PM Daily Market Commentary - 6/14/2016

By davefairtex on Wed, Jun 15, 2016 - 3:58am

Gold rose +1.70 to 1288.50 on moderate heavy volume, while silver fell -0.06 to 17.40 on moderate volume also.  Gold and silver ran into a bit of trouble mostly because of a strong dollar rally; gold managed to gain ground anyway, which is a testament to the strong bid underneath the metal, but the miners weren't so fortunate.

On the chart we can see that gold managed to pop above the previous high at 1290.40, but was unable to close above it by end of day.  While normally I'd characterize this as a more neutral behavior, the fact that gold managed to do this well on a day with a big dollar rally suggests interest in gold remains strong.  In Euros, gold rose +0.88%, making a new closing high for this particular cycle, while gold in Pounds (up +1.06%) closed at its highest level since the great gold smash of 2013.

Like gold, silver also made a new high, but silver under-performed gold.  Perhaps silver was affected more than gold by the relatively poor performance by the rest of the commodity space, where most everything fell on the day.  Still, the drop was minor, especially considering the big move in the buck.  I think we can safely call silver's modest drop a currency effect.

Miners weakened further today, with GDX off -2.20% on moderately light volume, while GDXJ dropped -1.97% on moderate volume.  GDX printed a swing high, but managed to find support on its 9 EMA.  GDXJ looked a bit stronger.  The mining shares continue to under-perform gold, as they have done for the past week or so.  This is a risk off sign for PM.  While the swing high in and of itself isn't a cause for panic, a crossing of the 9 EMA should not be ignored.

Platinum fell -1.43% on heavy volume, palladium dropped -1.78%, and copper was down -0.44%.  "The other metals" did poorly today, with gold being the only one that put in a gain.  To me that's always a clear sign of a flight-to-safety trade.  Market doesn't always see gold as a safe haven, but it certainly is seeing it that way now.

The buck had a big day, up +0.62 to 95.04, launching back above its moving averages and making a new high.  Mostly this is about the Euro (-0.74%) and the Pound (-0.92%), neither of which liked the new polls which suggest the undecided voters are breaking towards Leave in the last week before the referendum scheduled for June 23rd.

WTIC fell for the fourth straight day, losing -0.66 [-1.36%] to 47.90.  The drop happened after the US market had closed, due to the API inventory report which showed a rise of 1.2 million barrels in inventory.  This isn't a particularly big increase, but the market was definitely not pleased.  Feels bearish to me. It could be the strong dollar causing trouble too.  While things are a bit choppy right now, I think its best to ignore the newsflow talking about about $100 oil and suggesting you buy every oil company in sight.  Oil has moved back into a downtrend: we've seen a swing high, followed by a close below the 9 EMA.  We might see $100 oil eventually, but on the way there we could easily see $40 oil too, especially if Nigeria and/or Canada come back online.

SPX dropped just -3.74 [-0.18%] to 2075.32, closing just below its 50 MA.  The market had sold off more substantially earlier in the day, but managed to rally back in the last hour of trading.  Candle print was a "high wave", which gives us just a 20-30% chance of a low.  Mostly the market was led lower by financials (XLF:-1.48%) with utilities (XLU:+0.53) performing best.  That's a bearish configuration; financials often lead.  DB made a new multi-decade low today, losing -2.96%.  VIX pulled back today, dropping -0.47 to 20.50.  I'm not surprised - a 20 VIX rating for our recent small decline seemed a bit over the top.

TLT actually fell today losing -0.07% after gapping up strongly in the morning.  Mostly, TLT was sold all day long, printing a "bearish belt hold" which in this case is giving us a 30-35% chance of marking the top for TLT.

JNK fell for the fourth day in a row today, dropping -0.34% and continuing to signal risk off.  JNK remains below its 9 EMA and is in a short term downtrend.

CRB dropped too, falling -0.36%.  That said, CRB continues to look relatively strong, and remains above its 9 EMA, and it is still bullish.

PM is divided right now; gold and silver both remain strong, while the miners are starting to sell off more seriously, and there is ongoing weakness in platinum, palladium, and copper.  The FOMC announcement is tomorrow at 14:00, with the Chair press conference at 14:30.  There's always the chance the Fed could say something hawkish, but it seems unlikely with BRExit staring the financial system in the face.

As I have said before, if they manage to have a fair election and Leave wins, I believe we will see gold smash right through 1307.  However, first we need a close above 1290.40.

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Nate's picture
Status: Platinum Member (Offline)
Joined: May 5 2009
Posts: 605
and if Stay wins......
davefairtex wrote:

As I have said before, if they manage to have a fair election and Leave wins, I believe we will see gold smash right through 1307.  However, first we need a close above 1290.40.


What do you think gold will do is stay wins?


Adam Taggart's picture
Adam Taggart
Status: Peak Prosperity Co-founder (Offline)
Joined: May 26 2009
Posts: 3213
Gold above $1,300/oz

Gold just returned to a $1,300 handle

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