PM End of Week Market Commentary - 9/18/2015

davefairtex
By davefairtex on Sat, Sep 19, 2015 - 3:38am

On Friday, gold rose +9.00 to 1139.10 on moderately heavy volume, while silver moved up +0.03 to 15.15 on moderate volume.  Both gold and silver made new highs today just before market open in NY; gold was able to hold onto most of its gains.  Silver was not so fortunate.  The buck rallied strongly at end of day.

On the week, gold rose +31.20 [+2.82%], silver climbed +0.56 [+3.87%], GDX rallied +9.61% and GDXJ moved up +9.59%.  Platinum was up +1.05%, palladium climbed +2.81%, but copper fell -2.94% with most of those losses coming on Friday.

Last Friday gold made a new low, which turned out to be the low for this cycle - the swing low was confirmed on Wednesday, and gold managed to cross two moving averages on some decent volume.  It looks to me that now that the selling pressure coming from the overhang of a potential Fed rate rise is gone, the shorts are covering and some new buying is appearing at the COMEX.  The next technical hurdle for gold is crossing its medium turn downtrend line at 1155; after that, we're looking at the 1170 previous high.  Those are both two logical places for the shorts to renew their attack and if they cannot stop gold's rise, it suggests the possibility of a longer term trend change for the yellow metal.  But I'm getting ahead of myself.  We aren't there yet.

14.25 proved to be a decent support level for silver; on Wednesday it launched off that level and crossed two moving averages.  After the FOMC meeting on Thursday silver rallied a bit more, but then on Friday silver ran into a bit of trouble at the downtrend line.  The almost-doji candle is a bit of a concern, and may signal that silver is running out of steam and is encountering a bit of selling pressure.  A close above the downtrend line would be helpful, and after that, its a close above 15.75 that would mark the end of the medium term downtrend for silver.

Miners

Miners had a solid week, with GDX managing to climb through both moving averages and is now approaching its medium term downtrend line.  Next step for the miners is a close above the downtrend line; after that, its the old high at 16.25.  A close above 16.25 would confirm the "double bottom" pattern which would be a solid bullish reversal signal to the longer term traders.  The GDX:$GOLD ratio is also starting to look short-term bullish, which is nice to see after being bearish for so long.

Juniors also look good; they are closer to marking a double bottom than the senior miners, although they ran into a bit of selling on Friday.

The USD

The dollar had a very wide trading range on Friday; stockcharts says it closed at 95, up +0.32, but after the ostensible close it continued higher, ending the day up +0.68 to 95.36.  This Friday rally wiped out almost all the losses post-FOMC, which is an interesting outcome.  I expected the buck to continue falling after the rate rise didn't happen, but the rebound Friday was quite strong.

On the week, USD fell -0.20 to 95.00, but again that didn't account for what happened after the close.  If that is included the buck actually rose on the week, up +0.12 to 95.36.  Given the dollar's strength, gold's move this week looks quite strong.

US Equities/SPX

SPX was slightly down on the week, falling -3.02 [-0.15%] to 1958.03.  That minor drop conceals a fair amount of price movement - a rally early in the week met strong selling after FOMC and especially on Friday, where SPX dropped -32.17 points on some pretty high volume.   The weekly candle print is almost a gravestone doji/inverted hammer - bearish in either case.  While the equity market hasn't picked a direction just yet, this week's failed rally candle suggests we probably go lower.  It appears that equities didn't like the Fed's rate decision so much.

VIX dropped -0.92 to 22.28.

Gold in Other Currencies

Gold rose strongly in every currency this week, especially in Rubles and BRL.  You can see by the gain in Gold.XDR that this week's rally was not just a currency effect.  The Brazilian Real is not doing well.  They should buy gold.  :-)


 

Rates & Commodities

Bonds (TLT) staged a reversal this week, climbing +0.58%.  On the weekly chart we see a bullish-looking dragonfly doji, and on the daily chart we see a swing low marked Thursday after FOMC, with follow-through on Friday.  Bonds seem to like the Fed rate decision.  My guess is they'll continue to move higher, especially if the equity market continues to sell off.

Junk bonds (JNK) on the other hand moved lower, dropping -0.78% and hinting at another possible bout of risk-off selling.

The CRB (commodity index) fell -1.29%, with all of the losses coming on Friday's -2.03% strong sell-off.  The move on Friday took the commodity index out of its trading range, and appears to hint at a near term move lower in the near term.

WTIC rose +0.54 [+1.21%] to 45.32, more or less chopping sideways within a range.  WTIC broke higher out of its descending triangle pattern on Wednesday, only to drop back down on Friday's correction.  WTIC spent two days this week above the 50 MA, but could not hold there.  My computer says oil looks bearish in the near term; if true, oil probably will drop below 44 support and might even retest the lows at 37.

Physical Supply Indicators

* Premiums in Shanghai over spot are now at +5.04 over COMEX, up slightly vs last week.

* The GLD ETF was unchanged this week, with 678.18 tons remaining

* GC has moved into backwardation, with the current two-front-month spread at -0.30.

* ETF Premium/Discount to NAV; gold closing (15:59 close price on Sept 11th) of 1107.00 and silver 14.58:

 PHYS 9.38 -0.47% to NAV [down]
 PSLV 5.94 +1.66% to NAV [up]
 CEF 10.60 -8.65% to NAV [up]
 GTU 38.10 -4.18% to NAV [up]

ETF premiums were mostly up - some by as much as 2%.

* Bullion Vault gold (https://www.bullionvault.com/gold_market.do#!/orderboard) shows no significant premium for gold or silver, but some pretty wide spreads for silver in Toronto and Singapore.

* HAA big bar premiums are slightly higher for gold [2.23% for 100 oz bars in NYC], and higher for silver [4.22% for 1000 oz bars in NYC].

Futures Positioning

The COT report covered trading through Sep 15th, when gold closed at 1102.60 and silver 14.32, which was right before the big PM rally this week.

Gold commercials reduced shorts by a huge -23.6k, right at the low.  They're smart money.  Managed money increased shorts by +13.8k.  Commercials indicate this could well be a low here.  Positioning for gold looks bullish.

In silver, commercials continue to cover, this week -4k contracts.  Managed money also covered, dropping -1.1k contracts.  Commercials have not been in this place since late 2014; its also pretty bullish for silver.

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

Well, that's quite a difference in a week.  Most PM items have cross two moving averages, which looks substantially healthier than last week.

Name Chart Change 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Platinum COMEX.Platinum 1.66% -27.05% rising falling falling rising ema9 on 2015-09-18 2015-09-18
Senior Miners GDX 1.54% -37.03% rising falling falling falling ma50 on 2015-09-18 2015-09-18
Gold COMEX.Gold 0.71% -7.16% rising falling falling falling ema9 on 2015-09-16 2015-09-18
Silver Miners SIL 0.44% -41.54% rising falling falling falling ma50 on 2015-09-17 2015-09-18
Silver COMEX.Silver 0.29% -18.17% rising falling falling rising ema9 on 2015-09-16 2015-09-18
Junior Miners GDXJ -0.52% -43.72% rising falling falling falling ema9 on 2015-09-16 2015-09-18

Summary

Gold found support at 1100, and printed a swing low the day before the FOMC meeting; after the meeting gold continued to rally showing some real strength regardless of moves in currency.  Silver wasn't quite as strong, but followed gold higher.  Miners looked solid.

The gold/silver ratio fell -0.77 to 75.19, retreating from the highs set three weeks ago.  The GDX:$GOLD ratio rallied this week and is now looking near term bullish; GDXJ:GDX was unchanged, and remains bullish.  The ratios signal improvement.

The COT reports which cover the period immediately before the rally, show a decrease in Commercial shorts for both gold and silver.   The potential is there for quite a bit of short covering, and my sense is that not all that much short covering happened this week, so there is yet more fuel for a continued move higher if the buyers at COMEX are willing to push prices above some of the previous highs.

Gold and silver big-bar physical shortage indicators are ticking higher; in the west, ETF premiums were up, GLD tonnage is unchanged, and gold futures moved into backwardation at COMEX.  In the east, premiums in Shanghai moved up slightly.   Big bar premiums at HAA increased, especially for silver.  Retail shortages in silver increased, with silver eagles selling at a 33-36% premium to spot.  Given that price rose on the week, the increase in premiums is noteworthy.

The computer this week is split; it likes the prospects for gold and sees good potential for even higher prices, but is showing a potential reversal (top) for silver and isn't nearly as bullish.  For crude, the computer is showing near term reversals for both crude and SPX.  So gold higher, and crude, silver, and equities lower.  That's pretty much what I see too.

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