PM Daily Market Commentary - 7/23/2015

davefairtex
By davefairtex on Thu, Jul 23, 2015 - 10:38pm

Gold fell again today, dropping -3.40 to 1089.40 on very heavy volume, while silver fell -0.15 to 1461 on moderate volume.  Both gold and silver broke above yesterday's high in London trading, but then the sellers emerged and pushed prices slowly back into the red by the time the market closed in NY.

Why did gold and silver have a hard time today?  My sense was, the overall commodity complex sold off, and just dragged PM down with it.

Unless commodities in general can start to recover, gold looks headed inexorably for a new low.  Again, the rebound will be astonishing when it happens, but in the meantime, we get to endure seemingly unending selling.  Gold has been down 8 of the last 9 days - no fun if you are long gold.

Silver had a strong rally today in the London session, breaking above the 9 EMA - but it didn't last.  Silver looks destined to test the 14.49 lows possibly tomorrow...and if commodities keep falling, my guess is silver will drop through 14.49.

Miners opened up, and then sold off all day long.  GDX dropped -3.27% on moderate volume making a new low for the cycle.  GDXJ fell -3.08% on heavy volume, and it made a new low as well.   In any recovery I'd expect the miners to be leading...currently GDX:$GOLD is still bouncing along the lows.  Ratio says: no recovery yet.

Platinum was off slightly, down -0.25%.  Palladium fell -1.48%, while copper dropped -2.10% to 2.38, breaking below its previous low, making a new six-year low that dates back to 2009.

The dollar fell today, dropping -0.51 to 97.23, falling through its 9 EMA.  It remains in an uptrend, but the fall below the 9 EMA is the first step towards a dollar correction.  However the large drop in the buck did not help the commodity complex at all.  This tell us that the commodity complex is seeing a large amount of selling.

SPX continued falling, dropping -12.00 to 2102.50, knifing through its 9 EMA but finding support on the 50 MA.  SPX is still only a few percentage points from an all time high.  VIX rose +0.52 to 12.64.

Bond ETF TLT broke out today, climbing +1.25% and breaking above its recent consolidation area.  Bonds are finally starting to shake off the weakness of the last few months.

The CRB (commodity index) fell -1.11%, another large drop especially given the decent-sized fall in the buck, with the CRB making a new low and stopping right at the previous low set back in March.  Commodities are really looking terrible.  This is not helpful for gold at all.

WTIC fell -0.37 [-0.73%] to 48.85, a relatively small drop but nevertheless making a new cycle low.  Oil continues to fall after breaking the round number 50.  All the news for oil is bearish - rig counts remain high, shale production is stable, Iran nuclear deal is done - we officially have an oil oversupply with no relief in sight.  And there are still 925 wells in the fracklog up in the Bakken...with 110 wells completed again this month.  Are those wells profitable?  I don't think they are.  But as long as those companies can continue to borrow money, they will keep drilling.

It feels like the entire commodity complex is headed lower, and gold and silver are caught in the downdraft.   If it were just gold that was suffering, I'd be more sanguine about a recovery and a great snap-back rally.  However since the whole commodity group is falling, it may be tough for gold to rally on its own, regardless of the Commerical short position.  How long will commodities continue to drop?  That I can't say.  All we can do is watch the charts, and wait for the buyers to appear to mark that elusive swing low.

I suspect once commodities find support, that's when we'll see the PM rally happen.

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11 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5063
new low, nice bounce

Saw a new low for gold (1072.30) in Asia trading flushing all those new longs that bought the 1080 low, followed by a nice rebound - better than the bounce off 1080 for sure.  Once the retracement of the intraday drop moves up past 100%, that's when I start to think we may have seen the actual bottom for the cycle.

We need a close above 1084 (curiously enough, that's Armstrong's Weekly Reversal value) for me to call this a strong candidate for a reversal candle for gold.  We have to wait for the close at EOD Friday to get the answer.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5063
correlations, swing lows

In recent months, the correlations (monthly, 20 point) with gold have been as follows:

  • NIKKEI: -0.84
  • PAYEMS: -0.70
  • SPX: -0.88
  • Copper: +0.53
  • Oil: +0.73

What this says is, what's good for the stock market (and bad for commodities) = bad for gold.  Its probably about money flow as much as anything else.

You can ask "why this is" - or you can observe that gold's big rebound today came concurrently with an SPX selloff and...take note.

The low for gold isn't locked in, but if the market closes where it is now, things are looking more positive than they have for a while.  I especially like the spike low today that was bought.

Likewise, if the stock market ends up rebounding into the close - gold may suffer as a result, based on the correlations in place for the past year or so.

We won't have a swing low for gold until Monday...assuming that's how it all plays out, of course.  If we do get that swing low, I think we'll be off to the races.  Even Armstrong says we'll get a 2 week rally if we close above 1084...  :-)

 

Cornelius999's picture
Cornelius999
Status: Gold Member (Offline)
Joined: Oct 17 2008
Posts: 373
Dave, Ken

Thanks for steading our nerves as gold contorts Dave.  Your analysis is such a help!

Ken, I'm sure I saw " Ten best gold stocks " item on Marketwatch yesterday. Good luck!

 

sofistek's picture
sofistek
Status: Platinum Member (Offline)
Joined: Oct 2 2008
Posts: 818
4 years and counting

Wasn't the high point for gold in 2011? If so, we've had 4 years of falls. I'm not sure how this is maintaining my wealth. Still, the rebound is bound to occur but will that be in months, years or decades?

KugsCheese's picture
KugsCheese
Status: Diamond Member (Offline)
Joined: Jan 2 2010
Posts: 1428
davefairtex wrote: We won't
davefairtex wrote:

We won't have a swing low for gold until Monday...assuming that's how it all plays out, of course.  If we do get that swing low, I think we'll be off to the races.  Even Armstrong says we'll get a 2 week rally if we close above 1084...  :-)

On PP home page the markets panel shows gold at 1085 so I assume that is good news based on technical analysis?

KugsCheese's picture
KugsCheese
Status: Diamond Member (Offline)
Joined: Jan 2 2010
Posts: 1428
sofistek wrote: Wasn't the
sofistek wrote:

Wasn't the high point for gold in 2011? If so, we've had 4 years of falls. I'm not sure how this is maintaining my wealth. Still, the rebound is bound to occur but will that be in months, years or decades?

Almost all asset prices are distorted to the high side b/s of central banking action, especially since mid 90's.  There is going to a big deflationary crash (b/s of forced selling of good assets to cover bad unless more bailouts), then massive inflation, then another deflationary adjustment as wages etc will be very out of whack.   What assets will be doing relatively better after all this?  Gold.

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
Flat as a tack.

Gold and silver are doing nothing in $Aus. terms. Flat as a tack. Which makes me think that this may be more to do with a rush to safety in $US, rather than a decrease in the desirability of the yellow metal.

But I am not in my natural environment. 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5063
gold closing price

Gold closed at $1098.40, according to stockcharts - and my trading app said 1098.50.  That's good news.

I'm not sure where PP gets its data.

And yes, 1098.50 is definitely good news.

Luke Moffat's picture
Luke Moffat
Status: Gold Member (Offline)
Joined: Jan 25 2014
Posts: 364
PP Charts

Sometimes the PP Charts don't always update immediately (seldom occurrence but it does happen). For example, S&P 500 only starts updating from roughly 1pm GMT.

Dave has the bones of it; $1098.87 close according to my trading app

KugsCheese's picture
KugsCheese
Status: Diamond Member (Offline)
Joined: Jan 2 2010
Posts: 1428
davefairtex wrote: I'm not
davefairtex wrote:

I'm not sure where PP gets its data.

And yes, 1098.50 is definitely good news.

PP gets it from Kitco and Kitco's http://charts.kitco.com/KitcoCharts/?utm_source=kitco&utm_medium=banner&utm_content=20110407_iCharts_live_gold_ny_chart&utm_campaign=iCharts shows gold closing at ~1099 on 7/14/15 17:00.

Adam Taggart's picture
Adam Taggart
Status: Peak Prosperity Co-founder (Offline)
Joined: May 26 2009
Posts: 2934
Looking into it

Actually, we get the live quote feeds on our front page from several different sources (Kitco isn't one of them). 

Our PM live quote partner has been updating their feed protocols this week, and some wonkiness has resulted. I've alerted them and expect the issue to be quickly addressed. More as I have it.

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