PM End of Week Market Commentary - 8/7/2015

davefairtex
By davefairtex on Sat, Aug 8, 2015 - 12:50pm

On Friday, gold rose +4.30 to 1093.30 on heavy volume, while silver climbed +0.15 to 14.78 on heavy volume too.  Both metals sold off hard at the time of the Nonfarm Payrolls report at 08:30, only to rally inexplicably an hour later regaining all the lost ground and more.  Much of the gains were lost later in the day, but enough were retained to allow both gold and silver to close above their respective 9 EMA lines.

On the week, gold fell -1.70 [-0.16%], silver rose 0.02 [+0.14%], GDX dropped -2.55% and GDXJ lost -2.43%.  Platinum was down -2.15%, and palladium fell -2.09%.

Although gold dropped on the week, on Friday it managed to squeak above above that 9 EMA line, which it had not done since June.  In addition, the RSI momentum indicator is showing a distinctly bullish divergence pattern, and the MACD trend change indicator has executed a bullish crossover which is an early sign of a move higher.  While a swing low remains elusive, there are a number of early bullish signs in gold.  A close above 1103 is a swing low for gold.

While silver executed its swing low last week, it was unable move substantially higher.  It remains in a trading range, barely avoiding a new low early in the week, and then rallying on Friday to close convincingly above the 9 EMA, which is a positive step.  Similar to gold, silver too is showing a reversal of momentum on both RSI and MACD indicators.  A close above 15 (the high of the recent trading range) would be a breakout for silver.

The USD

The dollar rallied only modestly this week, climbing +0.18 [+0.18%] to 97.62.  Much of the interesting action happened on Friday, when the buck initially rallied following the positive (and market-moving) Nonfarm Payrolls report making a new cycle high, only to drop back down by end of day, eventually closing below its 9 EMA.  Losing the 9 EMA on a good Nonfarm Payrolls report is not a positive sign for the buck.  What's more, this inability to rally in the face of positive economic news suggests the high for the buck may be in.  A dollar drop would be helpful to propel PM higher.

Miners

Senior miners made a new low this week, and have not yet managed to either close above their 9 EMA, or to print a swing low.  Senior miners have teased us by rallying briefly above the 9 EMA, but traders do not yet show any desire to "take the miners home" with them overnight.  As with gold, we see a MACD crossover in GDX, which is a sign that the downside momentum has slowed down.  Still, miners remain weak.

Junior miners fell this week, seemingly pushed lower by the falling 9 EMA.  Junior miners crossed the 9 EMA briefly on Friday, but the rally didn't last and GDXJ fell back below the 9 EMA by end of day, printing an inverted hammer candle to end the week.  This sort of ending to the week has me a bit concerned, since failed rallies are often followed by abrupt moves downhill.

US Equities/SPX

The equity market fell -26.27 to 2077.57, once again testing the 200 MA and finding some support.  On the daily chart, the market looks a bit choppy and confused, but pulling back to the weekly chart we see that the SPX has just been trading in a relatively narrow range for the past six months.  Until the market either breaks higher, or breaks down, it is hard to draw a conclusion about where we might be headed next.

VIX rose +1.27 to 13.39.

Gold in Other Currencies

Gold did extremely well in Rubles and Brazilian Real this week, but side-tracked most everywhere else.

Rates & Commodities

Bonds (TLT) had another good week, rising for the 4th week in a row, up +1.70% and breaking cleanly above the 200 MA.  Bonds are now above all 3 moving averages, and are in a clear uptrend.  Money appears to be flowing from stocks to bonds right now - perhaps this bodes ill for the equity market.  It is a sign of risk off.

Junk bonds (JNK) rallied last week, but it appears to have been just a bounce - JNK lost a big -1.13% on the week, dropping right along with crude oil and commodities.  Junk bonds are signaling risk off.

The CRB (commodity index) fell yet again this week, dropping -2.10%.  Commodities are quite oversold at this point, and momentum might be slowing - but as of right now these are only faint hints rather than any real clear signals of a low.

WTIC dropped too, losing -3.02 [-6.46%] to 43.75.  The low set back in march is 42.41, which is not that far away.  Will oil stop when it hits 42?  Its hard to say, the downward velocity of the oil sell-off is high right now, and I'm not seeing any real signs of a bid under oil right now.  Unlike with overall commodities, the oil sell-off shows no signs of slowing down.

Physical Supply Indicators

* Shanghai premiums fell to +1.81 over COMEX.

* The GLD ETF lost -5.01 tons, with 667.69 tons remaining.

* GC futures remain in backwardation, with the current two front-month spread at -0.30.

* ETF Premium/Discount to NAV; gold closing (15:59 close price on Aug 7th) of 1091.50 and silver 14.74:

 PHYS 8.99 -0.51% to NAV [up]
 PSLV 5.65 -0.64% to NAV [down]
 CEF 10.46 -11.10% to NAV [up]
 GTU 37.65 -6.18% to NAV [down]

ETF premiums were mixed.

* Bullion Vault gold (https://www.bullionvault.com/gold_market.do#!/orderboard) shows no significant premium for gold or silver.

Futures Positioning

The COT report covered trading through Aug 4th, when gold closed at 1090.70 and silver 14.56.

The commercials continued covering short, losing -6.3k short contracts and they remain at six-year lows in terms of their short position, which is very bullish.  Managed Money has started to cover too, dropping -6k shorts this week.  They still remain close to historical highs, but the process of Managed Money short covering is what will launch gold out of its current trough.

Silver remains largely unchanged; Managed Money is still very heavily short but is starting to cover, and the commercials are continuing to close their short positions, dropping -1.8k shorts on the week.

Both gold and silver COT reports look like a rally is ready to happen any day now.

Moving Average Trends [9 EMA, 50 MA, 200 MA]

Silver re-crossed its 9 EMA on Thursday, and gold did so on Friday.  These are early signs of a possible rebound in PM.

Name Chart Change 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Silver COMEX.Silver 0.98% -25.86% rising falling falling falling ema9 on 2015-08-06 2015-08-07
Platinum COMEX.Platinum 0.65% -35.05% falling falling falling falling ema9 on 2015-07-06 2015-08-07
Gold COMEX.Gold 0.36% -16.53% rising falling falling falling ema9 on 2015-08-07 2015-08-07
Senior Miners GDX 0.30% -49.60% falling falling falling falling ema9 on 2015-06-19 2015-08-07
Silver Miners SIL 0.00% -54.54% falling falling falling falling ma50 on 2015-06-23 2015-08-07
Junior Miners GDXJ -0.32% -55.03% falling falling falling falling ema9 on 2015-06-22 2015-08-07

Summary

Gold and silver both moved sideways this week, with silver doing slightly better than gold.  Both ended the week on happy notes, and if buyers show up, both could easily launch sharply higher from where they are now. 

The gold/silver ratio fell, dropping -0.22 to 73.97, still high but slowly retreating.  The GDX:$GOLD ratio fell once again, and is very bearish.  The GDXJ:GDX ratio moved sideways but still looks bullish.

The COT reports show an increased bullish positioning for gold, and a continuing bullish positioning for silver.  There are hints of Managed Money beginning to cover their massive short positions.  If this short-covering starts in earnest, we could see some big moves in PM.

Physical shortage indicators are slightly positive;  in the west, ETF premiums were mixed, GLD tonnage fell again, there is some modest backwardation at COMEX.  In the east, premiums in Shanghai are barely positive.

Commodity prices continued to fall this week - same story, different week.  Six straight weeks of downward move, led lower by oil.  If oil finds support at 42, that would help PM quite a bit.  The dollar may be topping out, which would be helpful as well.

Gold and silver are both showing signs of reversal - the 9 EMA crossing on Friday is our first bit of actual positive price action, and the momentum indicators are also showing incipient reversal signals.  Sometimes "the bottom" is a slow process rather than a V-shaped reversal pattern, and that seems to be the case here.  Right now its all just potential, however; if oil plunges through 42, gold and silver may follow it lower, so we have to watch and wait.

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9 Comments

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2385
Meanwhile, back in the real world of phys;

Dave said,

Physical shortage indicators are slightly positive

Dave Kranzler said,

http://investmentresearchdynamics.com/is-the-fractional-bullion-scheme-f...

YTD silver eagle sales reported by the U.S. mint  are running well ahead of 2014’s record sales pace.   Gold eagle sales in July were up 456% from July 2014.  I heard today that the RCM is now putting silver maple leafs on allocation.   Retail demand for bullion is beginning to avalanche.

Gold sales in Malaysia were up 50% in July – LINK.   South Korea is on track to import a record amount of gold in 2015 – LINK.   Gold imports into India have accelerated well ahead of the biggest  seasonal buying period, which begins in a few weeks.  Deliveries into and withdrawals from the Shanghai Gold Exchange our occurring now at a record rate.

The Federal Reserve, in conjunction with the U.S. Government and the Central Banks and Governments of the EU, has chosen to push down the visible price of gold as much as possible primarily by flooding the market with the naked short-selling of paper gold.  The motive behind this is to support and reinforce the highly artificial and uneconomic policies of zero interest rates and money printing in order to keep the U.S. and European economic systems from collapsing.

The unintended consequences of this operation are now starting to surface, not the least of which are several indicators which suggest that there is significant stress in the availability  physical gold and silver  in both the U.S. and London.

The capitulation is remarkable. I see it everywhere. However, I continue to believe that, in retrospect, this will be seen as the best buying opportunity in the history of gold and,especially, silver.   –  John Embry (from email exchange with John earlier this week)

There you go.. both sides of the coin. 

Luke Moffat's picture
Luke Moffat
Status: Gold Member (Offline)
Joined: Jan 25 2014
Posts: 377
Anyone Else Catch This?

Article over at SRS Rocco Report

The article refers to the decline in silver output from 3 of the world's top 4 producers* (Mexico, Peru and Australia).

Quote:

Total estimated silver production from these top producers in the world would be down from 4,704 mt (Jan-May) 2014, to 4,365 mt in 2015.  Again, I say estimated because I don’t have Q2 data for Australia.  I assumed a small build in production in the second quarter and estimated Australia’s silver production for the first five months of 2015.

If my assumption for Australia’s Q2 silver production is correct (or close), then total silver mine supply from these top producers will be down 339 mt (7%) compared to the same period last year.  This is a lot of silver…. nearly 11 million oz.

* Note: China is number 3 for those interested - stats not available to the public

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5418
kranzler says

The unintended consequences of this operation are now starting to surface, not the least of which are several indicators which suggest that there is significant stress in the availability of physical gold and silver  in both the U.S. and London.

Wish he'd cough up the actual details around these "indicators" so us peons could verify whether or not this is simply yet another unsupported assertion, or something far more interesting - real evidence of a shortage.

Given that he's remaining vague rather than specifically identifying these alleged indicators, I'm going to go with the odds and say he's just talking his book and this is yet more hype.

See, I actually supply the data behind what I base my conclusions on.  That way, you can verify for yourself if I'm drawing the correct conclusion or not.  Wouldn't it be nice if everyone did that?

I really, really want to see gold break out.  But wishful thinking propaganda won't move prices higher, only buyers will do that.

 

 

Luke Moffat's picture
Luke Moffat
Status: Gold Member (Offline)
Joined: Jan 25 2014
Posts: 377
Balance Sheets

In the wider context of gold/silver promotion I try not to get too excited. I've not read the Kranzler article (other than the quote you posted) but as we edge further into deflation mine closures are inevitable. Mining companies drowning in debt, no loans available to fund exploration, weak demand from industrial sector combined with job losses to minimise operational expenditure all leads to low production. I wasn't referring to the paper games on COMEX, I was referring to mining companies staring at their balance sheets.

But yes, i concede the point on evidence. More needed. So let's start with this;

Australian Government Resources and Energy Quarterly Report June 2015

Page 7

Quote:

Australia’s resources and energy commodities, production and exports

The combination of overcapacity, slowing consumption growth and a stronger US dollar have led most mineral and energy commodity prices to decline in the past year. As a result Australia’s export earnings are estimated to have decreased in 2014-15 despite growth in export volumes.

Page 8

Quote:

Exploration

Exploration expenditure declined 9 per cent year-on-year to $1.3 billion in the March quarter, as falling commodity prices removed the incentive to develop new sites. With most commodity prices forecast to remain low through 2015 and 2016 exploration expenditure appears unlikely to rebound in the short term. The decline in exploration expenditure was driven by a 22 per cent year-on-year fall in mineral exploration and a 4.7 per cent fall in petroleum exploration. Exploration at existing deposits fell 21 per cent in the March quarter 2015 (year-on-year) and exploration at new deposits fell 25 per cent. Exploration expenditure fell in every state and territory in the March quarter (year-on-year), led by Queensland which recorded a 47 per cent fall to $53 million, Western Australia which fell 11 per cent to $184 million and South Australia which fell by 13 per cent to $22 million.

Page 9

Quote:

Capital expenditure

Over the past decade global consumption of commodities grew rapidly which in turn led to an increase in prices and an escalation in investment in resource and energy projects. However, with global consumption growth slowing and production of most commodities increasing prices steadily fell through the second half of 2014 and through 2015. This fall in commodity prices has caused mining companies to shift their focus from expanding production to cutting costs. Lower capital expenditure has been one of the principal indicators of this shift in focus.

Quote:

Mining sector employment

Mining sector employment was 229 156 people in the June quarter 2015, down 13 per cent year-on-year. In the wake of falling prices and profitability many producers have reduced staff numbers. Miners have also been consolidating and cutting the price of service contracts, which has led to a fall in the number of employees providing services to the mining sector. Mining sector employment is not expected to rebound in the short term as a fall in construction labour, associated with declining capital expenditure, is likely to fully offset any increases in employment associated with rising production.

Silver Production quota - taken from the SRS Rocco Report referenced in my post above. The source was a little difficult to track down but it can be found here (you'll want the June 2015 statistical data table - sheet 36)

It's worth looking at the full table (above is just an extract). The full table gives export values. 2014 looked to be a slow year until the final quarter - and then BOOM! 117 tonnes exported. First quarter this year sees 99 tonnes exported (refined bullion).

Luke Moffat's picture
Luke Moffat
Status: Gold Member (Offline)
Joined: Jan 25 2014
Posts: 377
Kranzler

Sorry Dave, I thought the Kranzler reference was referring to something i said (i hadn't tracked the reply notification

robie robinson's picture
robie robinson
Status: Diamond Member (Offline)
Joined: Aug 25 2009
Posts: 1182
Thanks JimH

for the other side,

if in Va. give us a connect

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5418
commodity/PM breakout

We may be putting in that long-awaited swing low today.  Commodities have done so already, and gold peeked its head above 1104 only to retreat back slightly below.  If we close above 1103 today, we mark that swing low for gold.

Miners are doing well too, with GDX up 4%.  If they close here by end of day, they too will mark a swing low.

It should be no surprise that oil is rallying too.

This is no guarantee of a long term trend change, but once the momentum starts to reverse, the repeated bursts of short covering should give us quite a nice rally.  Managed Money is very, very short and if they are forced to unwind those positions by the evil banksters, it will provide a lot of fuel for a bounce.

Let's hope the commodity markets close well.

One possible "tell" - the SSEC (Shanghai Stock Exchange) had a very good day, up +4.93%.

 

KugsCheese's picture
KugsCheese
Status: Diamond Member (Offline)
Joined: Jan 2 2010
Posts: 1447
davefairtex wrote: We may be
davefairtex wrote:

We may be putting in that long-awaited swing low today.  Commodities have done so already, and gold peeked its head above 1104 only to retreat back slightly below.  If we close above 1103 today, we mark that swing low for gold.

Miners are doing well too, with GDX up 4%.  If they close here by end of day, they too will mark a swing low.

It should be no surprise that oil is rallying too.

This is no guarantee of a long term trend change, but once the momentum starts to reverse, the repeated bursts of short covering should give us quite a nice rally.  Managed Money is very, very short and if they are forced to unwind those positions by the evil banksters, it will provide a lot of fuel for a bounce.

Let's hope the commodity markets close well.

One possible "tell" - the SSEC (Shanghai Stock Exchange) had a very good day, up +4.93%.

 

Strange that PM stuff is doing so well with stocks doing a casino up move...

sand_puppy's picture
sand_puppy
Status: Diamond Member (Online)
Joined: Apr 13 2011
Posts: 1894
Goldman Sachs and HSBC Accumulate Pet Rocks

The 'Big Long' - Goldman Sachs And HSBC Buy 7.1 Tons Of Physical Gold

from Seeking Alpha

Summary

 

  • On August 6, 2015, Goldman Sachs, which has issued very bearish forecasts on long-term gold prices, took delivery of a 3.2-ton purchase of physical gold.
  • On August 6, 2015, HSBC which also claims to be bearish, took delivery of a 3.9-ton purchase of physical gold.
  • In both cases, the purchases are registered as being for the benefit of the bank's own house account, rather than the accounts of customers.
  • Investors should do as the banks do, not as they say.

Maybe, these banks know something. ....  why not buy an equivalent amount of gold in the form of shares in a highly liquid, easily traded gold trust? HSBC is actually the custodian of the alleged gold bars inside GLD, so you would think they would view it just as good as gold? Apparently not...

 

Perhaps, then, the banks are filled with tinfoil-hat-wearing goldbugs? You have to wonder what they're worried about, because they're not buying paper-gold shares ... either. They are buying hard metal bars that they can fondle. Whatever is going on, it is a big deal because absolutely no one who really believes long-term gold prices will stagnant or decline would buy 7.1 tons of physical metal.

 

 

 

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