PM Daily Market Commentary - 8/12/2015

davefairtex
By davefairtex on Wed, Aug 12, 2015 - 9:50pm

Gold rose +16.90 to 1125.00 on heavy volume, while silver climbed +0.18 to 15.51 on extremely heavy volume.  Gold spiked lower in early Asia trading at the time of the CNY devaluation, but then recovered quickly, and spent the rest of the day moving higher, closing at the highs of the day.  Both metals broke to new highs for this cycle today.

Gold is rising on heavy volume, which is a good sign.  For the last few days, intraday dips have all been bought which to me shows that the buyers are here.  Gold is now moving up to test resistance at 1140, which also happens to be the falling 50 MA.  A convincing close above the 50 MA is gold's next step, which could change this rally from a short-covering bounce into a more sustained medium term uptrend.

Armstrong's computer has confirmed gold's "September rally" on the close above 1109 today.  It advises a sale on a weekly closing above 1144.  Note how that ties in with my resistance line on the chart below and the current value of the 50 MA - although we are still quite a ways away from September at this point.

Although percentage-wise gold outperformed silver today, overall silver is looking stronger than gold - silver just closed above its 50 MA.  Volume on the rally continues to be strong, although I am a bit worried that if the rest of the commodity complex can't rally, silver may start to run into problems.

Senior miners did extremely well, gapping up at the open, fading a bit into the afternoon, but then rising strongly higher into the close.  GDX rose a huge +6.89% on extremely heavy volume.  Those are all good signs, and a dramatic change from what we were seeing just last week.  Shorts are running for cover, and the longs are buying the dips.  GDX:$GOLD ratio has reversed too - miners outperforming gold is a bullish sign.

Juniors did better than the seniors again today, rising a huge +8.01% on heavy volume.  GDXJ just moved higher all day long, with a nice spike right into the close.  It sure feels like the shorts are being squeezed hard.  A close above that 50 MA is the next step for GDXJ.  I like that GDXJ is outperforming GDX.

The USD fell hard, dropping -1.04 [-1.07%] to 96.29, closing below its 50 MA for the first time in a month and a half.  Initially the devaluation of the RMB was seen as dollar-positive especially vs the commodity currencies CAD and AUD, but as the day wore on, the dollar fell, the Euro rose, and AUD actually appears that it may have put in a significant low at 0.7215.

Overall, gold certainly seemed to like the CNY devaluation.  While it makes it more difficult for Chinese people to buy gold, it also increases their motivation to do so - who wants to hold a dropping currency?  As of right now, the premium for gold in Shanghai has jumped to +15 over COMEX, and gold in CNY is looking quite strong.

SPX sold off hard in the futures markets prior to the open, dropping almost 35 points.  However about an hour into the NY session it made its low, and recovered all the way back into the green, closing up +1.98 to 2086.05, printing a massive bullish hammer candle on the day.  SPX remains in a trading range.  VIX fell +0.10 to 13.61.

Bond ETF TLT fell -0.55%, printing a bearish engulfing pattern on the day.  Bonds did not like that reversal in equities.

The CRB (commodity index) fell -0.21%; commodities continue to struggle to put in a low.  Gold and silver have diverged strongly from CRB in the past three weeks.

WTIC (oil) continues to struggle, up just +0.14 to 43.31.  It didn't put in a new low, but neither is it showing any signs of rallying.  To my mind, oil needs a convincing close above its 9 EMA and a swing low before it will reverse course.  Oil equities, on the other hand, have had a strong last three days.  Do we believe the equities, or oil itself?

We are fortunate that PM has diverged so strongly from oil and the rest of the commodity complex in recent weeks.  The week-long weakness in the dollar has helped PM, but gold and silver are looking a bit overbought at this point.  I could see gold taking a rest at 1140 resistance - which means we might see a sell-off and a drop back to the 1100 range.  However if commodities finally put in a low and the dollar keeps falling, gold might just keep climbing.  A wildcard is what happens with CNY.  We have to watch and see how things unfold.

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