PM End of Week Market Commentary - 12/25/2015

davefairtex
By davefairtex on Sat, Dec 26, 2015 - 1:56am

On Thursday, gold rose +6.10 to 1075.80 on very light volume, and silver rose +0.07 to 14.38 on very light volume also.  A decent commodity rally and a falling dollar helped encourage PM to move higher in light pre-holiday trading.

On the week, gold rose +10.20 [+0.96%], silver rose +0.30 [+2.13%], GDX climbed +5.56% and GDXJ was up +4.69%.  Platinum rose +2.85%, while palladium was up only +0.05%.  This week, rising commodity prices and a falling dollar helped PM to start moving higher.

The descending triangle was negated this week as gold broke above its downtrend line; gold closed the week by finding support on its 9 EMA, and inching higher towards its next breakout target of 1081.40.  Gold needs a close above 1088.30 for the double bottom scenario to be confirmed.  If commodities continue to cooperate, I think this scenario is most likely to happen.

Silver was very choppy post-FOMC last week, but it appears that rising commodity prices and the falling dollar have encouraged silver to move slowly higher.  Silver needs a close above 14.64 to break out.

Miners

The senior miners snapped their downtrend line this week, breaking out to close just below the 50 MA.  While volume is light due to the holiday season, this is still a relatively dramatic reversal from last week, when it appeared that the miners were on their way to re-test the lows.  Junior miners look even better, closing well above their 50 MA and threatening to break above the previous high set four weeks ago.

The USD

Last week, the dollar's rally didn't look all that great post-FOMC; this week saw the dollar lose all its gains from the rate rise, with some added on for good measure.  The buck is now slightly below its 50 MA.  A close below the previous low of 97.22 would most probably lead to a fair amount of dollar selling and a corresponding rise in both PM and commodities.  It really does appear that the Fed rate rise ended up as a sell-the-news event.

From what I can tell, the Fed sold about 83 billion in bonds this week in reverse repo operations; with a balance sheet of 4.5 trillion that ends up being an effect of about 1.8%.  In fact, the bonds remain on the Fed's balance sheet; the reverse repo just gives the bonds an opportunity to "spend the night at a friend's house."  In this case the overnight happens every single day.  One virtue of this is the Fed doesn't need to mark any losses to market, since they aren't actually selling the bonds.

US Equities/SPX

SPX rallied strongly this week, climbing +55.44 [+2.76%] to 2060.99.  It had three strong rally days but stalled out right at the confluence of the 50 MA and the 200 MA.  VIX fell -4.96 to 15.74, a massive drop.  Most of the time not much happens over the holidays, and so option premiums tend to decline.

You can see that the US market did fairly well relative to peers this week.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Europe IEV 3.33% -6.20% rising falling falling falling ema9 on 2015-12-23 2015-12-25
United States VTI 2.85% -1.23% rising rising falling rising ema9 on 2015-12-23 2015-12-25
Eurozone EZU 2.48% -4.66% rising falling falling falling ema9 on 2015-12-23 2015-12-25
Emerging Asia GMF 2.45% -9.48% rising falling falling falling ema9 on 2015-12-22 2015-12-25
Developed Asia VPL 1.69% -0.94% rising rising falling rising ema9 on 2015-12-22 2015-12-25
Latin America ILF 1.69% -31.11% falling falling falling falling ema9 on 2015-12-24 2015-12-25

Even though the week was positive, equity markets worldwide are struggling right now, with the emerging markets faring the worst over the past 52 weeks.

Gold in Other Currencies

Gold was mixed this week; while gold rallied in XDR up +9.16, it was flat or fell in a number of other currencies.  Emerging market currencies look to be improving somewhat vs the buck.


 

Rates & Commodities

Bonds (TLT) fell -0.93% on the week, losing ground probably because of the strong equity market rally.  Money is flowing from bonds to equities - but bonds still appear to be (roughly speaking) in an uptrend.

JNK rallied +1.40%, a decent rally which pushed JNK back over its 9 EMA, the first step on the road to recovery.  However, I'm not certain its time to break out the party hats just yet - two up-days this week don't put an end to the big junk bond correction.  If JNK continues to move higher, however, that could be a signal for a stronger equity market rally.  Its something to keep an eye on.

The CRB (commodity index) finally rallied this week, climbing +2.29%, printing both a daily and a weekly swing low, and managing to close conclusively over the 9 EMA for the first time in 12 weeks.  While the commodity news is still horrid, prices are now starting to inch higher.  This likely helped JNK to rally.

WTIC rose this week, up +2.29 [+6.39%] to 38.12, printing a weekly swing low and a conclusive close above the 9 EMA.  Oil was helped by a positive oil inventory report that showed a large drop in Cushing, OK, the delivery location for WTIC crude.  Brent didn't look nearly as strong; it rose only +1.29 [+3.52%] and it was not able to print a weekly swing low.  Oil really needs a close back above 40 - the next resistance level - for this to turn into something potentially more durable.

Physical Supply Indicators

* Shanghai premiums for the Au9999 contract were +6.08 vs COMEX, down -0.06 on the week.

* The GLD ETF tonnage on hand fell -4.16 tons, with 644.75 tons remaining

* Gold moved more into backwardation at COMEX, with the spread in the first two contracts at -1.30.

* ETF Premium/Discount to NAV; gold closing of 1065.50 and silver 14.08.

 PHYS 8.85 -0.44% to NAV [up]
 PSLV 5.51 -0.38% to NAV [down]
 CEF 10.37 -10.01% to NAV [up]
 GTU 38.52 -1.67% to NAV [up]

ETF premiums were mostly higher.

* Bullion Vault gold (https://www.bullionvault.com/gold_market.do#!/orderboard) shows no particular premiums for gold or silver this weekend.

* HAA big bar premiums are slightly higher for gold [2.17% for 100 oz bars in NYC], lower for silver [3.83% for 1000 oz bars in NYC].  Silver Eagle premiums fell [22.18% in NYC].

Futures Positioning

There was no COT report this week because of the Christmas holiday.

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

Well this is bullish - silver mining shares leading the flock of miners higher, and the miners outpacing the metal.  This sort of ordering is what you expect to see in a commodity-led PM rally.  Let's just hope it lasts.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Silver Miners SIL 7.05% -27.25% rising falling falling falling ema9 on 2015-12-22 2015-12-25
Senior Miners GDX 5.52% -19.70% rising falling falling falling ema9 on 2015-12-23 2015-12-25
Junior Miners GDXJ 4.69% -11.16% rising falling falling falling ma50 on 2015-12-24 2015-12-25
Platinum COMEX.Platinum 2.67% -25.80% rising falling falling falling ema9 on 2015-12-18 2015-12-25
Silver COMEX.Silver 2.13% -8.47% rising falling falling falling ema9 on 2015-12-18 2015-12-25
Gold COMEX.Gold 0.90% -8.33% rising falling falling falling ema9 on 2015-12-24 2015-12-25

Gold Manipulation Report

There were no 0.5% "after-hours" spikes in PM during the past week.

Summary

Commodity prices started to recover this week, led by oil.  This had a noticeable effect on silver, and gold followed along behind.  The falling dollar also helped.  Whether this will end up being a major trend change or simply a dead cat bounce is not apparent right now.  It is still too early to tell.

The gold/silver ratio fell -0.87 to 74.81, moving down to the middle of its recent trading range.  Long term this level is bearish, but medium term it is a move from bearish to neutral.  GDX:$GOLD rallied strongly this week, and is now short-term bullish.  GDXJ:GDX fell somewhat, and looks more or less neutral.  Miners improved greatly over last week, and when the miners lead, that's bullish.

There was no COT report this week.

Gold and silver big-bar physical shortage indicators are mostly unchanged; in the west, ETF premiums were mixed, GLD tonnage fell somewhat, and gold remains in backwardation at COMEX.  Big bar premiums for gold at HAA were little changed.  In Shanghai, premiums fell to $4 vs COMEX.

In long downturns, prices often turn before the news does.  We are seeing a small rebound in commodity prices right now.  Will this lead to a trend change?  Forces of deflation are pretty strong right now, but even Martin Armstrong with his fancy computer was surprised at the rise in oil off the lows.  He thinks it might have something to do with an impending war cycle.  So my advice: watch prices.  The well-connected seldom let an opportunity to make money slip by; that is why events can show up in prices prior to them appearing on the world stage.

COT report from last week remains bullish for gold, and slightly less so for silver.  My guess is that's still the case today.  If oil continues to move higher, we could see a nice PM rally either right before New Years - or right after.  That's the setup anyway.

Risks to this story are that the oil rally falters, and then oil resumes its downtrend.  Silver may well make new lows if this occurs - that's my guess anyway.  I'm less sure about what happens to gold.

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