PM Daily Market Commentary - 12/2/2015

davefairtex
By davefairtex on Thu, Dec 3, 2015 - 1:04am

Gold fell sharply today, dropping -15.60 to 1052.70 on heavy volume, while silver dropped -0.19 to 13.97 on moderately heavy volume as well.  A flurry of economic reports plus a speech by Chair Yellen all pointed to an imminent rate increase by the Fed, and this caused the buck to spike higher, and PM to sell off.

While yesterday I thought gold might be ready to rally, today the picture looks quite a bit different.  Gold made a new low, the dollar made a new high - last time we were there it was 2003 - and according to Chair Yellen, a rate increase is more or less a sure thing due to strength in employment.  This situation leaves the shorts completely in control at COMEX - as long as the dollar continues to rise, the shorts will be able to continue pushing the price of gold lower.  I'm not sure how high the dollar can go, or how low they'll be able to push gold before it bounces back.  In Asia as I write this, gold made yet another new low, hitting 1045.40, but then it bounced back, entirely wiping out the loss.  I'm always looking for those intraday rebounds which show buyers showing up at COMEX to mark the low.  Maybe we'll see one tomorrow - or maybe not.

Silver followed gold lower - it avoided making new lows during the US session, but a few hours after NY closed, silver was pounded through the previous 13.86 low, touching 13.80.  As with gold, all we can do is wait to see if the buyers at COMEX show up.  Likely, commodities need to stop dropping too.

Miners sold off today, with GDX down -2.61% on moderately heavy volume, while GDXJ fell -2.22% on moderately light volume.  The decline pushed the miners right back into their triangle, resulting in a failed breakout.  Sometimes when that happens, the failed breakout is seen by the market as a head-fake, and the "real move" will be a drop below the lower uptrend line, which would send GDX down to test support at 13.   If the miners can avoid this fate, it will indicate significant strength, especially with gold making new lows.

The buck rose +0.18 to 100.02, making a new high intraday of 100.54 but the buck then sold off into the close.  The high point of the dollar occurred during Chair Yellen's speech where she intimated that a Fed rate hike was inevitable.  This spike triggered the final sell-off in gold for the day.  What conclusion can we draw from the dollar's failure to hold its gains into the close?  Is this the sell-the-news high?  It could be.  Of course I've suggested we have a top in the buck so many times now, its just getting old; we need to see a swing high and a close below the 9 EMA before we get too excited.

SPX did not like Yellen's rate hike comments either; it started to sell off hard right after 12:30, the same time as the peak in the buck and the low in gold.  SPX fell -23.12 to 2079.51, wiping out yesterday's gain entirely and then some.  All the interest rate sensitive sectors sold off hard: utilities, REITs, and energy.  VIX rose +1.24 to 15.91.   Computer is short SPX now.

JNK fell -0.31%, dropping just below its 9 EMA and suggesting a bit of risk off.

Bond ETF TLT weathered a bit of selling intraday and managed to gain +0.03%; coming on the heels of yesterday's big rally and a clear signal from Chair Yellen that rates will be rising, this is actually a good performance.  Shorter-term bonds fell today, which suggests money is moving from short to longer duration. 

The CRB was pounded hard today, dropping -1.92%, breaking cleanly below its recent consolidation range, and making a new all time low.  As in, overall commodity prices have never been lower in the history of the CRB timeseries, which dates back to 1981.

WTIC fell hard, losing -1.55 [-3.72%] to 40.10, making a new intraday low of 39.84, violating the previous low set two weeks ago.  Oil had a whole lot of volatility today - Iran suggested that many OPEC members supported an output cut which caused a momentary $1 spike higher, but then the Petroleum Status Report showed yet another inventory build, and then Yellen's "sure thing rate hike" talk pushed oil down even further.  Brent looks even worse than WTIC, as it is now trading just above the lows set back in August.

COT report still is top of mind for me.  I believe we just need to wait for the buck to stop its apparently eternal rise, for commodities to stop plummeting, and then gold should recover.  As to when those two things might happen - they are probably driven by the upcoming market-moving events.  Once again, they are:

  • Tomorrow, Dec 3: ECB Rate Decision
  • Friday, Dec 4: OPEC meeting
  • Friday, Dec 4: Nonfarm Payrolls
  • Dec 16: FOMC Rate Decision

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7 Comments

Jbarney's picture
Jbarney
Status: Silver Member (Offline)
Joined: Nov 25 2010
Posts: 233
Silver

When I got into prepping six or seven years ago, the price of Silver (poor man's gold) was in the midst of its long ascent upwards.   I never have enough cash to make large purchases, but have basically been dollar cost averaging my accumulation of physical silver.  Bought on the way up toward $50 and have been buying all the way down.

I must say I never thought the paper price of silver would ever squeeze below $14.00, but yet, it happened yesterday, and has only been hovering above $14.00 for the last several weeks.  These paper cost shifts are certainly interesting to watch, and with all of the manipulation, one wonders how much lower the paper price can go. 

Last time I spoke with one of the coin dealers in my area, he started to explain that getting junk silver coins is becoming harder. He also said it was becoming harder to get inventory.  Not sure if this is Christmas PMers buying for family members. 

Just amazed though.  Hopefully I will have time to run out this weekend and buy a little more.

Jason

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5570
The end-game for PM's
Jbarney wrote:

(...)

Last time I spoke with one of the coin dealers in my area, he started to explain that getting junk silver coins is becoming harder. He also said it was becoming harder to get inventory.  Not sure if this is Christmas PMers buying for family members. 

(...)

I am at a wealth conference right now, and the people in attendance are the big family money on the one side, and all the various 'suppliers' on the other trying to get money from them.  By suppliers I mean tax attorneys, fund managers, real estate speculators and every well-heeled grifter with a pitch.

It's an interesting mix.  As I test for reactions to PMs here I find that most are only slightly aware of gold, almost none silver, and that there's not a lot of interest at present...in the US crowd.  For the attendees from Europe, Panama, Venezuela, and Argentina that I spoke to, there's plenty of interest and awareness, but not a lot of excitement.  

So I think that gold and silver are pretty close to being a hated asset class right now, as the developers of the Financial Repression intended.  Or at least needed and very, very coincidentally and luckily got by magical accident.

All things being equal, it's best to be selling your most loved assets and buying the hated ones.

The Fed has tried to engineer that we should all get rich by following the herd, but that's just not how things work.  How could they?  How could we all get rich by speculating in the same financial assets as each other?  After all, financial assets are merely claims on wealth.  

Time will prove the FED and other central bankers to be really pretty much idiots.  

Next week I get to present at a conference of all hedge fund managers and CEOs.   I'll give them a dose of the Three E's and see what happens next.  I probably don't get invited back, is what happens, but you never know.  :)

The end-game for PMs looks like this;  suddenly the well-heeled crowd thinks it's the height of intelligence to own PMs and they begin to buy.  Within a nanosecond there are no more supplies to be had and Joe Little Guy gets locked out.    If there are retail shortages now, when the last few die-hard PM believers are tossing in a few bucks, there's no chance of anything but a long-lasting retail shortage once the big bar buyers begin to squirrel away their hoards.

Jim H's picture
Jim H
Status: Diamond Member (Offline)
Joined: Jun 8 2009
Posts: 2379
What Chris said...

Yes, Yes, Yes.... we all should realize that the phys supply vs. demand situation, especially for Silver, has been in deficit for years. 

https://srsroccoreport.com/official-release-world-silver-deficits-12-yea...

Availability can  change on a dime (pun intended).  Speaking of dimes, I was tempted by $25 face bags of Mercury dimes at a local coin show last weekend, but instead opted for a well priced one ounce Russian Palladium ballerina.. I am a pushover for pretty things  : ) - these really are some of the most beautiful coins in my opinion.  Palladium is 10X more scarce than Gold and 1/2 the (spot) price.. hard not to buy some here.     Gold was not moving too visibly at the show, but Silver was FLYING out of the dealers.. wads of paper $50's and $100's being visibly exchanged with rabid Gresham's delight for coins and bars.     

Chris said,

The end-game for PMs looks like this;  suddenly the well-heeled crowd thinks it's the height of intelligence to own PMs and they begin to buy.  Within a nanosecond there are no more supplies to be had and Joe Little Guy gets locked out.    If there are retail shortages now, when the last few die-hard PM believers are tossing in a few bucks, there's no chance of anything but a long-lasting retail shortage once the big bar buyers begin to squirrel away their hoards.

Watch for the little things.. the little signs that things are breaking down.  Might this be one?

http://investmentresearchdynamics.com/the-system-is-starting-into-a-fina...

The director of the CME Metals Group announced her resignation to effective December 11. No further explanation was providedReuters link.  I’m not one to infer some type of conspiracy theory in connection with this, but it seems rather abrupt.   It’s akin to Bernanke leaving the Fed much sooner than anyone expected.  The rats are leaving the ship before it sinks.......  (the whole article is worth reading - Jim H)

 

davefairtex's picture
davefairtex
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 5073
Draghi Disappoints

Market did not like Draghi's money-printing offering today.  The buck is off a massive 2 points - the largest move I've ever seen in a single day.  Euro is up 2.70%.  That's another massive move.

Gold is not reacting with nearly the enthusiasm I would have expected, given the huge currency moves.  My guess: it's being weighed down by the bearishness in the rest of the commodity complex.

As for gold being a most-hated asset class, that's backed up by sentiment, price, and trend.  And I agree with Chris - that's a good time to be considering a purchase.

 

 

 

thc0655's picture
thc0655
Status: Diamond Member (Offline)
Joined: Apr 27 2010
Posts: 1517
A little guy chimes in

I've been watching the silver spot price plumbing lows and looking for a chance to get some more Silver American Eagles.  The premiums have been running $3.00 -$5.00 and that's just too high for my sensibilities.  In the last week something I've been waiting for happened: spot at $14.00 and premiums at $2.75 (which used to be a common number!).  So I thought and thought for days about getting 400 to fill a partial monster box (holds 500) I have.  Last night I decided to get them this morning unless the spot price started falling fast again, in which case I'd wait until it paused.  So this morning I go back "on the line" and found that the dealer only had 327 left.  Aaargh!  Anyway, I ordered them at $2.65 over spot.  I'll fill the box eventually.

This was Gainesville Coins who I've dealt with before (always completely satisfied) and the product was mixed dates of Silver Eagles. Their premiums for 2015's and 2016's are still about $3.50.  They offer these batches of mixed dates from time to time (and now I've just cleaned them out).  I have to assume they accumulate these batches from disillusioned sellers who are giving up the scenario we know has to happen eventually.  I'm not giving up.  It's coming.

Cornelius999's picture
Cornelius999
Status: Gold Member (Offline)
Joined: Oct 17 2008
Posts: 373
Thanks Chris and Dave - I

Thanks Chris and Dave - I needed to hear that bit about PMs being the most hated asset class, as I was was one of those beginning to hate them!

Luke Moffat's picture
Luke Moffat
Status: Gold Member (Offline)
Joined: Jan 25 2014
Posts: 364
EUR/USD

I'm wondering what Draghi's ideal currency pairing range is. Possibly EUR/USD 1.09 - 1.13?

Countries that Europe exports goods to (numbers are millions of Euros);

Source

My guess is that it's a little lower - EUR/USD 1.05

I'm also guessing that he's buying (or ensured) the Yellen rhetoric that the Fed will raise, hence making the strong Euro a fortnightly affair. If the Fed had flat out refused to raise rates then Draghi would have gone down the QE bazooka route to ensure the Euro doesn't sky-rocket and threaten the EU with recession (if they aren't already in one of course). Unless the Fed pulls a fast one and delays tightening, sending Europe into the abyss. But isn't there honour among thieves? Ooh, it's all so dramatic, it might actually be entertaining if widespread financial ruin wasn't the end game.

Of course poor Ms Lagarde will be having kittens with all this fiscal tightening but then again someone has to have a bad day...

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