PM Daily Market Commentary - 7/9/2015

By davefairtex on Thu, Jul 9, 2015 - 9:52pm

Gold rose +1.40 to 1158.80 on moderately heavy volume, while silver climbed +0.27 to 15.36 on moderately heavy volume also.  Both metals took off higher mid-day in Asia trading; silver held onto most of its gains, while gold did not.

Gold's failed rally is a bit worrisome - it suggests that the shorts remain in control, and that another leg down may be coming soon.

Silver looks quite a bit better.   It managed to close above 15.25 resistance, kept most of its gains, and looks to be on track to close above the 9 EMA (currently 15.47 - also another resistance line) as its next step on the road to recovery.  If it can manage that, step #3 is a close above the downtrend line which is approximately 15.62.  The gold/silver ratio retreated a big -1.26 today, and has dropped down to 75.44.

Platinum and palladium did poorly today, with platinum off -0.73% and palladium fell a big -2.57%.  Copper, like silver, staged a nice rally climbing +2.33%.  Silver and copper look to be correlated - I'm not sure that's a good thing given weakness in China.  Perhaps gold is following platinum.

Miners rallied today, with GDX up +0.42% on very light volume, while GDXJ climbed +0.92% on moderate volume.  Both mining ETFs gapped up on the open, but then sold off as the day wore on.  It didn't seem there was much enthusiasm to acquire mining shares today.  I don't think miners like it when the dollar rallies.

The dollar rose +0.32 [+0.33%] to 96.97.   Although there are ongoing hints that debt relief for Greece may be possible now, most bank economists are now opining that Grexit is their more-likely-than-not outcome.  The USD seems to agree with them.  I go back and forth.  It appears that the US is pushing hard for a deal.  I guess defaulting on an IMF payment followed by a referendum got everyone's attention.

SPX (US equities) rallied about 30 points in the futures markets during Asia and London trading, climbing steadily into the US open.  However once the market opened in NY, SPX sold off for the rest of the day, closing up just +4.63 to 2051.31.  For those who complain about "a manipulative ramp in the futures markets", today is what happens when the sellers treat high prices as a great opportunity to get out.  SPX remains below its 200 MA, and the massive failed rally tombstone doji candle looks quite ominous.  VIX rose +0.31 to 19.97.

The Shanghai composite rallied +5.8%, finding support at the confluence of its 200 MA and a previous high of 3400 dating back to January 2015.   As I write this in the morning in Asia, Shanghai is up another +5.5%.   My sense is, this is probably only a short term rally, but - who knows.  If enough companies stop trading and the Chinese government throws enough money at the problem, they could jam the market higher.

Bond ETF TLT was hit hard today, dropping a big -1.97%.  TLT is now back below its 50 MA.  Even with a big failed rally in SPX, TLT can't seem to do well.  I'm not a buyer of bonds at this point.

The CRB (commodity index) rallied +1.08%, more than making up for its losses yesterday, and performing quite well given the strength in the buck.  Commodities still look ill, but at least they are showing some signs of recovery.

WTIC (oil) tried rallying today, and managed to gain +0.79 to 52.59, however no swing low was marked as oil could not hold enough of its gains to close above Tuesday's high.  Brent did manage to print a swing low, outperforming WTIC.  Oil equities do not seem to be supporting the rebound case yet for oil.

The commodity picture is mixed, but slowly improving, the miners still look iffy, the US equity market is weak, but China isn't collapsing (at least not today), and once again Greece may have a shred of hope going into the weekend.  Silver appears to have buyers at COMEX (and/or the shorts are covering), as does oil, while gold seems weak.  If silver can close above its downtrend line, that will be quite positive.

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Michael_Rudmin's picture
Status: Platinum Member (Offline)
Joined: Jun 25 2014
Posts: 972
New Price Fixing Method

If I understand correctly, the prices previously were fixed by about 5 traders, over the phone or in a small room. 

The fixing scandal was that they would fix the prices up or down to benefit their own derivatives bets.

Now, for greater transparency ... correct me if I am wrong... but they have automated computers that periodically, at times unknown to us (but if trading volume is an indication, known to others...) that opens the price up to adjustment by bids.  At other times, bid prices simply go through without affecting the price of the exchange.

So then, I miss where the greater transparency is.  If you know when the "auction" is, you can target specific purchases to drive the price up or down.  Meanwhile, you either stockpile the metal, or make massive derivative bids, at *non* auction times.

So the scandal continues, just once removed.

Or am I missing something?  Am I completely wrong on the new price fixing programs?


Michael_Rudmin's picture
Status: Platinum Member (Offline)
Joined: Jun 25 2014
Posts: 972
Okay, I *was* missing something

Reading over the information, it appears that the prices are still set by an "auction" that is limited to about 5 players: for platinum and palladium, it's BSF, Goldman-Sachs, HSBC, Johnson Matthey, and ICBC. For silver, it's HSBC Bank USA NA, JPMorgan Chase Bank, Mitsui & Co Precious Metals Inc, The Bank of Nova Scotia - ScotiaMocatta, The Toronto Dominion Bank and UBS AG.

So, basically by their internal auction, they still fix the prices to whatever they want.

The method was different than I understood, but there is NO free market in this.

I wonder how the price is set in the rest of the world?  And rather than solely wonder how they might loot others, I also wonder:  how do they prevent themselves from being looted, according to how badly they reflect the outside market?

For example, the London Fix for Platinum was AM:1029 PM:1023.  The world market right now has it at 1032 bid, 1037 ask.  What keeps a large player from buying from the London players at 1023, and selling at 1032?  Is it simply that the auction-basis companies don't have to sell at their prices once the auction is set?  If that were the case, I'd expect the London fix to have little effect on the market.


Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
Mitsubishi transmutes.

Here is the patent for the transmutation of elements.

Perhaps we do not have the full picture. 

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