PM Daily Market Commentary - 9/17/2015

davefairtex
By davefairtex on Thu, Sep 17, 2015 - 1:09am

Gold rallied +11.80 to 1130.10 on moderately heavy volume, and silver climbed +0.22 [+1.44%] to 15.11 on moderately heavy volume.  The PM rally started immediately after 14:00 Eastern, after the Fed announced that it was not going to raise its short term rates.  The buck fell substantially, that appeared to drive gold up by about the same amount.

At the time of the announcement, gold immediately spiked higher through the 50 MA, and gold managed to retain much of its gains through to the close.  Gold in euros ended up falling on the day so gold's move was entirely a currency effect.  Gold's next step is to close above the previous high at 1147.30; if the dollar continues to fall, this will most likely happen.

Silver continued higher today, climbing +0.22 to to 15.11, closing clearly above its previous high of 14.97.  The breakout was not particularly dramatic, and silver sold off a bit after the initial pop following the FOMC announcement.   While silver's move at the time of the announcement was respectable, there was little follow-through; silver really needs a close above 15.75 in order to get the attention of the shorts.  I'm not trying to be negative, I just expected a better performance on the news.

Miners continued their rally today, with GDX rising +2.74% on heavy volume, while GDXJ was up +3.72% on moderate volume.  GDX rallied right up to the 50 MA but was unable to close above it, while GDXJ looked more bullish, closing above its 50 MA for the second day running and breaking out above a previous high.

Senior miners could be in the process of forming a "double bottom", but the pattern needs confirmation by a close above 16.25.  Double bottom patterns are bullish reversal patterns, but we have a ways to go before we get there.  The GDX:$GOLD ratio shows some improvement, but overall it remains bearish in the medium and longer term.

The USD fell -0.87 to 94.68, dropping through its 200 MA and continuing its downtrend that topped out three weeks ago.  The buck started selling off about ten minutes prior to the FOMC announcement, sold off some more at the time of the announcement, and continued falling more slowly into the close.  The Euro rallied, climbing +1.24% - as mentioned before, gold in Euro terms actually fell on the day.

The FOMC explicitly tied the failure to raise rates to the uncertainty in China, as well as threats to inflation that are "global economic and financial developments" - whatever that means.  Perhaps they are referring the recent market tantrums.  "We won't raise rates unless China calms down and the markets stop throwing a fit."  It's always something - if its not one thing, its another.  The uncertainty about a rate hike remains, it has just moved out another six weeks.  The Fed has successfully threatened a rate hike all year long, and as a result the markets continue to view a rate hike as almost certain - but the timeframe is perennially three months out.  This tells me the Fed remains credible in the eyes of the market.

What does this mean for gold?  Well if Armstrong is right, and gold is a hedge against government (and by extension, the Fed), most likely it will only really move higher once confidence in the Fed is on the downhill slide.

SPX rallied after the FOMC announcement climbing as much as as 25 points, but then it peaked, and then SPX sold off hard into the close, eventually closing down -5.11 to 1990.20.   VIX ended down on the day, dropping -0.21.  The failed rally painted a hammer candle, and this appears bearish for SPX - it could potentially mark the top in the SPX rally off the lows.  It looked like traders took the rally as an opportunity to sell.

Bond ETF TLT started rallying an hour before the FOMC announcement, and continued rising right into the close.  TLT climbed +1.22%, marking a swing low on the day.  Bonds could continue to rise from here, especially if traders decide that whatever issues that caused the Fed not to raise rates this time will remain in play.

The CRB (commodity index) fell -0.38%, a poor performance given the extremely weak dollar.  CRB is chopping sideways within a range at this point, trying to decide if it will continue rallying or re-test its lows.  CRB remains above its 9 EMA but below the 50 MA.

WTIC (oil) fell too, dropping -0.23 [-0.49%] to 46.90.  After breaking out of its descending triangle pattern, oil remains above its 50 MA.  Its hard to say if it will continue rallying or fall back to test its lows.  Given the plunge in the buck today, oil's fall today didn't look all that bullish.

HAA has 100 oz gold bars right now in NYC at 1152.94/oz [+2.18% over spot], and 1000 oz silver bars in NYC at 15.62/oz [+3.52% over spot].   Eagles in NYC are quoted at 19.21 [+31.39% over spot].  Premiums fell on the day, and there is no visible big-bar shortage.

Gold's move today was entirely a currency effect; if the dollar continues to drop, gold will hopefully continue rising.  There does not look to be any large buying pressure at COMEX, but the charts definitely do look improved vs three days ago.  Miners are looking more hopeful than they did, with juniors leading seniors.  Will the buck keep falling on "no rate rise" by the Fed?  That's the open question.

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4 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5064
just guessing...no rate raise.

Buck down -0.70, to 94.81, gold up +4 to 1125 and silver +0.30 to 15.16.

 

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
Done. Fin. (With a silver lining)

I lied about the 10 year tend on Silver bottoming out. The line just keeps trucking down.

Here is how see it.

Forget about the lower class. They haven't any spare change. The middle class are represented by John and Mary. And no one else. All the money is in the coffers of the Corporations and their running dog parasites. Who live the life of tapeworms.   What corporation buys gold? 

In Catherine A. Fitts's language we have two economies,  mainstreet and the tapeworm.

So the real economy that we watch is starved for cash and can't buy gold. And the tapeworm Wall street that is trotted out by their bought press when they analyse the markets. 

I feel as though this parasite is done with it's host. 

Corporations might find silver hard to come by though. That is if carbon nano tubes don't unseat silver as the best conductor. 

 

sand_puppy's picture
sand_puppy
Status: Diamond Member (Offline)
Joined: Apr 13 2011
Posts: 1757
Dilbert on owning physical gold ;-)

All forms of savings carry risks that need mitigation.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5064
QE/next phase goes main stream

Saw this reference over at TAE.  This is the continuing of the mainstreaming of QE Phase 2; Chris imagines a one-year tax rebate, while other people imagine government infrastructure spending, or simply depositing money into people bank accounts - all funded by money printing.  Last paragraph I quote is the key: it has been done before, in Japan in 1932, and with "good results."

I've said it before - this is surely the next tool in the toolbox to be used.

http://www.telegraph.co.uk/finance/economics/11869701/Jeremy-Corbyns-QE-for-the-people-is-exactly-what-the-world-may-soon-need.html

There are many good reasons to gasp at Jeremy's Corbyn's planned assault on capital, but his enthusiasm for "People's QE" is not one of them.

Overt monetary financing of deficits - the technical term - is exactly what the world will need if the global economy tips into another recession with interest rates already at zero and debt ratios stretched to historic extremes.

Variants of People's QE were tried in the inter-war years. Japan's Christian prime minister Takahashi Korekiyo instructed the Bank of Japan in 1932 to fund a blitz of fiscal spending until deflation was defeated, pulling his country out of the Great Depression remarkably quickly.

 

 

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