PM End of Week Market Commentary - 9/25/2015

davefairtex
By davefairtex on Sat, Sep 26, 2015 - 1:28am

On Friday, gold fell -7.80 to 1145.50 on moderately heavy volume, while silver fell -0.02 to 15.10 on light volume.  Both metals sold off a bit after Thursday's large move higher.  Gold found some support at 1140, while silver barely moved at all.  Given the rally in the dollar, this was not a bad showing for PM.

On the week, gold rose +6.40 [+0.56%], silver fell -0.05 +0.56 [-0.36%], GDX fell -3.45% and GDXJ moved down -4.47%.  Platinum dropped -3.57% and made a new low, while palladium screamed higher up +8.64%.

This week gold managed to close above both a previous high as well as the medium term downtrend line.  These two bullish accomplishments show that gold remains in its short term uptrend.  This is a pretty good performance, especially given the dollar rally during the week.  If gold can cross the old high at 1170, that will be quite positive, since it will signal that the uptrend off the 1080 lows remains intact.  The shorts have to be a little bit nervous at this point.  Looking at the volume picture, that's also bullish - up-day volume is substantially higher than down-day volume.  Picture continues to look good for gold.

Silver found support this week at 14.75, but was unable to close the week with a new high.  If you compare this with gold's performance, you can see that silver is definitely lagging behind gold.  Silver needs a close above the old high at 15.44 to "keep up" with gold.  Copper dropped -4.14% on the week; they are often closely correlated and perhaps that is why silver is underperforming.

Miners

Miners encountered some selling this week, with the miners dipping below the 50 for three days.  They look to be following silver more than gold, in that they have yet to surpass last week's high.  The volume picture looks bullish - up-day volume looks stronger than down-day volume - but the price action is still not so great.  The GDX:$GOLD ratio continues to bounce along the bottom; no bullish sign there yet.  Junior miners are doing a little better - but only a little.  It appears if GDX can close above its downtrend line, it will also break above last week's high at the same time.  That however is just step #1.  Miners really need a close above 16.25 to change the chart from bearish to bullish.

The USD

The dollar rose this week, climbing +1.44 to 96.43, breaking to new highs for this cycle and just barely squeaking over the 50 MA.  On Friday the buck rose, but ended up printing a bearish looking doji candle on the day.

The dollar strength seems to be affecting mining shares, but gold managed to move higher regardless.  Gold in euros actually rose +1.52% this week, a nice move.

US Equities/SPX

SPX fell -26.69 to 1931.34.  Equities have just been dribbling lower; rallies continue to be sold and the one bullish reversal candle from Thursday has yet to be confirmed.  The strength in the dollar this week does not seem to have helped the equity market.  That's a change from recent behavior - and that's probably not bullish for equities.

VIX rose +1.34 to 23.62.

Gold in Other Currencies

Gold rose in all currencies again this week; gold in XDR was up $15, which gives a good sense of how well on average gold is performing overall.


 

Rates & Commodities

Bonds (TLT) fell on the week, dropping -0.56%.  Bonds are more or less tracking sideways; if you are a bond bull you expect bonds to be rallying as the equity market falls.  Since that isn't happening, something else is in play.  There is selling pressure coming from somewhere, and that's been true for a while.

Junk bonds (JNK) are making another leg down this week, dropping a big -1.74% and looking quite bearish.  The chart looks pretty ugly, and it appears that JNK will re-test its lows within the next few days.  The bearish pattern of lower highs and lower lows is unmistakeable in JNK - I count five in the past four months.  JNK is saying: risk off.

The CRB (commodity index) rose +0.79%, managing to climb back into its recent trading range after an unpleasant day on Wednesday.  CRB still looks to be trending lower; it really needs a close above the range to inject some hope for commodity bulls.

WTIC was mostly flat this week, closing up +0.02 to 45.34, just barely above its 50 MA.  Oil has been more or less tracking sideways now for the past four weeks - eerily similar to what it did for 8 weeks back in May and June.  I keep thinking oil will break lower, but buyers have come to the rescue every time so far.  A close below 44 is my danger sign that oil prices are going to break lower.

Physical Supply Indicators

* Premiums in Shanghai over spot are now at +2.03 over COMEX, down vs last week.

* The GLD ETF tonnage on hand increased +5.96 tons this week, with 684.14 tons remaining

* GC remains in backwardation, with the current two-front-month spread at -0.10.

* ETF Premium/Discount to NAV; gold closing (15:59 close price on Sept 25th) of 1146.20 and silver 15.07:

 PHYS 9.44 -0.43% to NAV [up]
 PSLV 5.92 +1.90% to NAV [up]
 CEF 11.12 -9.05% to NAV [down]
 GTU 40.83 -2.80% to NAV [up]

ETF premiums were mostly up - GTU looks especially strong.

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

* HAA big bar premiums are slightly higher for gold [2.28% for 100 oz bars in NYC], and lower for silver [4.06% for 1000 oz bars in NYC].  Silver Eagle premiums continue to rise [38.86% in NYC].

Futures Positioning

The COT report covered trading through Sep 22nd, when gold closed at 1125.00 and silver 14.75; the coverage period included the big $40 rally from 1100 to 1140, and the two day selling period that followed.

Gold commercials increased their shorts by 18.4k, as they usually do when price rises.  Gold commercial shorts remain quite near the lows even with this week's increase.  Managed money covered 8.7k shorts this week - a decent amount, but I'd estimate another 65k contracts remain before the shorts "run out."  We have plenty of fuel left in the tank, in other words.

In silver, commercials increased their shorts by 5k, while Managed Money covered -11.6k shorts.  I'd say another 20k shorts remain - silver is not looking nearly as bullish as gold, and Managed Money doesn't look nearly as interested in going long.

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

This week, we saw the 50 MA for both silver and gold has started to rise.  That's another sign of improvement.

Name Chart Change 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Silver COMEX.Silver -0.13% -13.38% rising rising falling rising ema9 on 2015-09-24 2015-09-25
Platinum COMEX.Platinum -0.48% -27.62% falling falling falling rising ema9 on 2015-09-21 2015-09-25
Gold COMEX.Gold -0.70% -6.18% rising rising falling rising ema9 on 2015-09-16 2015-09-25
Senior Miners GDX -1.62% -36.99% rising falling falling falling ema9 on 2015-09-24 2015-09-25
Silver Miners SIL -1.78% -40.22% rising falling falling falling ma50 on 2015-09-25 2015-09-25
Junior Miners GDXJ -2.24% -43.38% rising falling falling falling ema9 on 2015-09-24 2015-09-25

Summary

This is the second week of uptrend off the 1100 price level.  Gold continues to break higher, shorts are covering, and miners and silver are underperforming.  Given dollar strength, this is a good outcome.

The gold/silver ratio rose this week, climbing +0.70 to 75.89, underscoring silver's underperformance.  The GDX:$GOLD ratio fell this week - the best that can be said for the ratio is that its neutral in the short term.  GDXJ:GDX fell this week - remaining largely bullish, but it is fading a bit.

The COT reports show that the shorts are covering, as usually happens on a rebound off the lows.  Plenty of fuel remains for a continued move higher, more so in gold than in silver.  It does not look like Managed Money is going long PM; all the movement is due to short covering.  If this reluctance to buy continues, it will place a cap on how high the rally can go. 

Gold and silver big-bar physical shortage indicators are unchanged; in the west, ETF premiums were up, GLD tonnage rose, and gold futures remain in backwardation at COMEX.  In the east, premiums in Shanghai moved down.   Big bar premiums at HAA were mixed.  Retail shortages in silver increased, with silver eagles selling at a 38% premium to spot.

Gold currently has some momentum; if it can close above 1170 that would change the medium term trend in gold from down to neutral.  Silver and the miners are following along behind.  Commodities continue to be relatively weak, which isn't helping, and the dollar is continuing to rally, which isn't helping either.

My prime concern is, the PM engine isn't firing on all cylinders right now; ratios say this, so do the miners.  Whatever is driving gold higher isn't Managed Money going long, its short covering.  This is a bit of a thin reed to base the rebound on - there is a fixed expiration date on the rally which arrives once the shorts have all covered.  Let's hope someone at the COMEX starts buying soon.

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4 Comments

HughK's picture
HughK
Status: Platinum Member (Offline)
Joined: Mar 6 2012
Posts: 761
Falling knives & Sux to be Glencore

NASDAQ completes the death cross grand slam

Glencore shares plunge as debt fears rattle investors (Note, w/o much research, it seems to me that Glencore may be the Enron of our time.  Is this a fair statement?)

Looking forward to the commentary tomorrow.  Will promising never to raise interest rates ever ever ever again help?

Michael_Rudmin's picture
Michael_Rudmin
Status: Platinum Member (Offline)
Joined: Jun 25 2014
Posts: 847
Can you look at Palladium again?

My interest is in the Pd, and it admittedly has performed worse than gold and silver over the time of my interest. Yet it is looking very promising about now.

Could I ask you to take a glance over there, and declare what you see and don't see?

Thanks.

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 5456
palladium

On the daily chart PALL put in a clear swing low on the 25th, had a nice breakout on Sep 16, broke above 625 resistance convincingly four days ago, and has endured some modest selling yesterday.  It is a little overbought right now and might need to rest for a bit.  If it holds the 9 EMA that's quite bullish; otherwise I'd say the 625 level might be decent support.  Ratio-wise, its easily outperforming overall commodities ($PALL:$CRB), and it is also doing better than gold.

Weekly chart looks decent too - PALL marked a weekly swing low 1st week of September, had a bullish MACD crossover at about that same time.  I don't know what's making it move, but it looks good in both timeframes.

Hmm, even on the monthly timeframe, PALL looks good.  I especially like $PALL:$CRB, it looks quite strong.  Something over the long term has definitely put a bid under palladium; perhaps its car manufacturing?  I don't really follow it so I'm not as clued in to the fundamentals as I need to be to give you a decent answer.

I'll ask my computer what it thinks and I'll let you know.

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 5456
palladium

Computer confirms the low at the time of the swing low in August, but now it is seeing a high based on Monday's move; this is a bit speculative since the week is far from over; we can't know for sure for another 4 days.

Hmm, now that I look at it, PALL did just print a swing high on the daily chart yesterday.  Perhaps my computer is seeing something I missed.

Swing high suggests a correction of some sort is probably on the way.

I still like PALL better than the rest of the commodity complex, however.

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