PM Daily Market Commentary - 12/17/2015

davefairtex
By davefairtex on Fri, Dec 18, 2015 - 2:02am

Gold plunged -21.40 to 1050.10 on heavy volume, and silver was hit for -0.48 to 13.69 on heavy volume also.  PM started moving lower in Asia, and then gold starting getting sold a little after 08:00 Eastern, and then silver more or less fell off a cliff an hour later.  All the gains from yesterday were erased in less than an hour.

All I can say is, gold is a really tough trade right now.  I did not expect today's big sell-off.  One minor consolation is that pretty much everything sold off too.

In the charts, we can see that gold is re-testing the previous low of 1045.40; so far that low is holding, but given the demonstrated sell-side enthusiasm at COMEX, I'm not sure it will hold for much longer.

To me it looks like there is a war going on in silver.  Yesterday there was a massive rally, today, an even larger drop.  Unfortunately, the shorts are winning the war, and price has fallen to a few cents away from the prior low at 13.62.  Based just on momentum, I'm guessing the previous low will not hold.

Miners opened much lower, and sold off throughout the day.  GDX dropped -5.86% on heavy volume, while GDXJ dropped -5.39% on moderate volume.  For quite a while the miners have been outperforming gold, but that is not happening any longer.  GDX made a new low, and appear to be headed for a retest of the previous low at 12.92.

Platinum was hit for -3.41%, and palladium dropped -2.67%.

A big part of the problem was the USD, which was up either +1.44 or +0.73, depending on where you mark yesterday's close.  Dollar closed at 99.32.  Any way you slice it, it was a large move higher, and pretty much all of the markets did not take this well.  If the buck keeps rising, my guess is we'll see continued selling across the board, including in PM - most likely driving prices to new lows.

SPX post-Fed excitement didn't last; US equities started dropping from the opening bell and didn't really stop until the close; SPX fell -31.18 to 2041.89, wiping out all the gains from yesterday and a bit more.  The "bearish engulfing" candle suggests that momentum is lower going forward for equities.  VIX rose +1.08 to 18.94.

JNK sold off alongside equities, falling a big -1.11% and also printing a large bearish engulfing candle.  JNK is back to signaling risk off, quite strongly.  I'm sure some of that is about oil.

Bond ETF TLT rallied +1.13%, a nice move that pulls bonds back into modestly bullish territory.  I'm still not sure about direction for bonds, but it appears that they will do relatively well if equities keep selling off.

CRB fell once again, dropping -0.65%, making yet another new low.

WTIC rose +0.37 to 36.11, but that's just an artifact of the contract roll; in actuality, if we look at the same contract month, oil dropped -0.94.  From what I could tell, the drop in oil (which was more or less a failed rally) started at nearly the same time intraday as the cliff-dive in silver.

US Natural gas ($NATGAS) was pounded too, dropping -0.09 [-4.93%] to 1.74, another multi-decade low.  Natgas prices are basically collapsing, they are incredibly oversold in any timeframe you care to look at.  The natural gas storage report (released at 10:30) showed a drop in the gas in storage; I guess it wasn't enough of a drop to make the market happy.

At some point commodities (especially energy) will stop dropping and reverse, but its tough to know when that will be.  Right now, momentum continues to be down.

Yesterday I said that gold will start to rally - subject to moves in the dollar.  How's that working out?  Not so well.  Yes the dollar is rising, but the move isn't dramatic enough to account for such a large sell-off in PM.  Something else is going on here; I thought the uncertainty about FOMC was the major item holding back a PM (and commodity) rally, but clearly that's not the case.

Last year we had selling pressure for gold, silver, and the miners in December right up until the last day of the year.  Perhaps this December will be the same.  The COT report remains quite bullish for gold, less so for silver.  Now it looks like we might have to wait a bit longer for it to take effect.  I do not think the value of the COT as an indicator has changed; commercials still like to make money, and they still profit from the cycle.  Its just the timing of the cycle start we have to wait for.

If that pesky dollar stops rising, I think that might help.  If commodities stopped dropping, that would probably help too.

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2 Comments

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
666

1 kg of Silver costs $666 at the Perth mint.  
I'm sure that's significant. 

http://www.perthmintbullion.com/mobile/buysilverbars.aspx

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
666

1 kg of Silver costs $666 at the Perth mint.  
I'm sure that's significant. 

http://www.perthmintbullion.com/mobile/buysilverbars.aspx

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