PM Daily Market Commentary - 6/11/2015

davefairtex
By davefairtex on Thu, Jun 11, 2015 - 11:38pm

Gold fell -3.50 to 1181.50 on moderate volume, and silver rose +0.01 to 15.99 on heavy volume.  PM sold off a bit prior to the NY open, making its day low right at 08:30 at the time of the release of the Retail Sales report, which came in relatively strong - Atlanta Fed GDPNow estimates for 2Q 2015 are now 1.9%.  Immediately following the report, both gold and silver rallied, with silver outperforming gold.

Silver made a new low today but rallied relatively strongly off its low, printing a doji-ish candle which looks like it is trying to be a bullish reversal candle.  Volume was relatively good; it looked like some shorts were forced to cover because of the rally.  If silver can keep it together and continue moving higher marking a swing low here, it would be a positive sign for PM.

Mining shares sold off today, with GDX down -1.16% on light volume, while GDXJ dropped -1.84% on light volume too.  Mining share ETFs appear to be in a slow-motion correction right now, especially the seniors who made a new low on the day.  However if you look at individual miners, some are doing much worse: AUY made a new 5-year low, selling off very hard on the day.  The longer the miners as a group continue in their downtrend, the more this will tend to happen, which will cause the overall pace of the drop to accelerate.

The dollar tried rallying today but largely failed, printing an inverted hammer candle, and rising +0.33 to 94.98.  The Retail Sales report seemed to cause the buck to spike higher briefly, then it started to sell off and ended up losing most of its gains by end of day.  It felt to me like the market perhaps expected a more positive Retail Sales report, and when it wasn't, selling happened.

SPX (US equities) also had a small failed rally today too, rising +3.66 to 2108.86.  VIX fell -0.37 to 12.85.

Bond ETF TLT rallied very strongly today, climbing +2.10% and erasing 3 days of losses.  Bonds were bought all day long, taking off in the  morning prior to the NY open and then continuing throughout the day.  Bonds put in a swing low.

The CRB (commodity index) fell -1.26%, a big loss.  It remains above the 50 MA, but it is looking a bit weaker.  Copper had a big loss on the day and it has been in a brisk downtrend for the past 4 weeks.  Copper = China, which suggests our friendly large manufacturing/exporter isn't doing so well, regardless of what its stock market is saying.

WTIC (west texas crude) fell -0.54 to 60.55, seemingly finding it difficult to continue higher once the magic 61-62 resistance zone was hit.

Silver might have put in a low today.  Might.  That requires confirmation tomorrow: a close above 16.04.  That doesn't seem to be a particularly tall order, lets see if silver can manage it.  Gold needs to close above 1205 in order to violate the most recent "lower high" which would bring this 4-week correction to an end.

I'm not seeing any big catalyst for PM right now - it feels more like the downside pressure has dried up after all the selling that has gone on in the past few weeks, and right now the market is trying to figure out if this is really going to be the low.

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2 Comments

geneok's picture
geneok
Status: Member (Offline)
Joined: Sep 4 2011
Posts: 4
Precious metals in general

Dave, 

Are you of an opinion that after Greece, Italy & others in the Euro zone default or Germany accepts 

a significant write down of these countries' debts that PM will rally significantly in 2016?  

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5681
PM and defaults

geneok-

Are you of an opinion that after Greece, Italy & others in the Euro zone default or Germany accepts a significant write down of these countries' debts that PM will rally significantly in 2016?

Heh.  I believe if the EU starts down that path, the end result will lead to a positive move for PM.

I think there is only a very small chance that the current gang in charge of the EU will countenance an outright haircut on the Greek debts.  That would mean taxpayers in each EU country has to cough up the cash as a direct result of the haircut.  If the bailout wasn't popular, the impact of a haircut would be incredibly unpopular - my guess: vote of no confidence for leadership, new elections, strong anti-EU feelings in many lender countries, the whole bit.

They might send the debt off to the ECB where it sits in perpetuity - "GDP-linked bonds" paid off a little bit at a time every quarter Greece has a positive GDP number, but in reality, the bonds go there to die, hopefully inflation taking care of the principal over the next 50 years.  Portugal would probably ask for that same treatment for their debt, and Spain (Podemos) too.  And why not France, while we're at it.

If real defaults start to happen (with either a departure from the Zone or otherwise) there will be lots of fallout to individuals regardless of how the major powers manage to ring-fence themselves, and that news-making fallout will encourage the normal people and businesses to take action ahead of the next potential problem site that is tired of austerity: Spain, Portgual, Italy.

In the run-up to elections in each of those might-be-next countries, any suggestion that a Syriza-like party might win will cause a stir, and money will end up fleeing for safety ahead of those election results.  Gold should benefit from the flight to safety along with everything else.

Austerity is a very long deflationary path before it ends, one that likely leads to extremes of either Fascism or Communism as some sort of relief from the apparently unending pain.

And of course if the gang in charge of the EU decides to engage in a massive jubilee/reflationary event ("QE for the people"), that should be good for gold too.

I really see an amazing amount of chaos as the promoters of austerity run into democracy.

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