PM Daily Market Commentary - 5/13/2015

By davefairtex on Wed, May 13, 2015 - 11:21pm

Gold jumped +22.20 to 1214.70 on extremely heavy volume, while silver powered up +0.61 to 17.12 on very heavy volume.  The big gold rally came at the time of the Retail Sales report release at 08:30 EDT; retail sales were unexpectedly soft, which caused the buck to tank, and that seemed to light a fire under gold.

I've been saying that gold needed a catalyst, and it appears that when the buck dropped -0.50 immediately following the Retail Sales numbers release, that was enough to encourage both gold and silver to rocket higher.  Note that gold ended up closing right at the previous high at about 1215.  While today's progress was great, a close above the previous high of 1226 is required for gold to regain its upward momentum.

Silver's breakout was even more impressive, as silver managed to close significantly above its previous high of 16.75.  Silver's rally stopped right at the 200 MA.  The gold/silver ratio has dropped -1.28 to 70.95.

Mining shares did well on gold's breakout, with GDX up +2.41% on moderately heavy volume, while GDXJ climbed +2.78% on moderately heavy volume as well.  Senior miners are on the cusp of making another high, and the juniors actually did manage to break out to new highs today.  When the junior miners are looking strong and leading higher, that's bullish for PM.

As mentioned previously, the buck dropped big today, down -0.96 to 93.64, losing -0.50 right at 08:30 following the poor Retail Sales report, and selling off further as the day progressed.  By end of day, the buck ended up making new lows, breaking below 94 support.  This breakdown below 94 looks a bit ominous for the dollar.

SPX (US equities) tried rallying (Really?  On weak retail sales??) at the open, only to sell off for the rest of the day, closing down -0.64 to 2098.48, printing an almost-gravestone doji.  With the buck down big, it makes me wonder where the money is coming from; perhaps the bond market?  VIX fell -0.10 to 13.76.

Bond ETF TLT was hit for an -0.80% loss, marking a new closing low for bonds.  Ignoring US equity market weakness, TLT was sold for most of the day.  Bonds really look weak to me.  Yield on the 20 year US treasury is up 0.54% (to 2.79%) over the past 4 weeks; this has translated into a 10% loss in capital for owners of TLT, or about 4 years of interest payments.  Ouch.  Worldwide, long bonds also continue to drop.  German 10 year bonds hit 0.71% - still ridiculously low, but a big change from the 0.08% set just four weeks ago.

Money is sloshing back and forth right now between currencies, bonds, bank deposits, and equities - one month pushing German 10 year yields down almost to 0, and the next racing out of bonds to go somewhere else.  To quote Herbert Hoover:

We were to see currencies demoralized and governments embarrassed as fear drove the gold from one country to another.  In fact, there was a mass of gold and short-term credit which behaved like a loose cannon on the deck of the world in a tempest-tossed era.

The CRB (commodity index) moved up +0.02%, more or less unchanged.  Given the buck's swoon (which would normally push commodity prices higher), this relatively lame commodity price performance suggests to me that commodities may be nearing a top.

WTIC (west texas crude) fell, dropping -1.09 [-1.78%].  Crude remains above its 9 EMA and is thus still in a clear uptrend, but the loss for crude on a day when the dollar had a big decline suggests the momentum for oil may have peaked.  Other technical indicators show a loss of momentum for oil too: the daily MACD has gently tipped over.

It appears that strong miner performance was the "tell", essentially predicting gold and silver's break higher.  Gold finally responded positively to a large move lower in the buck, while commodities and oil look to have topped out.  The teflon-coated equity market continues to chop sideways defying bad news and the steadily declining dollar, while bonds continue falling.  

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