PM Daily Market Commentary - 2/2/2016

By davefairtex on Wed, Feb 3, 2016 - 1:00am

Gold rose +1.00 to 1129.60 on moderate volume, while silver fell -0.04 to 14.31 on moderate volume also.  Gold traded sideways within a range, as did silver.  Both metals seemed relatively immune to the second day of plunging oil prices.

Gold managed to touch the 200 MA today, but was unable to break through it, printing a doji for the day.  The intraday high of 1131.50 is a new high for this cycle.  While that's positive, the relatively narrow trading range makes it relatively easy for gold to print a swing high, which would be a sign of a top.  To keep the momentum going, gold needs a close above the 200 MA; a close below the 9 EMA (at 1116.81) would most likely signal a correction.  So far gold has proved quite resilient, but a 5-6 day correction (like we saw back in early January) would not surprise me here.

Not much change in silver; it retreated slightly on the day.  I suppose we can be grateful its not following oil and the commodity index lower.  Silver retains a bid, as evidenced by the fact that its remains both above its uptrend line, and the 9 EMA.  Still, my dreams of a big silver rally seem quite distant right now.  Its tough for silver to rally with commodities sinking once again.

Miners sold off after yesterday's big rally, with GDX off -2.39% on moderately heavy volume, and GDXJ lost -2.34% on moderately light volume.  GDX was right on the edge of printing a swing high; as in, GDX closed at 14.30, which was exactly yesterday's low.  The rule for a "closing swing high" is a close below yesterday's low, so it missed the swing high by a penny.  GDX remains clearly above the 9 EMA so it remains in an uptrend, but it would not take much for that swing high to be marked.  The selling in the miners suggests that gold may be putting in a top.  At the very least, traders are ringing the cash register after a nice move higher - they are probably nervous with gold right at that 200 MA.

Platinum fell -1.62%, palladium dropped -2.58%, and copper fell -0.70, dropping back below its 50 MA.  It is possible the three-week copper rally has run its course.

The buck moved steadily lower today, dropping -0.16 to 98.86, just above the 50 MA.  The BOJ printfest seems to have been just a one-day rally.  The overall dollar uptrend seems to be fading.  This should help gold, if it continues.

SPX just gave it up today; half the losses came in the futures markets overnight, and once the market opened, the selling just continued.  SPX ended up dropping -36.35 [-1.87%] to 1903.03, plunging below its 9 EMA and moving right back to the top of its previous trading range.  The two sectors leading the market lower were energy and financials, with energy in the lead.  This makes sense, because financials are linked closely with energy via lending to the shale drillers.  XLE (energy) fell -3.33%, while XLF (financials) dropped -2.77%.  VIX rose +2.00 to 21.98.

JNK plunged -0.82%, falling through its 9 EMA and strongly signaling risk off.

TLT screamed higher, up a huge +1.86% and breaking out to new highs for the cycle.  That's a very strong risk off signal.  Since the start of 2016, bonds have been in a relatively steep uptrend - which makes sense, because that's when the big move down in equities first started.

CRB fell -2.02%, another big move, dropping below the 9 EMA and is now back in a downtrend in all timeframes.

WTIC was hammered again today, dropping -1.61 [-5.14%] to 29.71, continuing the sell-off that started yesterday.  It looked for a time as though round number 30 might provide some support, until the API inventory report came in at 16:30 which showed a 3.8 million barrel inventory rise.  Oil promptly broke through 30 at that point.  EIA's petroleum status report comes out tomorrow at 10:30; it will probably move the market too.  Oil is now just a couple of dollars above its previous low of 27.56.  Unless there is some positive news, I'm guessing we will re-test those lows in the next few days.

The miners are suggesting the gold rally might be getting tired, while the hints of dollar weakness are supportive.  The 200 MA is a key resistance level for gold where I expect selling at COMEX to appear.  Oil is selling off again; the "Russians agree to work with the Saudis" story didn't prop up prices for very long. 

My computer has everything back to a downtrend except gold, silver, and the 20 year Treasury.  Now we get to see if buyers are COMEX are strong enough to push gold through its 200.

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Mark Cochrane's picture
Mark Cochrane
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PM action?

Is the PM action today all a function of breaking the 200MA?

davefairtex's picture
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dollar crash


Is the PM action today all a function of breaking the 200MA?

So if you recall, I've said that "a move lower in the buck is likely supportive of PM."  The buck is off -1.59 today, a massive -1.60% lower.  Gold is up +1.08%.  This move by gold is entirely a currency effect.

The dollar has been absolutely smacked.  There was no single event that caused this move lower that I could see - it just started falling around 4am Eastern and it just didn't stop until about an hour ago.

Gold definitely did have a volume spike when it popped over the 200 (around 10 AM Eastern - around the time of the non-manufacturing ISM report, which looked weak) and there was likely some short covering, but I think the huge dollar plunge today was likely the primary impulse behind gold's rally.

The oil rally didn't hurt either.  The combination probably was responsible for silver's breakout as well.

Arthur Robey's picture
Arthur Robey
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A new platinum venture.

They could be rich in platinum group metals used in the auto industry, energy sector, jewelry as well as electronics and medical devices. These metals are getting hard to mine on Earth, while “a single 500-metre platinum-rich asteroid contains more platinum than has been mined in the history of humanity,” says the company.

Way to go Luxembourg. As if you weren't rich enough already. Fortune favors the bold.

But please, send any Cultural Marxists to Zimbabwe so they can live out their fantasies. They will destroy your venture if they remain amongst you.

EDIT:  Space Pirates! Wannabe space pirates. They would have to get up there first. And only my people can do it. Prove me wrong. 

screenspirit's picture
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Kennedy half dollars VS Silver Eagles

I'm thinking about purchasing some junk silver in the form of Kennedy half dollars.(1964) The premium is almost twice the American Silver Eagles.  What does the forum think of the pros and cons of each investment.  Thank you for your take.

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