PM Daily Market Commentary - 8/26/2015

By davefairtex on Thu, Aug 27, 2015 - 12:56am

Gold fell -15.50 to 1124.80 on very heavy volume, while silver was crushed again, falling -0.58 [-3.96%] to 14.08 on very heavy volume as well.  Both silver and gold were sold steadily all day, with the low hitting at 10:30 ET.  Neither metal had much of a bounce off the low.  Silver actually touched 13.91 at one point, which is a new five-year low for silver.

Gold has continued to fall since the swing high, and the selling is at relatively high volume.  These are not great signs, and neither is today's close below the 50 MA.  While gold is definitely holding up better than silver, and much of today's move lower can be attributed to some big currency moves (the Euro was off -1.75% and GBP -1.43%), so far there is no sign of a slowdown in gold's move lower off its swing high.  Perhaps once the buck stabilizes, so will gold, but we will have to see.

Today, silver plunged through its previous low of 14.15 that dates back to December of 2014.  Making new lows is never a good sign, as its a clear signal that a downtrend remains intact.  Silver has been weak for the past four days, losing about $1.50 in that time, and this dreadful performance has pushed the gold/silver ratio to 79.89, the highest level since December 2008.  Back then, the gold/silver ratio peaked at about 82.

Miners continue to be heavily sold.  GDX dropped -4.61% on heavy volume.   Most of the selling happened early, and GDX just traded sideways for the remainder of the day.  It has been a 23% loss in 4 days, and from what I can see the selling pressure is still on, so more lows can probably be expected.  Juniors acted worse, dropping -5.13% and also very heavy volume.  For now, stay away from the miners.

The USD rebounded today, recovering yesterday's late-day losses and then some, closing up +0.59 to 95.13, moving back over the 200 MA.  All in, the dollar was probably up more than 1.40, even though the futures markets report a much lower gain because of the early closing time for the USD index.  The dollar strength was supportive for the equity market, but troublesome for PM and commodities.  In Euro terms, gold actually climbed today.

SPX staged a strong rally again today, but this time it did not encounter any late-day selling; the difference between yesterday and today?  A very strong rally in the dollar that continued through end of day.  SPX closed up a big +72.90 to 1940.51.  VIX fell -5.70 to 30.32.  Once again the market confounded yours truly; I expected a further drop based on yesterday's selling pressure, but instead we got a strong bounce.  Its a good thing I didn't have any positions that depended on my forecasting ability!

This doesn't mean the selling pressure is gone - it just means that it seems to be reduced at these price levels.  There it little doubt in my mind that as the market moves higher, more sellers will emerge - and you can be one of those sellers if you like.  Once this bounce slows down and the selling pressure appears again, that's your opportunity to enter short.

Bond ETF TLT sold off hard for the third day, dropping a big -1.93% and moving TLT below its 200 day MA.  Someone out there is dumping the long bond in large quantities, and I suspect it is probably not Ma & Pa Kettle.

The CRB (commodity index) fell -1.27%, erasing yesterday's gain, almost making yet another new low.  Commodities cannot muster any sort of rally right now.

WTIC (oil) fell as well, dropping -0.76 to 38.88; oil managed to avoid making a new low, but it remains below its 9 EMA and is still in a downtrend.  A relatively bullish-looking Petroleum Status Report at 10:30 showed a drop of -5.5M barrels in storage, but that failed to change the direction of the oil market for longer than a minute or two.  Still, no new low today, that's a good sign right?

After topping out not long ago, PM is now back in sell-mode, with silver and the miners leading to the downside.  The gold/silver ratio is at 7-year highs.  The US market is bouncing while treasuries are being sold hard.  The downtrend in commodities is unchanged, and silver and the miners are back to following commodity prices lower.  Gold still has a chance to remain in an uptrend, and a weaker dollar would definitely help but as always, all we can do is wait for the buyers to appear.

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davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
commodity rally today

Don't look now but the commodity complex has finally decided to rally - in the teeth of a huge move higher in the USD, up +0.76 to 95.91.

Copper has put in a swing low, up +3.49% on the day, and is above its 9 EMA.

Oil too has put in its swing low, is trading up +2.35 around $41, and it is also above its 9 EMA.

Gold miner GDX is also above yesterday's high, which will form a swing low for the miners.

Of course, we have to wait to see if it all holds through the close.  And buying things now is a bit iffy considering all the uncertainty in equities.  But - isn't it interesting how commodities decide to rally now?

This should help silver out quite a bit.  Theoretically anyways.


davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
correlations: sometimes they are magic

So soon after I posted that last, silver rocketed higher (+3.03%), following copper (now up +4.47%) which ended up dragging gold along behind it.  Because I was watching copper & oil, I had a sense they'd probably drag silver higher - and they sure did.

Now we just get to see how it closes.  But if the commodity complex can pick itself off the floor, that should help PM quite a bit.  Especially silver.


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