PM Daily Market Commentary - 7/8/2015

davefairtex
By davefairtex on Thu, Jul 9, 2015 - 3:30am

Gold rose +3.70 to 1157.40 on heavy volume, while silver rebounded +0.07 on very heavy volume.  Both metals sold off during trading in Asia, with gold making a new low of 1145.90.  Buyers appeared at that price, firmly stopping two attempts to push prices lower.  Prices then rebounded, moving gold back into positive territory.

While that sounds somewhat positive - and it certainly beats a continued decline - this is against a backdrop where the dollar fell relatively substantially on the day, so gold's performance was actually somewhat poor.  Gold priced in Euros looks like it wants to break below its five-week consolidation - if that happens, it would probably lead to more selling in gold.

Silver's rally off yesterday's pounding was anemic, given the drop in the buck.  The previous support, 15.25, is now resistance.  Step #1 for a silver recovery is a close above 15.25.  Step #2 is a close above the 9 EMA, at 15.50, and step #3 is a close above the downtrend line which is about 15.65.  In trading in asia as I write this, silver has rebounded to 15.49, which has fulfilled step #1, assuming silver can actually close above this level at end of day.

Platinum and palladium both printed hammer candles on the day, which suggests the low might be in for both metals.  Copper also printed a high volume candle.

Miners were not impressed with gold's rally, with GDX dropping -0.71% on moderately light volume, while GDXJ fell -2.13% on moderate volume.  Both mining ETFs closed at the dead lows of the day.  On the one hand it seems like there are no real buyers for mining shares right now, but on the other, GDX was one of the top 3 best performing sectors in the US equity market, with the other two being Utilities and REITs.  Perhaps selling in GDX was more driven by selling in the broader market.

The dollar fell -0.60 [-0.62%] to 96.47.  Although the dollar fell today, it remains above all three of its moving averages, which tells me it is still looking fairly bullish.   As always, a rising dollar will pressure gold, while a falling dollar will tend to support it.

There are all sorts of articles on Greece, one particularly fascinating and believeable one by AEP that suggests Syriza did not expect to win the referendum and is now at a bit of a loss how to move forward.  It turns out, democracy surprised everybody.  And, IMF head Lagarde has finally stood up and said the Greek debt needs to be restructured.  (The IMF = US, I believe, which is finally weighing in at the last moment probably out of geopolitical concerns).

I think the US/IMF is probably too late.  Six weeks ago, it might have done some good.  But now, positions have hardened, and I think the answer is, Greece ends up defaulting and leaves the EU.  Debt needs to be addressed, the EU is unwilling to address it especially since they would have to admit arch-enemy Varoufakis was correct, and although there will be maneuvering right to the end, it will be effectively be a cosmetic rearranging of the deck chairs on the Titanic as she sinks beneath the waves.  This should be positive for gold, although if forced selling from China continues, it might just trump Greece exiting the EU.

SPX (US equities) sold off for most of the day, closing down -34.66 to 2046.68, closing below its 200 MA for the first time since October 2014, and at this point it generally looks ill.  Whether its China, or Greece, or SPX is simply echoing the other equity markets around the world that sold off today, SPX is not looking great.

Bond ETF TLT rallied again today, up +0.86%, bonds rising as a result of the dropping US equity market.  I would have expected more given the equity market drop; it suggests to me that the bond market remains weak even though it managed to move above its 50 MA.

JNK dropped -0.63% today making a new low, underscoring the "risk off" feeling in the equity market.  That's a pretty big move for JNK.  The IEF:JNK trade looks to be back on - in fact, its been doing well for the past few weeks, and I didn't notice until today.

The CRB (commodity index) fell -0.13% on the day, a poor performance considering the buck dropped a whole lot more.  Commodities overall still look weak.

WTIC (oil) fell -1.09 to 51.80, dropping right after the Petroleum Status Report at 10:30 EDT which showed a small build in oil stockpiles.  The market did not like the report.  Oil equities sold off too.  No new lows were made today, but the rally from yesterday is looking a bit less definitive.

Gold is finding some bids down near support, aided somewhat by the dropping dollar.  If the panic in China subsides, it will probably help everything bounce back.  Perhaps if China simply shuts down the exchange and disallows all trading things will improve!  [That's a joke, Son!]

Seriously.  Where things go in the near term is anyone's guess; China might rally for a few days, but I think that is one bubble that will continue popping sooner rather than later.  There are lots of trapped, inexperienced and leveraged longs that are hoping to get back to even so they can bail out.  "Gosh that was fun, but maybe I've had enough."  The whole thing is a warning shot across the bows of the Fed.  "So you think you can control the markets?"

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3 Comments

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
Ron Paul's last Prediction.

I Thought I Would post Ron Paul's last Prediction. 

Synopsis: First the dollar goes the way of all fiat. Only then Gold will shine.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5416
debt relief for Greece?

Not only the IMF is saying it, but now Donald Tusk - EC Council President - is saying it too: Debt Relief for Greece.

http://www.independent.co.uk/news/business/news/greece-debt-crisis-live-ec-leader-adds-to-us-pressure-on-germany-to-scrap-greek-debt-10378134.html

European Council President Donald Tusk added to US pressure to offer debt relief to Greece on Thursday.

"The realistic proposal from Greece will have to be matched by an equally realistic proposal on debt sustainability from the creditors," Tusk said in a speech in Washington.

Merkel of course says "no haircuts" but there are lots of ways to skin the debt relief cat.  Bonds that don't need to be repaid until GDP is in surplus, for instance, which was a Varoufakis proposal that was met with scorn not long ago.  Everyone pretends that the debt will eventually be paid back, but the NPV (practically speaking) is quite close to zero.

Well.  As soon as I start thinking its done, it isn't done after all.

"Just when I thought I was out....they pull me back in!"

If Greece gets their debt relief, thats...a really big deal.

Michael_Rudmin's picture
Michael_Rudmin
Status: Platinum Member (Offline)
Joined: Jun 25 2014
Posts: 831
Manipulation maybe like Libor, for derivatives benefit?

There's been some commentary here on supposed Silver manipulation, and indeed it does seem somewhat possible.

Over on Kitco, there is an article in which the lead researcher in the Libor manipulation-for-profit case, claims that silver indeed is also looking manipulated.

http://www.kitco.com/news/video/show/Kitco-News/1018/2015-07-09/First-Go...

Just assuming that the bankers are not terribly imaginative, then having been busted in Libor and not penalized, they might try it again elsewhere.

The structure of the Libor manipulation, if I understand correctly, was misreporting rates in order to trigger derivatives benefits to associated traders, based on positions they took ahead of time. In other words, it was a conflict of interest by the entity charged with setting the rates.

Just a thought: isn't gold set that way? Didn't they just change how the Silver price was set? Might it be possible to mathematically vet the process to discover if and where the rates are being manipulated, and how corrupt profit is being taken?

Not to prove it in a court of law -- we have already seen how that works -- but to analyze the corrupt system for weakness, and then take it down in a court of utter financial disaster.

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