PM Daily Market Commentary - 7/16/2015

davefairtex
By davefairtex on Thu, Jul 16, 2015 - 6:41pm

Gold fell -4.70 to 1143.80 on moderately heavy volume, while silver dropped -0.12 to 14.94 on moderately light volume.  Once again, a strong dollar is giving gold heartburn.

Gold made a new low today at exactly 08:30 EDT, at the time of the jobless claims report.  The report didn't look that interesting to me, but it appeared to cause gold to spike down and the dollar to start rallying.  Gold's violation of the prior low at 1141.60 is a bad sign, and suggests we will probably test 1130 in the not too distant future.

Silver continued dropping too, appearing as though it is destined to re-test the 14.62 low it made on Monday of last week.  Silver downtrend remains intact.

Miners fell as well, with GDX off -0.98% on light volume, while GDXJ dropped only -0.23%, once again outperforming the seniors.  GDX is down 23% over the past eight weeks - compare that with the Shanghai composite, which is off 26% from its high.   At some point, traders will once again start to show interest in the mining shares, but its probably best to wait for some visible evidence of this happening before buying.  Low prices can always get lower.

Platinum: down -1.14%, palladium down -1.73%; both metals made new cycle lows.  Copper actually rose +0.16%.

The dollar rose +0.53 to 97.81, making another new closing high and apparently preparing to break above its previous high of 97.88.  The strong dollar is causing no end of trouble for commodities. 

Gold in euros actually rose on the day.  This supports my thesis that gold's weakness is still all about currency movements.

SPX (US equities) opened higher, and just continued rising all day long, climbing +16.89 to 2124.29.  SPX needs a close above 2130 to violate the "lower highs" downtrend now in place - that's less than 6 points away.  From there it is not far to SPX making yet another new all time high.  US equities are looking strong at the moment - they apparently like the whole concept of a new Greek bailout.  VIX dropped -1.12 to 12.11.  That level in the VIX is usually a good buy point, but I think I'd wait until SPX showed some signs of slowing down before buying any puts.

Bond ETF TLT rallied +0.69%, climbing right alongside SPX.  Money is flowing into US assets right now - both stocks and bonds.

The CRB (commodity index) dropped again, falling -0.49%.  Most commodities I watch were down today.

WTIC (oil) fell once again, dropping -0.70 to 50.92, moving to the lower end of its recent trading range.  Oil is looking like it might break lower once again.  The shale drillers are really suffering, but then so too are the services companies.  Nobody in the industry seems to like oil down around $50/barrel.

Same story, different day.  PM continues to look weak - along with most commodities.  Strong dollar pushes commodity prices lower.  As I have said many times, if the buck continues to rise, commodities including PM will most likely continue falling.  I wish I had better news.

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5 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5064
gold breakdown

Strengthening CPI this morning caused the dollar to rally, and gold to break lower.  The test of the 1130 low looks be happening today.  There are no buyers at COMEX at the moment for gold.

Today's drop looks to be less about currency, and more about an attempt to force gold through 1130 support.  Juicy profits await if the shorts can make this happen.

How gold handles the 1130 test will be key.  I see three outcomes:

* bounce off 1130; disaster averted for now

* a drop through 1130, lots of stops get run, followed by a rebound back through; would depend on how gold responded the following day; if it continued to rally, that could mark a low.  If the rally is sold, likely that leads to a breakdown followed by a lot more selling and much lower prices.

* a drop through 1130, and the bounce is unable to re-cross 1130.  This would be very bearish, and would most likely lead to a lot more selling in the days to come.  The shorts would pile in forcing prices substantially lower.

I hope for #1, but I fear #3 is more likely.

Jbarney's picture
Jbarney
Status: Silver Member (Offline)
Joined: Nov 25 2010
Posts: 233
Great Timing for me....

Hi,

I thought about the different venues to make this announcement, shot down the idea of facebook etc, just because even many of my friends would not understand the significance or the POV by which I post this....

Aside from my paying for my house.....I am debt free.  Last credit card payment was put in the mail this morning.

So.....I think I will be purchasing a few more ounces of really cheap silver.  

Peace,

JB

Time2help's picture
Time2help
Status: Diamond Member (Offline)
Joined: Jun 9 2011
Posts: 2766
Nice
Jbarney wrote:

Aside from my paying for my house.....I am debt free.  Last credit card payment was put in the mail this morning.

Right on.  Might I strongly advise a celebratory hitting of some of that hard cider?

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5064
mining share capitulation

The miners are really giving it up here - traders are bailing out left and right.  We're not quite at capitulation yet, I think - perhaps one or two more days down on Monday & Tuesday.

It will depend on if 1130 holds.  But traders aren't sticking around for the answer.  They're bailing out today.

This is the kind of thing that happens when prior lows get violated, as gold 1130 did today.  We could rally Monday, certainly, but right now it all looks pretty bleak.

Miners are making new all time lows relative to gold each day.  That is, GDX:$GOLD ratio has never looked this bad.  At some point, that will reverse and it will be a great buying opportunity - but certainly not today.

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

Honestly, I had not even thought of it!  Of course....will have to follow through, now!

 

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