PM End of Week Market Commentary - 5/15/2015

davefairtex
By davefairtex on Sat, May 16, 2015 - 3:02am

On Friday, gold rose +2.10 to 1223.00 on moderately heavy volume, and silver climbed +0.06 to 17.52 on moderately heavy volume.  Gold and silver sold off during London trading, only to rally immediately prior to the NY open.  Gold ended the day just above its 200 MA.

On the week, gold ended up +35.80 [+3.02%], silver rose +1.10 [+6.70%], GDX climbed +3.76% and GDXJ was up +5.62%.

Gold was up four days out of five this week, blasting to new highs and affirming the uptrend off gold's 1140 low set in March 2015.  The big move happened on Wednesday, and the only thing I could link it to was the break in the buck below 94 support after the surprisingly weak Retail Sales report was released.

Silver continued to outperform gold this week, moving well above its 200 MA, seemingly leading the whole PM complex higher.  Silver has not been above the 200 MA for 10 months; silver's outperformance is generally seen as a bullish indicator for PM overall.

The gold/silver ratio has had a dramatic fall over the past three weeks; the ratio was near the top of the range at around 75, but it has recently dropped below the range to 69.79.  If this represents a true trend reversal of the gold/silver ratio, its very bullish for PM - and for silver especially.

The USD

The buck had another bad week, dropping -1.72 [-1.82%] to close at 93.18.  As mentioned, I believe the drop through 94 on Wednesday encouraged the (paper) gold buyers to come out of hiding - although who really knows for sure.  What we can see is that the buck was down four days in a row, and that mirrored the rise in gold and silver, which were up four days.  Gold and the buck are finally back to their more customary negative correlation.  To support this claim: gold priced in Euros have stopped falling, and have been tracking sideways for the past two weeks.

Miners

Both miner ETFs broke out to new highs this week, with GDXJ leading GDX.  Still, juniors have a long way to catch up to the seniors; you can tell that just based on the positions relative to the 200 MA.  GDX has advanced right up to its 200 MA, while GDXJ remains far below its own 200 MA.

Junior miners continued to move higher vs the seniors; I put a relatively large amount of importance on this ratio, since this represents "risk on" in the PM sector.  While it is completely possible for a "flight to safety" to push gold prices higher on their own, only a desire by traders to take on more "PM risk" will move the whole complex higher, which includes mining shares as well as silver.  The GDXJ:GDX ratio, alongside the gold/silver ratio represents risk on.

You can also see from this chart just how badly the juniors were doing from October-February.

A fair number of miners are now above their 200 MA; mostly these are either low cost producers or those who have had decent earnings reports.  During this "bottoming" phase they are doing best.  However once the gold market starts to take off in earnest, the crappy high cost miners will rally the most, since those have been pounded down the hardest - assuming they avoid bankruptcy in the meantime.  Unfortunately, we aren't there yet.

Name Chart Change 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Fortuna Silver FSM 2.61% -3.91% rising falling falling rising ma50 on 2015-05-13 2015-05-15
Newmont Mining NEM 1.80% 14.52% rising rising rising rising ma50 on 2015-04-24 2015-05-15
Coeur Mining CDE 1.07% -28.68% rising rising falling rising ma200 on 2015-05-15 2015-05-15
Silver Standard SSRI 0.46% -15.48% rising rising falling rising ma200 on 2015-05-13 2015-05-15
First Majestic AG 0.37% -40.86% rising falling falling rising ma50 on 2015-05-14 2015-05-15
Hecla Mining HL 0.31% 7.97% rising falling falling falling ma50 on 2015-05-12 2015-05-15
Kinross Gold KGC 0.00% -36.02% rising falling falling rising ema9 on 2015-05-07 2015-05-15
Silver Wheaton SLW 0.00% -5.28% rising rising falling rising ema9 on 2015-05-11 2015-05-15
Royal Gold RGLD -0.16% 5.05% rising falling falling rising ema9 on 2015-05-08 2015-05-15
Pan American PAAS -0.29% -19.19% rising rising falling rising ema9 on 2015-05-11 2015-05-15
Iamgold IAG -0.43% -30.42% rising rising falling rising ema9 on 2015-05-12 2015-05-15
Barrick Gold ABX -0.46% -21.06% rising rising falling rising ema9 on 2015-05-13 2015-05-15
Yamana Gold AUY -0.50% -45.23% rising falling falling rising ma50 on 2015-05-11 2015-05-15
Gold Fields GFI -0.52% -1.54% falling falling falling falling ma50 on 2015-05-06 2015-05-15
Aurico Gold AUQ -0.54% -1.07% rising rising falling rising ma200 on 2015-05-12 2015-05-15
Randgold GOLD -0.55% 0.38% rising rising falling rising ema9 on 2015-05-13 2015-05-15
New Gold NGD -0.58% -32.68% rising falling falling rising ema9 on 2015-05-12 2015-05-15
Franco-Nevada FNV -0.75% 13.08% rising rising falling rising ma200 on 2015-05-01 2015-05-15
Newcrest Mining NCMGY -0.76% 22.01% rising rising rising rising ema9 on 2015-05-12 2015-05-15
Eldorado Gold EGO -0.77% -13.49% rising rising falling rising ma50 on 2015-05-08 2015-05-15
Goldcorp GG -0.87% -20.46% rising falling falling rising ma50 on 2015-05-13 2015-05-15
Pretium Gold PVG -1.25% -12.12% rising rising falling rising ma200 on 2015-05-13 2015-05-15
Agnico Eagle AEM -1.30% 3.04% rising rising falling rising ema9 on 2015-05-07 2015-05-15
Anglogold Ashanti AU -3.51% -35.18% falling rising falling rising ema9 on 2015-05-15 2015-05-15

US Equities/SPX

This week, the equity market largely traded within a range, breaking out ever so gently to a new all time closing high, up +6.63 to 2122.73.  Weak retail sales: didn't matter.  Negative industrial production: didn't matter.  GDP Now print of 0.7% for Q2 2015: not important.  Money flowed into equities, and so the market went up.  Does it make sense to me?  Not from a fundamental point of view - earnings, economics, that sort of thing.  But someone, somewhere, sees the US market as a better place to be than where it is right now and as a result, market goes up.

VIX dropped -0.48 to 12.38.  Fortunately, the ever so slowly rising US equity market is not detracting from PM, as it sometimes does.

Gold in Other Currencies

Gold rallied in every currency I track this week.  There is no question that gold has resumed its uptrend.

Rates & Commodities

Bonds (TLT) fell -0.75% this week, making a new cycle low but printing a doji candle on the weekly chart - almost a dragonfly doji.  Either are bullish reversal bars if they appear after a reasonably long downturn.  Truthfully, bonds had a bad week right up until Friday, when they rallied up a massive 2.01% on the day, marking a swing low.  Perhaps this is the low for bonds for a while.

Junk bonds (JNK) was unchanged on the week.

The CRB (commodity index) rose +1.00%, rising a 9th straight week, probably as a result of the weaker dollar.  Commodity rebound/two-month uptrend remains intact.

WTIC rose +0.49 [+0.82%] to 59.96, mostly chopping sideways; oil did not make new highs, but was still able to close above its 9 EMA.  For a few days it looked that a correction might be in the cards, but on Friday the buyers came out and bid oil back up again, printing a dragonfly doji on the day.

Rig counts have stopped dropping, for the most part; US land rig counts are down only 8 rigs, and the Eagleford actually gained 3 rigs this week.   The ponzi remains intact; only the best wells (150k BOE/first 3 years) even make back their drilling costs at $60/bbl ($50 realized/BOE x 150k BOE = $7.5MM); they certainly don't pay for operations.  Yet capital remains available to the drillers so that they can continue losing money on every well.  But since capex spending gets dropped into a different accounting bucket than operational expenses, nobody notices.  Or rather - nobody professes to notice.  This should put a lid on oil prices, unless we get some geopolitical excitement in the middle east.

NN still picks oil to reverse - third week now.  "But this time it's not kidding."

Physical Supply Indicators

* Shanghai premiums were +1.38 over COMEX on Friday.

* The GLD ETF lost -4.41 tons, with 723.91 tons remaining.

* GC futures remain in backwardation; the spread of the two front month contracts is still -0.20.

* ETF Premium/Discount to NAV; gold closing (15:59 close price on May 15th) of 1224.60 and silver 17.54:

 PHYS 10.12 -0.27% to NAV [down]
 PSLV 6.73 -0.67% to NAV [down]
 CEF 12.46 -7.79% to NAV [down]
 GTU 42.82 -5.09% to NAV [down]

ETF premiums were down across the board.

* Bullion Vault gold (https://www.bullionvault.com/gold_market.do#!/orderboard) shows only a negligible premium amongst its 5 locations.

Futures Positioning

The COT report covered trading through May 12th, when gold closed at 1192.60 and silver 16.51.  Note that the coverage period missed the vast bulk of gold and silver's rally this past week; we will have to wait until next week to get the story on what happened.

Last week I pointed out that the commercial short positions were at an important low that often matches up with low points in gold.  It looks like this signal was a pretty good one.  Managed money longs were also at low levels.  This week, commercials increased shorts and longs, while managed money just went long.  However, the moves weren't that large.

In silver, not much changed; again, the coverage period didn't pick up the big moves.

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

Last week I noted that silver & the juniors were doing the best.  Perhaps I should have paid more attention.  This week we see that both gold and silver have risen above the 200 MA - things look quite a bit better.

Name Chart Change 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Platinum COMEX.Platinum 1.00% -21.79% rising falling falling rising ema9 on 2015-05-13 2015-05-14
Junior Miners GDXJ 0.72% -23.47% rising rising falling rising ema9 on 2015-05-08 2015-05-15
Silver COMEX.Silver 0.55% -9.78% rising rising falling rising ma200 on 2015-05-13 2015-05-15
Gold COMEX.Gold 0.01% -5.26% rising rising falling rising ma200 on 2015-05-14 2015-05-15
Silver Miners SIL -0.10% -20.58% rising rising falling rising ema9 on 2015-05-07 2015-05-15
Senior Miners GDX -0.48% -11.70% rising rising falling rising ema9 on 2015-05-11 2015-05-15

Summary

The dollar plunged through 94 support dropping 4 days out of 5; gold and silver responded by rising 4 days out of 5, marking an gold & silver uptrend by setting new cycle highs on Friday. 

The gold/silver ratio fell again, down a huge -2.49 to 69.79, breaking below its recent range of 70-75.  The GDX:$GOLD ratio was up slightly, while GDXJ:GDX broke higher and now looks medium term bullish - although still coming off some very low levels.  It was a positive week for PM.

The COT commercial short position bottomed last week, and that seems to have helped foretell the rally in gold, although we have to wait until next week to get the data on who did what.  The silver COT position doesn't look particularly significant.

Physical demand is flat this week; in the west, ETF premiums were down across the board, the backwardation at COMEX remains, but premiums in Shanghai have dropped and are just barely positive.

Commodities continued moving higher helped by the falling dollar, and WTIC crude rose slightly but remains below $60.  I'm still worried about an oil correction - now I think it will come when and if the buck makes a low.

Gold finally got its catalyst this week - I believe - from the falling dollar.  Concurrent with the weak Retail Sales report, the dollar falling through 94 support finally brought the western paper gold buyers out of the woodwork.  This week everything is aligning to produce a relatively happy picture for gold.  Isn't this just when Lucy snatches the football away from Charlie Brown?  We should expect two steps forward and one step back.  If you want to participate, your choices are to either "buy the breakout" or "buy the dip".  Unless the trend higher is a strong one, its probably safer to buy the dip.

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5 Comments

Jbarney's picture
Jbarney
Status: Silver Member (Offline)
Joined: Nov 25 2010
Posts: 233
Great Summary

Hi Dave,

Great summary.....I was particularly fascinated by Silver's move this week, as it does seem to indicate a general upswing.  I've been expecting it for some time now.  The move does seem very substantial, making me wonder if there might be a short down trend next week.

At the very least, things are starting to feel like we have gotten passed the bottom.

Peace,

Jason

robie robinson's picture
robie robinson
Status: Diamond Member (Offline)
Joined: Aug 25 2009
Posts: 1221
Me too

kudos to Dave for his hard work, and Jason who posted first giving me the chance to agree.

Denny Johnson's picture
Denny Johnson
Status: Gold Member (Offline)
Joined: Aug 13 2008
Posts: 348
JPM Silver

Thanks Dave, as always, greatly appreciate your sharing of your views.

I'd sure like to hear your (or anyone knowledgeable) opinion of this Bill Holter article re JPM's rumored silver position.

http://blog.milesfranklin.com/the-great-silver-debate

Thanks

 

KugsCheese's picture
KugsCheese
Status: Diamond Member (Offline)
Joined: Jan 2 2010
Posts: 1469
Jbarney wrote: Hi Dave, Great
Jbarney wrote:

Hi Dave,

Great summary.....I was particularly fascinated by Silver's move this week, as it does seem to indicate a general upswing.  I've been expecting it for some time now.  The move does seem very substantial, making me wonder if there might be a short down trend next week.

At the very least, things are starting to feel like we have gotten passed the bottom.

Peace,

Jason

The cronies will crash the price.  The silver and gold gyrations are so predicable. 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5693
silver, etc

Jason-

I could easily see silver drop back and re-test support at 16.75, or at the very least the 200 MA at 17.11 (ish).  It has moved up quite a bit, and a retracement now would not be surprising.  Two steps forward and one step back, etc.

Have we passed the low?  Seems like it.  Only one potential fly in the ointment: if the buck decides to scream higher due to sovereign debt issues in the Eurozone.  I think silver probably gets hurt if that happens.

Denny-

Thanks for the reference.  I distrust that sort of news.  Martin Armstrong suggested that the big banks are good at setting these sorts of situations up.  He details a case where they drained the COMEX of silver, transferring it to Europe, so everyone thought the COMEX was running out and prices screamed higher, only to have the big banks sell.   While I do think silver will win in the long run (silver paste in solar panels, etc), anything could happen in the next week/month/quarter.

Kugs-

The cronies will crash the price.  The silver and gold gyrations are so predicable.

Please start a trading advice service.  Everyone wants to know the future - and it definitely sounds like you've got the inside scoop...do you want to go on record with a time and price target for the "so predictable" upcoming smash?  One would assume if it is so predictable, getting rich off such information would be child's play.

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