PM Daily Market Commentary - 6/17/2015

By davefairtex on Wed, Jun 17, 2015 - 9:56pm

Gold rose +3.50 to 1184.60 on moderately light volume, while silver climbed +0.17 to 16.08 on moderate volume.  As expected, the FOMC meeting provided volatility but it was largely PM friendly, with analysts summarizing the tone of the meeting as generally dovish.

Econoday wrote: [Yellen] says inflation, as well as core inflation, [is] still running below target: "We need to see additional strength in the labor market and the economy moving closer to capacity in order to have confidence that inflation will move up to 2 percent. But we'll have to make some progress."

Sounds like no rate rise before September, and maybe not even then unless we get some pretty good numbers between now and then.

With the buck off -0.81%, today's PM moves (gold +0.30% silver +0.72%) didn't even keep up with currency moves; gold in Euros fell -0.46%.  At least at first blush, the FOMC meeting did not appear as though it will provide the catalyst for higher PM prices.  Right now, gold is just moving sideways within a trading range.  A close above the top of the recent trading range at 1192 would be a good first step at a move back to bullishness.

Mining shares outdid metal, with GDX up +2.89% on heavy volume, while GDXJ was up +3.16% on moderate volume.  The juniors are now back above their 50 MA, and even the lagging senior miners were able to break above their downtrend line as well as close above their 9 EMA.  Both are positive signs, although the senior miners have a lot of work to do to regain any sort of bullish tone.

The dollar fell -0.77 [-0.81%] all driven from the FOMC minutes release and press conference.  The buck did not like the dovish tone, and the dollar which had feebly rallied for the past four days lost all its gains over four hours - and it remains in a medium-term downtrend.

Greece continues to simmer; as Mish reports (, the Greek parliament's "Debt Truth Committee" just returned with a preliminary conclusion that the Troika debt was illegal, odious, and illegitimate - a necessary international legal checkbox item that allows Greece to unilaterally default on their debts.

Greece has been and still is the victim of an attack premeditated and organized by the International Monetary Fund, the European Central Bank, and the European Commission. This violent, illegal, and immoral mission aimed exclusively at shifting private debt onto the public sector.

The timing of this report wasn't accidental.  My sense now is that Syriza is perfectly happy to default on the debt (and potentially leave the Eurozone) if the Troika persists in continuing the austerity program.  The key requirement was for Syriza to maintain domestic political support throughout the process, and their 66% approval rating says they've done a fantastic job of keeping the Greek people on their side.  The only real chance the Troika had was to squeeze Greece economically and at the same time split Syriza from the Greek electorate; they did the first bit, but the second didn't happen.

Will the political back-tracking that the Troika will have to do prove to be too much?  Will Germany prefer to fork over the 94 billion Euros (Mish calculation) to relenting on the demand for $1 billion in pension cuts?  Can Spain and Italy find $100 billion between them if Greece defaults?  Fascinating math, isn't it?

Currency market still suggests "no default" - at least from what I can tell.  Greek stock market isn't nearly so sanguine, down 20% over the past five days.  While the EU banking system may well be ring fenced from the Greek default, the budgets of every EU nation will be thrown off by the requirement to backstop the default.  That suggests more austerity ahead for nations already at Peak Austerity.  Will Spain having to somehow come up with 40 billion Euros be positive or negative for Podemos' chances in Spain?  Knock-on effects of the default may well be more political than monetary: it should accelerate support for anti-EU parties in both core and peripheral nations.

SPX (US equities) did not benefit substantially from FOMC, rising just +4.15 to 2100.44.  Prior to the release, SPX had sold off and so the release did manage to get SPX back into the green, but the rally was anemic and SPX ended up losing much of its gains by end of day.  VIX fell -0.31 to 14.50.

Bond ETF TLT fell -0.77%, and that's after rallying strongly following the FOMC release.  Bonds still look weak.

The CRB (commodity index) fell -0.12%, a dismal performance on a day where the buck fell -0.81%.  CRB is struggling to remain in its medium term uptrend.

WTIC (west texas crude) had a very volatile day, climbing strongly in London trading and moving as high as 61.38 only to fall because of the Petroleum Status report, which showed a drop in inventories of -2.7 million barrels - apparently not enough to please the market, which started to sell off immediately after the report hit the wires.  But by end of day WTIC managed to rally back to almost even, printing a doji on the day closing down just -0.28 at 59.77, right in the middle of its 58-62 trading range.

So, no rate rise for a while.  Labor market still seems weak.  Econoday observes, "decisive jobs improvement is needed before the federal funds rate will be increased and says the first increase is likely to come later this year."  What is decisive jobs improvement?  Nonfarm Payrolls sure seems like its been pretty good of late.  What more do they want?  Liftoff?  Anyone think that's gonna happen?

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davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
clearing the decks

Looks like the FOMC release cleared the decks for PM and pretty much everything else except the buck and bonds to run for the sky.  This is what it looks like when the buyers show up - and there are a lot of shorts, and they have to start running for cover.

Yesterday it did not look like the FOMC meeting would affect anything, but the PM rally started in London and it has just kept on going.

Silver +2.57% gold +2.34% Oil +0.85% Copper +0.85% SPX +1.13% ... a good day was had by all.

Unless you hold 30 year treasury -0.89% or USD -0.57%.

My guess: western PM buyers were on the sidelines worrying about a rate increase.  Dovish Fed = no rate increase = PM moves back up again.

Michael_Rudmin's picture
Status: Platinum Member (Offline)
Joined: Jun 25 2014
Posts: 919
Wondering about the future

I know it has been suggested that the banks are shorting PM like crazy; maybe I'm wrong -- and please clarify if you think I am -- but I only see that as working if there is exponential growth in shorts, to both cover the old short and initiate further price control with new shorts.

Indeed, graphs I have seen here on PP DMC indicate such a possibility.

But then the question is, what kind of a hiccough could crash these shorts -- could the Greek default? Grexit? Breakup of the EU? Mass default of member states?

It seems to me that a rush to gold could indeed trigger a massive default by the banks on their PM shorts, followed by seizing the accounts of account holders.

But what then?

Will the governments appease their impoverished citizens by simply seizing PMs, or criminalizing those who held PMs through all the manipulations of central banks?

In other words, what are likely political risks with PMs?

KennethPollinger's picture
Status: Platinum Member (Offline)
Joined: Sep 22 2010
Posts: 656
Another Crisis indicator?

"History tells us two related facts. Central banks are always defeated by markets in the end, and central bankers have a touching faith that next time they will retain control over markets. But if we accept the lessons of history, we must dismiss complacency over systemic risk to the financial system."



"We can go even further, and begin to expect that of all the risks that will eventually trigger a widely expected financial crisis, it will be an old-fashioned bear market in bonds"


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