PM End of Week Market Commentary - 11/13/2015

davefairtex
By davefairtex on Sat, Nov 14, 2015 - 7:26am

On Friday, gold fell -1.10 to 1083.40 on moderately heavy volume, and silver fell -0.03 to 14.23 on moderate volume.  There was some volatility around the time of the PPI and Retail Sales reports at 08:30, but mostly gold and silver traded sideways in a relatively narrow range, with a slight downward bias..

On the week, gold fell -5.50 [-0.51%], silver dropped -0.51 [-3.46%], GDX rose +1.18%, and GDXJ climbed +1.85%.  Platinum was hit very hard, dropping -8.60%, while palladium was crushed, falling -13.19%.  I don't know what Palladium's deal is, but it dropped very hard both this week and last. 

Gold's decline slowed dramatically this week; it didn't stop, but this week's drop was quite minor especially given that gold fell four days out of five.  I am still concerned about a violent Sunday-night spike through support; we have moved closer to support, even almost touching the previous low on Thursday.  So far, while there are buyers at COMEX whenever gold falls below 1080, nobody seems interested in bidding up prices any higher.  The chart still points at a breakdown, even with gold being heavily oversold.

Silver just keeps dropping.  By Friday the rate of decline was definitely starting to slow, but there still were no buyers at COMEX for silver; rather, my guess is the only buyers are the commercial shorts gradually closing their massive short position at the expense of Managed Money.  Will actual buyers appear at 13.91?  Its hard to say.  Silver is very oversold.

Miners

The contrast between the miner chart, and the silver & gold charts, is significant.  Miners have been moving sideways during the period when gold was dropping gently, and silver dropping not-so-gently.  In the bad old days of 2013 and 2014, any drop in the price of gold would have resulted in almost panic-level selling in the mining shares.  However now, we are seeing miners holding up even though gold, silver, and the rest of PM continues to sell off.  Divergences like this are clues, in this case, bullish ones hinting at a bid under the miners.  When the big guys buy, they cannot buy like you and me.  They have to place an order and a price range - such as "buy GDX whenever the price is in the $13.40-13.60 range" and a computer algorithm does the buying for them.  They can't buy too much at any one time, or the price will rise.  I suspect that is what is happening now.

The USD

The dollar retreated slightly this week, dropping -0.16 to 99.10.  The buck tried rallying, failed, then dropped and found support at its 9 EMA, closing the week almost flat.  Dollar remains in a strong uptrend.  RSI momentum indicator shows no signs of the dollar slowing down, but my computer is not quite so sanguine; it says the dollar may have topped out for now.

US Equities/SPX

SPX moved decisively lower this week, breaking below both the 9 EMA and then the 200 MA, dropping -76.16 [-3.63] to 2023.04.  What's more, the pace of the decline is starting to accelerate, with two ugly red candles on Friday suggesting we have further left to fall.  That said, the market is not moving at the same speed as the August mini-crash, at least not yet anyways.  VIX rose sharply, up +5.75 to 20.08.  My computer is short SPX.

You can see that the US market did not do so well compared to the rest of the world, although all markets dropped on the week. 

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Developed Asia VPL -1.59% -3.82% falling rising falling rising ema9 on 2015-11-12 2015-11-13
Europe IEV -3.34% -6.59% falling falling falling rising ma50 on 2015-11-12 2015-11-13
Eurozone EZU -3.56% -2.68% falling falling falling rising ma50 on 2015-11-12 2015-11-13
Latin America ILF -3.65% -31.97% falling falling falling rising ma50 on 2015-11-12 2015-11-13
United States VTI -3.71% -0.27% falling rising rising rising ma200 on 2015-11-11 2015-11-13
Emerging Asia GMF -4.11% -10.56% falling rising falling rising ma50 on 2015-11-13 2015-11-13

Gold in Other Currencies

Gold fell in every currency this week except the Ruble, which had currency problems vs the buck this week because of the drop in oil.  Gold dropped in XDR by -11.50.


 

Rates & Commodities

Bonds (TLT) have finally started to rise, with TLT climbing +0.56% and marking a swing low.  The rally in bonds is quite tepid given the sharp decline in equities.  TLT just doesn't look very strong to me right now.

Junk bonds (JNK) had a bad week, falling -1.94% and apparently on track to re-test lows that it set back in early October.  JNK is sending clear "risk off" signals right now.

The CRB (commodity index) dropped -3.28% on the week, making a new six-year low on Friday.  That won't help PM.

WTIC suffered a large drop this week, falling -3.79 [-8.51%] to 40.73, breaking cleanly below 44 and apparently heading for a re-test of the 37.75 low set back in August.  Oil has now fallen 8 straight days.  I think its likely we'll see oil in the 30s next week; whether or not it finds buyers at the prior low is an open question.  Computer remains short oil.  Plunging oil prices are not particularly good for PM.

Physical Supply Indicators

* Gold in Shanghai is now trading at a 6.53 premium over COMEX, up +2.40 from last week.

* The GLD ETF tonnage on hand fell -7.15 tons, with 661.94 tons remaining

* Gold is not in backwardation at COMEX.

* ETF Premium/Discount to NAV; gold closing (15:59 close price on Nov 12th) of 1081.10 and silver 14.19.

 PHYS 8.88 -0.65% to NAV [down]
 PSLV 5.51 +0.83% to NAV [down]
 CEF 10.31 -10.40% to NAV [down]
 GTU 38.25 -3.32% to NAV [down]

All ETF premiums dropped this week.

* Bullion Vault gold (https://www.bullionvault.com/gold_market.do#!/orderboard) shows about a 1% premium for silver, and none for gold.

* HAA big bar premiums are high for gold [2.33% for 100 oz bars in NYC], slightly lower for silver [3.84% for 1000 oz bars in NYC].  Silver Eagle premiums rose slightly [19.18% in NYC].

Futures Positioning

There is no COT report this week - it is delayed until Nov 16th due to a Federal Holiday.

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

Miners show their stuff this week - nice divergence from gold.  Platinum is severely underperforming.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Junior Miners GDXJ 1.85% -21.40% falling rising falling rising ma50 on 2015-10-29 2015-11-13
Senior Miners GDX 1.19% -23.58% falling rising falling rising ma50 on 2015-11-05 2015-11-13
Silver Miners SIL -0.47% -28.18% falling falling falling rising ma50 on 2015-11-04 2015-11-13
Gold COMEX.Gold -0.58% -6.92% falling falling falling rising ma50 on 2015-10-30 2015-11-13
Silver COMEX.Silver -3.57% -9.12% falling falling falling rising ma50 on 2015-11-04 2015-11-13
Platinum COMEX.Platinum -8.56% -28.16% falling falling falling falling ma50 on 2015-11-03 2015-11-13

Gold Manipulation Report

No "off-hours" spikes were seen this week.  I believe there is a danger of one happening this Sunday evening, as we are quite near support for gold, and historically these sorts of events tend to happen in just these circumstances.

Summary

Gold continues to move lower, albeit much more slowly.  The rest of the PM complex has not been so fortunate, with silver, platinum, and especially palladium enduring much larger losses.  Miners are the sole exception; someone is buying mining shares while PM overall is declining.  This unusual state of affairs is both remarkable and a bullish signal over the longer term.

The gold/silver ratio rose +2.26 to 76.13, a large move, generally bearish, and indicative of silver's outsized drop on the week.  GDX:$GOLD ticked higher but still looks bearish, while GDXJ:GDX rose again this week and is now starting to look bullish.

Gold and silver big-bar physical shortage indicators are unchanged; in the west, ETF premiums dropped, and GLD tonnage dropped as well.   Big bar premiums at HAA were mostly unchanged, while silver coin premiums rose slightly.  Shanghai premium over COMEX is slightly elevated.

Buyers for gold at COMEX haven't appeared yet.  The dropping overall commodity complex is not helping, and the dollar, while taking a pause, is not actually correcting.   Deflation effects seem to be firmly in charge at the moment and right now, momentum still points lower.

I'm renewing my "gold manipulation warning" for this weekend.  Its quite possible nothing will happen, but the 1072.30 level is a tempting target, and not so very far away.

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6 Comments

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2385
Ongoing debate about the, "Gold Standard"

Dave,  I found this quote recently which paints a bit of a different light on your contention that a Gold standard would not work because it was nominally in place during the run up to the Depression.. and look how that turned out.  And, you have pointed out that I am not an ardent advocate of another Gold standard, and that is true.. I like many here simply want Gold to float freely as an alternative currency, as it should.  

But like so many things, the Gold standard was modified over time and subject to shades of gray... Here is the quote;

The Federal Reserve was created in 1913. Money was then linked to gold. Central bank reserves held only gold but in 1922, at a conference in Genoa, they decided to also hold currencies like pound sterlings and dollar IOUs. The gold standard morphed into a gold exchange standard with currencies elevated to money and dollar-based claims became equivalent to gold as part of central bank reserves. Subsequently and not surprisingly, the world soon was awash with printed liabilities with the postwar Bretton Woods system of fixed exchange rates existing from 1946 to 1971.

    http://kingworldnews.com/china-advances-master-plan-to-crush-the-west-an...

So what if the 1922 change had never occurred?   

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5416
factual inaccuracy

JimH-

Central bank reserves held only gold but in 1922, at a conference in Genoa, they decided to also hold currencies like pound sterlings and dollar IOUs.

So your source is confused.  I.e., wrong.  A simple review of the Fed balance sheet of the day (I'm picking Jan 1, 1916) show that Fed assets contain gold, notes, various bills, and US bonds.

Perhaps the amounts increased after the magic 1922 date, but from its inception the Fed has held bonds.  Indeed, that's its purpose - to lend money to banks, in exchange for good assets (some of which are bonds, others loans) when problems occur, so that solvent banks can obtain needed liquidity during times of crisis.  That was the whole reason the Fed was created.

Regardless, pegs don't work - gold standard can't work, because nothing remains in stasis.  England had to bail during the 1930s depression, because the peg was set too high.  As soon as they did, their economy recovered.  France didn't, and as a result they remained in depression.  Money needs to be servant to society, not master.

Attempting to keep a fixed gold-dollar exchange rate "forever" is simply absurd.  Cycles are a part of life - and the long term cycles especially.

An example: depression babies saved everything.  Their grand-children wondered at their silly behavior, and saved nothing.  Can we expect a peg to survive when society undergoes such a massive mind-shift as part of the generational cycle?  The penny-pinching depression children gave way to the boomers who couldn't borrow and spend enough.  Debt/GDP ratio moved accordingly.  Imagining you can keep a fixed peg of gold-to-dollars during such a change in mind-set across the entire culture is just fantasy.

Here's a chart of bank loans divided by GDP.  Its not total debt, but - it gives you a sense as to the change in credit during the time of the gold standard.  With such massive changes, how can a peg possibly survive?  Answer: it can't.

I believe your first inclination was right - gold should exist as a separate currency (i.e. no tax to swap between USD and gold) as a check on the state.  I'm not sure that will even survive, but it has a better shot than a gold standard.  A fixed peg standard will fail - it simply has to.  Blame the change in thinking over generations for that - its just how people and society works.  Either acknowledge it, or attempt to keep a peg in place and then have it fail.

Armstrong is right.  The only thing that remains static and unchanging is something that is dead.

 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5416
Turd Fergueson at USA Watchdog

One of Jim's favorite commentators, Craig Hemke (from tfmetalsreport.com) was interviewed recently by Greg Hunter at USA Watchdog.  Worth listening to, especially if you aren't familiar with the mainstream goldbug position on COMEX, GOFO rates, eligible vs registered gold, and so on.  He lays it all out there in 30 minutes.  He also opines on why he feels the Fed won't raise rates.

http://usawatchdog.com/huge-fraud-at-comex-covering-up-huge-demand-for-gold-craig-hemke/

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5416
bullish open for gold in asia

Looks like we may have avoided any spikes for this weekend.  Gold opened up in Asia, and is now rising.  If we close here (1092) we will mark a swing low in gold.  (We just need a close above 1089 to mark the swing low.)

The shorts don't look terrified, but the move higher is relatively steady.  Silver doesn't look quite as enthusiastic.  Perhaps the buying is Paris-related.

elendilnz's picture
elendilnz
Status: Member (Offline)
Joined: Dec 21 2014
Posts: 4
Gold Standard - politics

I am thinking about this topic and just read this article - there are some fascinating references and a mention of the translation from Latin of Copernicus's writing about what money is - Newton of course also wrote about this. Great minds tackle the task of thinking deeply about and writing about money and the minting of it. http://thepulse2016.com/ralph-benko/2015/11/13/cruz-paul-carson-huckabee...

elendilnz's picture
elendilnz
Status: Member (Offline)
Joined: Dec 21 2014
Posts: 4
Gold Standard Pro- Con

This website lays out it's version of gold standard pros and cons. I don't feel knowledgeable enough to comment on the correctness of the pro or con side but someone might. It seems some forms may work better than others? http://gold-standard.procon.org/

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