PM End of Week Market Commentary - 10/23/2015

davefairtex
By davefairtex on Sat, Oct 24, 2015 - 6:54am

On Friday, gold fell -1.90 to 1164.00 on moderately heavy volume, and silver dropped -0.02 to 15.81 on moderately heavy volume as well.  Both metals and a flurry of other things broke higher at around 07:15 Eastern, but a few hours later most of that same stuff sold off again - especially copper, which ended the day off -1.47%.  As a result there were a number of failed rally candles printed today.

On the week, gold fell -13.40 [-1.14%], silver dropped -0.22 [-1.37%], GDX rose +0.79%, and GDXJ was up +0.13%.  Platinum fell -1.45%, while palladium dropped -0.28%.

Gold elected to correct this week, but compared to corrections in recent months the move lower has been quite mild; you can see in the chart that the correction has been much shallower.  Is this a result of the move through the 200 MA?  Its hard to know.  Still, something seems to have changed.  Corrections are expected in both uptrends and downtrends; what determines trend is how soon into the correction that the buyers start to appear.

Silver surprised me by selling off very mildly this week - even rallying on Thursday.  On Friday it looked for a time that silver would actually move back above the 200 MA, but it was unable to hold those gains into the close.  Still, silver has resisted selling off; perhaps that's the Draghi Effect at work.  If not for the ECB Chairman, perhaps silver would be hovering down around the 50 MA.  Its hard to know.

Miners

The miners have - incredibly - managed to avoid correcting at all.  After one brief spike below the 9 EMA, buyers showed up, the miners rebounded and they now appear to be headed for another breakout.  Since miners are the riskiest group in PM, this is a bullish sign overall.   On the weekly chart, GDX has now printed a couple of hammer candles, which suggests that the buyers do not find miners too expensive at this point.  Perhaps it was gold's close over the 200 MA that caused this change - maybe it will disappear next week - but GDX rising in a falling gold price environment says "risk on PM" to me.  As long as it continues, of course!

The USD

The dollar absolutely screamed higher this week, climbing +2.65 [+2.81%] to 97.24, breaking cleanly above the previous minor high at 96.88 and if it can sustain this pace - a reasonably-sized if - looks as though it will test the Aug 7th high at 98.42.  Before the Draghi ECB statement on Thursday, it looked like the buck was engaged in a bit of a dead cat bounce - possibly traders closing some short positions in the advance of the ECB meeting.  Boy, they sure are glad they did.

Here's how the dollar fared this week against the DX bundle.  Mostly it was a Euro disaster, with the Euro now at 110.15; if you look at the Euro chart, it doesn't look like there are any Euro buyers out there right now.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Euro USD.EUR 3.01% 14.81% rising rising falling rising ma50 on 2015-10-22 2015-10-23
Swedish Kroner USD.SEK 2.78% 16.47% rising rising rising falling ma50 on 2015-10-22 2015-10-23
Canadian Dollar USD.CAD 1.93% 17.38% rising falling rising falling ema9 on 2015-10-19 2015-10-23
Japanese Yen USD.JPY 1.67% 12.31% rising rising rising rising ma200 on 2015-10-23 2015-10-23
Pound Sterling USD.GBP 0.82% 4.70% rising falling falling rising ma50 on 2015-10-23 2015-10-23
Swiss Franc USD.CHF 0.15% 0.12% falling rising falling rising ema9 on 2015-10-23 2015-10-23

US Equities/SPX

SPX rallied again, helped aloft by the ECB and the prospect of more money printing.  SPX gained +42.04 [+2.07%] to 2075.15, clearing the 200 MA.  It is now not far from the original breakdown point at 2103.   Prior to the ECB press conference it looked as though SPX was getting ready to tip over, but SPX never managed to close below that seemingly-critical 9 EMA.

How did that compare to the rest of the world?  US was in the top third this week.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Developed Asia VPL 1.88% 2.77% rising falling rising falling ma50 on 2015-10-07 2015-10-23
United States VTI 1.72% 6.89% rising falling rising falling ma50 on 2015-10-15 2015-10-23
Eurozone EZU 1.63% 2.39% rising falling rising falling ma50 on 2015-10-14 2015-10-23
Emerging Asia GMF 1.11% -2.68% rising rising falling rising ema9 on 2015-10-22 2015-10-23
Europe IEV 0.71% -0.30% rising falling rising falling ema9 on 2015-10-22 2015-10-23
Latin America ILF 0.12% -29.05% rising falling falling rising ema9 on 2015-10-22 2015-10-23

FWIW, my computer remains long SPX.  That's the virtue of having a computer; it looks at the price/volume evidence without bias - it isn't worried about "bad earnings" and "falling Margin Loans" and other fundamental things that will probably eventually seize control, but just haven't done so yet.  I might also add that the computer has zero conviction, and a short term focus.  If it sees evidence of a top, it will reverse itself without any fuss whatsoever.

VIX fell -0.59 to 14.46.

Gold in Other Currencies

Gold fell in almost every currency this week - the only currency where gold rose was the Euro.  Gold in Euros is actually doing fairly well.  The drop in gold wasn't substantial; gold in XDR fell -11.


 

Rates & Commodities

Bonds (TLT) fell -0.59%, a relatively small move considering the strength in equities.  The overall picture in the bond market this week was a bit of "risk on" with the higher risk items performing better than US government issues.  JNK rose +0.60 on the week, the best performing bonds in my table.  JNK moved above its 50 MA this week executing a slow-moving cup & handle breakout, and afterwards it has just been slowly moving higher.  That's a sign to bail out, if you are short JNK - sit back and wait for a better entry point.

The CRB (commodity index) had a bad week, dropping -2.87%.  It is now clearly below its 50 MA, and it appears to be heading for a retest of the Aug 24th low.

A big part of the CRB decline is oil; WTIC fell a big -3.00 [-6.29%] on the week, and bounced off 44 support on Friday.  WTIC is now below its 50 MA too; the line in the sand for WTIC is 44.  A close below that, and oil is in trouble.  My computer continues to be short oil.  I guess it is predicting a move through 44.  Of course we could get a spike through 44 that gets bought, but until some evidence appears of buyers showing up in the oil market the trend in oil is - quite simply - down.

As a trader I respect told me a long time ago, if you day-trade with the trend (i.e. you short oil as it moves downhill) you will be right each and every day while the trend remains in place - and you'll be wrong just once, right at the bottom.  As long as you place your stops properly, shorting rallies in a downtrend is a money-maker.

Physical Supply Indicators

* Premiums in Shanghai are now at +4.94 over COMEX, up vs last week.

* The GLD ETF tonnage on hand rose +1.79 tons, with 695.54 tons remaining

* GC remains in backwardation, with the current two-front-month spread at -0.50.

* ETF Premium/Discount to NAV; gold closing (15:59 close price on Oct 23rd) of 1164.00 and silver 15.81.

 PHYS 9.57 -0.59% to NAV [down]
 PSLV 6.09 +0.01% to NAV [down]
 CEF 11.29 -10.13% to NAV [down]
 GTU 41.41 -2.88% to NAV [up]

ETF premiums were mostly down, except for GTU.

* Bullion Vault gold (https://www.bullionvault.com/gold_market.do#!/orderboard) shows some premiums for silver again in Zurich and Singapore; other than that, its all quiet.

* HAA big bar premiums are slightly higher for gold [2.29% for 100 oz bars in NYC], lower for silver [3.75% for 1000 oz bars in NYC].  Silver Eagle premiums dropped again [22.26% in NYC].

Futures Positioning

The COT report covered trading through Oct 20th, when gold closed at 1178.00 and silver 15.92.

Gold commercials went nuts this week, adding +35.5k shorts right at the top.  Perhaps they even created the top, its hard to say.  Commercial short positions were just moving into the area of concern on Tuesday; depending on what we see in the report next week, they may well be there already. 

Managed money covered 11.3k shorts - they still have another 20k shorts left to cover.  In one bit of good news, Managed Money added a huge +27.8k gold longs.  This is what kept gold from selling off this week: Managed Money is piling into gold - perhaps as a result of the 200 MA crossing.  The gold rally is no longer about just short covering, which is good news if you are long gold.

In silver, commercials added 5.3k shorts, and sold 2.8k longs; as a result, the net commercial position is moving higher into the Area of Concern right now.   Managed Money bought +4.5k longs, and covered -1.4k shorts; Managed Money are almost out of shorts to cover.  Further upside will only come from Managed Money going long.  Fortunately, they seem to be doing just that right now.

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

PM's correction this week saw the metals sink below the 9 EMA; not very far below the 9, but still below.  All the mining share ETFs managed to re-cross the 9 on Friday.  Since miners often lead in an uptrend, this is good news for PM.  If the miners break out, that should drag gold and silver along behind.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Senior Miners GDX 0.85% -19.12% rising rising falling rising ema9 on 2015-10-22 2015-10-23
Junior Miners GDXJ 0.13% -28.05% rising rising falling rising ema9 on 2015-10-23 2015-10-23
Gold COMEX.Gold -1.72% -5.31% falling rising falling rising ema9 on 2015-10-21 2015-10-23
Silver COMEX.Silver -1.78% -7.77% falling rising falling rising ema9 on 2015-10-21 2015-10-23
Platinum COMEX.Platinum -2.09% -20.35% falling rising falling rising ema9 on 2015-10-23 2015-10-23
Silver Miners SIL -2.70% -24.85% rising rising falling rising ema9 on 2015-10-23 2015-10-23

Gold Manipulation Report

I saw some intraday spike activity on Friday which seemed to drive the price of gold lower.  I wanted to see how this activity looked relative to all the other recent "spike" activity.  Many of the smaller spikes are the result of support breaks, or traders selling rallies during a correction - in other words, normal trading activity.

So to do this, I ran my "off hours" 0.5% spike study which easily spotted the egregious assaults in 2011, 2013, and a few months ago in July.   Nothing showed up.  I then expanded my search to include the entire trading day (not just the off hours) and increased the spike detection sensitivity to include spikes around $3 (0.25%) rather than 0.5%.  This picked up a lot more activity - both to the upside, and the downside.

I circled what occurred on Friday.  So was that normal trading activity or official intervention?  It happened dead in the middle of the London trading session, at the same time that  copper was selling off even harder.   This combination makes me think this is probably just normal trading activity - selling a rally during a correction - which is something you do if you're a trader trying to make money.

Summary

Gold and silver both started correcting this week; initially the miners followed, but rallied to end the week in positive territory.

The gold/silver ratio rose slightly this week, climbing +0.17 to 73.62; its about the middle of its recent trading range.   The GDX:$GOLD rose on the week, which is bullish.  GDXJ:GDX ratio continued falling, and looks bearish.  Its a mixed bag - but the rise in GDX:$GOLD has my attention.  Miners rising with a falling gold price can't last long.  Either gold will rally, or the miners will fall.

The COT reports are showing stronger near-term danger signs for silver, and are probably there with gold as well.  However we are seeing Managed Money starting to seriously go long rather than simply covering short.  It looks like a struggle between the commercials and managed money at the moment.  Usually the commercials win this war, but sometimes during uptrends the market gets away from them.  The upcoming Dragi money printing spree (and effective Euro devaluation) may tip the scales on the side of Managed Money.

Gold and silver big-bar physical shortage indicators are mostly unchanged; in the west, ETF premiums were mostly lower, GLD tonnage rose, and gold futures remain in backwardation at COMEX.  In the east, premiums in Shanghai are up a bit.   Big bar premiums at HAA are more or less holding steady, while silver coin premiums have dropped again.

My computer will take its victory lap for spotting the dollar low last week.  I think it was rescued by Draghi, but who knows for sure?

In PM, right now it looks like a struggle for control of market direction.  Money appears to be flowing into both the COMEX futures, and the miners.  Who will win?  If Managed Money has its way we'll get a gold breakout and the miners will be in the lead.  My computer is long miners, but currently short gold and silver.  I think this effectively reflects the situation as I see it too.

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8 Comments

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
dup

.

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
Mind Games.

I don't know much about the subject but Bix Weir seems to be saying that it is all going to plan. Several competing plans. He thinks that the price is the result of a wrestling match between various parties over what I would call products of the mind. 

And things could go ballistic. 

He doesn't seem to be talking his book. 

http://www.roadtoroota.com/

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5059
one interesting point

Interesting viewpoint.

I enjoyed the part where he talks about metals inventories, and how Glencore has 30 billion in metals inventories they haven't released, in an attempt to manipulate prices higher.  This does hang together, and its the part I found fascinating.  Copper's chart looks horrid, and they've borrowed lots of money, they have massive piles of copper in an attempt to manipulate prices higher, and it has the real potential to blow sky high.  No wonder traders are nervous about Glencore.  And when he talks about how many derivatives they might have, and that they are more or less unregulated - the cost of them blowing up could be much, much higher than I had previous imagined.

That part makes complete sense to me.

However, he's just dead wrong about silver premiums - he's either misinformed or he's lying, neither of which you want in an analyst, because he's suggesting that coin price premiums are a proxy for industrial big-bar prices.  And they just aren't.   Maybe all he understands is retail?  If so, should we believe what he says about what the Fed does, or doesn't control with derivatives?

Just look at HAA, you can get a big bar from them for a 3.8% premium, not a "20-30-40%" premium.  Eagles are not equal to big bars.  And any mint could drain PSLV for a small premium - probably not even the 3.8% HAA premium.  There are lots of places for mints - and everyone else - to get silver other than COMEX.

He's another "Fed controls everything" fellow.  The 10-year 2001-2011 commodity bull market paralleled a massive increase in credit, but the Fed somehow controlled prices via derivatives during this entire time?  The Fed wanted commodity prices to rise then?  And over the last 4 years, they switched and now they want commodity prices to fall?  And the drop in credit growth is to be ignored?

His model: Fed controls everything.  My model: its about changes in the rate of credit growth.  Growth in credit is a massive force in the world, because its real money spent directly into the economy.  And when growth stops or even just slows down, the world shudders.

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2379
Credit growth

There is no question that credit growth.. aka money growth, is the main driver of everything.... certainly as it pertains to supply vs. demand of the products of Wall Street.  But what of precious metals supply vs. demand?  Supply has been going flat or down as the mining industry has been beaten down by the manipulated price.  Demand has been exploding in countries that understand the use of PM's as long term stores of value, countries like India and China. 

But here's where Dave starts sounding like a shill for the bankers, because he refuses to look one layer deeper into the onion and think about what might lie there?  While hard to prove, it certainly looks like the US Treasury is complicit in taking the heat off of the industrial bar market for Silver, while starving out the coin market, by limiting Silver Eagle production.... so, yes, big bar premiums are not so high.  Does this mean things are not being manipulated behind the scenes?  No way.. the signs are that they are, and Bix talks specifically about this here;

  http://sgtreport.com/2015/10/another-smoking-gun-us-silver-eagle-allocat...

Re: Illegal Silver Eagle Allocation Operation
Dear Sirs;

It has come to my attention that your continual limits on the allocation of US Silver Eagles since June 2015 is once again in violation of the American Silver Eagle bullion program Title II of Public Law 99-61 (Liberty Coin Act) codified as 31 U.S.C. § 5112(e)-(h) which requires that US Silver Eagles be produced “in quantities sufficient to meet public demand.”

The current limitation placed on US Silver Eagles is NOT due to limited manufacturing capabilities of the US Mint facilities but rather due to a supposed shortage of silver planchets (blanks) coming from the official suppliers to the US Mint.

THIS IS NOT A TRUE STATEMENT and I demand that the US Mint cease any limitation on US Silver Eagle sales immediately and comply with the law.

Proof of availability of stock was revealed in a recent article and interview with the CEO of the US Mint’s largest blank provider, the Sunshine Mint.

Sunshine Minting operating around the clock to to meet silver demand
http://www.coinworld.com/news/precious-metals/2015/10/sunshine-mint-producing-silver-planchets-at-capacity.html

In this interview published in Coin World the Sunshine Mint’s CEO Tom Power states that the Sunshine Mint will produce over 70M ounces of silver products this year and that the US Mint is NOT demanding or receiving 100% of this production.

“Sunshine Minting is the primary supplier of 1-ounce silver planchets to the United States Mint for the production of American Eagle silver bullion coins. Sunshine also provides silver planchets to other, undisclosed world mints.”

“The United States Mint doesn’t get 100 percent of our capacity,” Power said.” 

“In 2014, Sunshine Minting produced 70 million ounces of silver bullion products and is likely to eclipses that level in 2015, Power said.”
On the surface, the wide disbursement of the Sunshine Mint’s blank production may seem reasonable but in reality, and in accordance with the law, the US Mint IS REQUIRED to increase their BID for ALL SILVER BLANKS until they bid high enough to obtain enough blanks to meet public demand.

This high bid requirement is across all the other Authorized Suppliers of silver blanks to the US Mint.

It is the LAW and the fact that the Sunshine Mint, being the largest supplier of blanks, is producing over TWICE the output needed by the US Mint gives support to the theory that the US Mint’s silver suppliers are illegally conspiring to distort the Fair Market Value of silver. After all, according to conclusions in all three CFTC Silver Manipulation Investigations, since the futures and options price of silver was equal to the physical price of silver – there was no manipulation.

That is clearly no longer true as it is the artificially low silver prices today that has lead to the current silver shortage. And this is NOT just a retail blank shortage. The Sunshine Mint reveals in this interview that the availability of COMEX 1,000 ounces “good delivery” silver bars are ALSO in a shortage?

“Planchets are not the only form of silver currently in short supply. There has been a shortage of 1,000-ounce silver bars, Power said.”

With two of the most popular forms of silver bullion, 1oz silver blanks and 1,000 ounces COMEX silver bars, in short supply it is disingenuous at best for ANYONE to claim that there is no physical silver shortage.

Now we have direct proof that the price of COMEX silver futures and options are not reflecting the price or supply availability of physical silver. It’s once again time for the CFTC to open another Silver Manipulation Investigation into the price suppression on the COMEX.

davefairtex's picture
davefairtex
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Posts: 5059
silver bar shortage

JimH-

But here's where Dave starts sounding like a shill for the bankers...

Your go-to move still seems to be name-calling.  Isn't that getting old yet?  Didn't we pass grade school a while back?  I could give you a grade school response too - but that would be just silly.

In the interview, he clearly stated that premiums for silver were between 10-40%.  That's just not true.  That's why to me he appears to be an advocate looking to make an impact, rather than an analyst who doesn't have an axe to grind and is just reporting an interesting situation.

I'm still waiting why, if there is a big bar shortage, visible premiums on the big bars haven't increased.  Some evidence, rather than simply assertions, would be nice.  Something like, "we used to pay X for our big bars, and now we need to pay X +10%."  And explaining why they aren't able to stand for delivery at COMEX - that would be good too.  COMEX has a lot of big bars lying around.  If they don't, boy wouldn't that be nice to know?

And why can't they get bars from PSLV?  You have to wait a month, but they will appear.

Bars exist.  Lots and lots of bars exist.  These are not the Mona Lisa, or a one-of-a-kind family heirloom.  These are big, heavy, ugly silver bars.  A billion dollars in silver bars sits inside PSLV, or thereabouts.  You can't say there's a silver bar shortage.  Raid PSLV, and your silver desires will be met.

There may well be a shortage of bars at the COMEX price.  That I believe.  So what price must you pay in order for that shortage to disappear?

Enough money will cause people to part with their bars.  That's just how things work.  So I want to know, what's the premium they're having to pay to get the bars to feed the machinery?  Simple question, no?

davefairtex's picture
davefairtex
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Joined: Sep 3 2008
Posts: 5059
Manipulation, Open Interest Changes in Gold

Chris -

In a comment you requested I take a look at the open interest and line it up with the manipulation assaults on gold, to see what the impact might have been.  Here's the data.  Be warned - the OI data for gold was really messy, I had to hand-edit a bunch of bad ticks.  This is the OI for the first 5 contracts added together.  That's why it took me a while to put together.

For the first intervention, OI dropped significantly.  It recovered a year later, but the second intervention seemed to cause more damage.  It too tried to recover but did so only briefly before dropping back down.  But after the third intervention, OI actually spiked higher to the point where OI was at a multi-year high dating back to the peak of gold back in 2011, and now it seems to be ready to move even higher.

To me, this chart says that the first two really did scare people away - probably the longs from the bull market - but the last intervention resulted in a massive increase in COMEX futures participation.  Probably, they aren't the old bulls returning, they're new folks who see cheap gold and a chance to buy the dip and get in low.  That's just my guess.

What I don't see is any evidence to support a story line that claims repeated, weekly/monthly interventions have terrified participants to the point where they simply don't want to play any longer.  That might have been the case if you stopped watching the numbers in 2013, but is not true any longer.

It almost looks like we've got a cup & handle breakout situation forming.

How do you read the data?

KennethPollinger's picture
KennethPollinger
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Joined: Sep 22 2010
Posts: 653
Seabridge Gold making a great run

Over 16% in the last few days.  Probably because Doug Casey produced a wonderful video of the mine and the CEO, Frank Rudi.   Steve Sjuggerud is starting his new True Wealth podcast--excellent reading and interview with Frank Cursio of Wall Street Unplugged.  Some of you might like it.  Ken

hammer6166's picture
hammer6166
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Joined: Apr 30 2010
Posts: 25
Premiums for rounds and eagles are falling

Last week I received a sale offer from JMBullion for Sunshine Mint rounds for $1.09 over spot. Still elevated but down from a $2.00+ premium. This week APMEX had flash 4 hour sales with buffalo rounds for $0.99 over spot and silver eagles at $2.99 over spot. It looks like things are freeing up at the retail level.

I wonder if the 24x7 production at Sunshine Mint is what is increasing the premiums on 1000oz bars?

I just checked at comparesilverprices.com and the premiums for rounds and eagles have been falling fairly dramatically over the last 30 days.

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