich, New York, Singapore) locations.

Futures Positioning

The COT report covered trading through April 21st, when gold closed at 1202.90 and silver 16.00.

Managed Money closed a few shorts and longs, yielding no net change in position.  Current positioning indicates no trend change imminent - and would be supportive of a continued move higher.  The relatively low Commercial short position agrees.

In silver, Managed Money added 8.9k shorts and dropped -2.9k longs; the COT report does suggest we could be nearing the end of silver's correction.

Moving Average Trends [9 EMA, 50 MA, 200 MA]

The short and medium term recovery in gold & platinum prices has vanished.  PM is now entirely red.  Its tough out there right now.

Name Chart Change 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Silver COMEX.Silver -1.22% -20.58% falling falling falling rising ema9 on 2015-04-08 2015-04-24
Platinum COMEX.Platinum -1.39% -20.43% falling falling falling rising ema9 on 2015-04-20 2015-04-24
Gold COMEX.Gold -1.61% -8.93% falling falling falling falling ma50 on 2015-04-24 2015-04-24
Silver Miners SIL -1.94% -31.01% falling falling falling rising ema9 on 2015-04-24 2015-04-24
Senior Miners GDX -2.12% -18.60% falling falling falling rising ema9 on 2015-04-24 2015-04-24
Junior Miners GDXJ -2.61% -31.99% falling falling falling rising ema9 on 2015-04-24 2015-04-24

Summary

Dollar continued to fall, but so did gold and silver.  That suggests PM is particularly weak right now, which we can see in the gold-in-foreign currency charts.  Dollar looks ready to correct more seriously, but at this point I'm not sure how much that will help.

The gold/silver ratio rose again this week, up +0.98 to 75.08.  Gold/silver ratio is near the top of its six-month trading range and is now quite bearish.  The GDX:$GOLD ratio climbed slightly this week and continues to look "early bullish".  GDXJ:GDX climbed slightly too, but looks neutral near-term, having moved sideways for the past few months.  Moving averages are universally negative, with price being below all moving averages for all metals.  Except for the miner ratios, everything in this area looks universally bearish.

The COT report shows bullish potential for gold and now possibly for silver too, although it may still be a bit early.

Physical demand is more positive this week; in the west, ETF premiums increased, the backwardation at COMEX continues to increase, while premiums in Shanghai have also increased.

Commodities moved sideways this week, with oil potentially looking like it might be ready to correct after a strong five-week advance.  Over the past month, commodities have been generally supportive of gold, but neither they, nor the dollar, have been able to help very much.

Gold and silver just look weak right now.  Silver might be ready to put in a low based on Friday's price action, but I'm not as sure about gold.  Miners are the only "somewhat bright spot" and that's just on a relative basis vs gold.  But hey, at least Newmont managed to make money.  There is that.

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1 Comment

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 5456
hope for silver: 15.97

If silver can retain its gains today through to the close, silver will have marked a swing low, which given the length and extent of the recent silver correction is a good sign.  My gut tells me the gold/silver ratio is probably ready to reverse around now.

Silver needs to close above 15.88 to successfully mark the swing low.

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