PM Daily Market Commentary - 6/29/2016

davefairtex
By davefairtex on Thu, Jun 30, 2016 - 6:04am

Gold rose 7.30 to 1321.80 on moderate volume, while silver shot up +0.52 to 18.37 on heavy volume.  The BRExit safe haven crash has morphed into a commodity rally.  Silver, palladium, and platinum were the big winners today along with energy.  A falling dollar helped.

Compared to the other PM elements, gold had a bit of a tough time today; gold's rise was just about equal to the fall in the buck, which suggests that gold more or less was unchanged worldwide.

On the chart, gold remains well above 1300 support, but has been unable to move higher for the past few days.  Today's spinning top candle print is not particularly bearish (< 10%).  Open Interest increased, but only by 1158 contracts; commercials aren't holding things back.  I suspect another shoe might have to drop for gold to take another leg higher.  That, or maybe silver will drag it higher.  But as long as we remain above 1300, the uptrend remains in place.

Silver really liked today's commodity rally; at least that's how I interpret it.  Silver broke out to a new high on heavy volume, and it retained most of its gains into the close.  The two-day candle print was a "confirmed bullish doji" (one of my own) which in this context is pretty bullish.  The bounce off the 9 EMA looks to have led directly to higher prices for silver.  Sometimes things need to drop to re-test support before they move higher.  I don't know why this is, but it is true fairly often.  I think this silver breakout under these circumstances is an important signal - for PM and for commodities in general.

GDX rose +2.07% on moderate volume and GDXJ rose +2.56% on moderate volume also.  That sounds better than it looks on the chart; GDX rallied in the morning, but ended up selling off fairly hard right at end of day.  As a result, GDX printed a shooting star candle, which is bearish - but not all that bad (15-20% of being the near-term high).  GDX has been mostly chopping sideways; it is consolidating above its 9 EMA.

Platinum was a star performer today, up +3.05% on very heavy volume, closing just below its 50 MA.  Palladium did well also, up +3.67% breaking cleanly above its 50 and 200 MA lines, and moving back into a clear uptrend.  Copper continued to climb, up +0.76% and making a new high.  Looks like all systems go for the metals right now.  This feels much more like a commodity-inflation rally than anything having to do with BRExit.  Hmm.  Is inflation sneaking back into the picture?

The buck fell -0.54 to 95.81.  Pound is struggling higher, up +0.66% while the Euro rose just +0.49%.  Buck remains in an uptrend.  Let's see what happens to the pound when they invoke Article 50.

WTIC had another good day, up +1.43 [+2.79%] to 49.54, closing back above its 9 EMA.  Oil touched 50 briefly intraday.  The rally was helped by a bullish Petroleum Status report which showed a draw of -4.1 million barrels from inventory.  Crude stocks have been falling steadily since May.  Oil still needs to close above the 50.54 level to reverse its short term downtrend.

SPX rallied again today, up +34.68 to 2070.77, moving back above its 9 EMA and closing near its high for the day.  Today's "opening white marubozu" is a bullish candle.  Financials (XLF:+2.27%) led, possibly because the latest Fed stress test gave all the banks an A+ (except for two foreign banks: DB, and Santander who failed, and Morgan Stanley which received a finger-wag but was allowed to do what it wanted anyway), allowing them to raise dividends and buy back stock - and since the CEOs all own stock and reap benefits from short term moves in stock prices, they all announced divided raises and stock buybacks.  Woo hoo!  Most of the other sectors did well also, up roughly 1.5%-2%.  VIX continued to plummet, down -2.11 to 16.64.

TLT finally started to fall, dropping -0.77% and printing a "bearish engulfing" candle pattern; 23-42% chance of the high here.  TLT is belatedly signaling risk on.

JNK rallied again, up +1.23% and closing back above its 9 EMA.  JNK is signaling risk on.

CRB rallied too, up a big +1.61%, breaking above its previous high and ending its brief downtrend.  Commodities are starting to heat up again.  Mostly its energy, but also industrial metals, PM, and livestock.  It looks like BRExit only derailed the commodity move momentarily.  Is anyone watching?  I think silver has started to notice: gold/silver ratio has dropped to 71.95.  This is definitely not a flight to safety.

Rallies in peripheral Europe have not been great, especially when you compare them against the losses they just suffered.  Spain was down 12%, and it has rallied back perhaps 5%.  Contrast that with SPX which has regained perhaps 75% of its losses, and the FTSE which has regained all of it.

It looks as though BRExit isn't the end of the world for England after all; all the drop in the pound has done is to attract capital from other places into its equity market.  "England companies selling at a 10% discount."  And if oil continues to rise, and other commodities also, we could see quite the move in silver without any drama from Europe, and that would probably drag gold higher.

This commodity move is really starting to get my attention.  Think about this: commodity inflation alongside negative rates in most bonds = I can't imagine a better environment for a PM rally.  Its a more solidly PM-bullish market than just the safe haven move, because the commodity tide will be lifting all boats, and negative rates will push a ton of big money to move elsewhere.

Remember how angry some of you were when I would do nothing but talk about falling commodity prices and how that was pulling PM prices lower in 2014 and 2015?  Well...just perhaps...that process is now reversing more seriously.  For commodities to bounce back this nicely so soon after BRExit suggests real strength.  Especially copper.  All the fuss about BRExit might have concealed an important new trend...we'll have to watch it closely going forward.

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12 Comments

davefairtex's picture
davefairtex
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more europe

In the intro to the following document, the authors suggest the proper response to BRExit isn't just "more Europe."  Later in the (9-page) document they proceed to describe...what I'd call dramatically more Europe.

https://armstrongmedia.s3.amazonaws.com/wp-content/uploads/2016/06/EU-Document-Proposal-New-State.pdf

Highlights:

  • Permanent civilian-military chain of command in Brussels
  • Rapid reaction forces financed by Brussels; a nascent EU army
  • Increased member state defense spending
  • EU intelligence directorate
  • EU prosecutors: "for organized crime and terrorism"
  • EU border patrol & coast guard
  • No "transfer union"

"Let no crisis go to waste."  Put another way - now that the UK has bailed out, we can create that EU Army we always wanted.

 

Jim H's picture
Jim H
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Silver just broke 19 Boys and Girls....

Remember when Silver was in the 13's and all seemed lost?  I really like Kranzler.. I subscribe to his mining stock newsletter.  I have a great trust in ex-Wall street guys like him who lived in the belly of the beast and then finally had to get out in disgust after becoming fully awakes.  The list of folks like this includes Andy Hoffman, and Michael Krieger, to name just a few.   

  http://www.silverdoctors.com/silver/silver-news/bullion-banks-are-starti...

Submitted by Dave Kranzler:

The Open Interest in silver is close to the new all time record high – set just last week – and gold’s Open Interest is at the same level as 2011 when gold hit it’s all time high in value. As you know the acquisition cost of gold is about $600 less than in 2011 which makes the Open Interest all the stronger. What will it be when gold really starts moving again?

In this episode of the Shadow of Truth’s Market Update, we dig into the signals being given by the market which indicate that the silver manipulation scheme is becoming unmanageable.  In addition, we discuss the ongoing global systemic financial and economic collapse.

cmartenson's picture
cmartenson
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Well, what's interesting about silver...

Well, what's interesting about silver...besides the fact that it broke $19 a short while ago, is that during  the Friday Brexit market gyrations, when gold had 50,000+ new contracts added to the OI pile, silver had no such corresponding OI increase.

Very different behavior:

 

Well, would you look at that?  

Gold got clobbered with a 50k OI increase while silver saw a slight decline of 1.5k contracts.

That's a huge departure in behaviors and perhaps that should have been a clue for the recent run-up, although I still can't quite understand how or make the case for it.

However, I am sincerely hoping that there's a pile of JPM shorts out there sweating bullets right now and while the odds say that this rise will be smashed some Sunday night at 1:45 a.m., perhaps this Sunday night, one day the Bullion banks will lose, and lose spectacularly.

When they do I propose that we host a special PP webinar with whiskey and open microphone channels.  :)

Jim H's picture
Jim H
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Silver vs. Gold...

I tend to think that Brezit caused the big boys to play currencies in the immediate aftermath.. and in this league, the monetary metal of choice is Gold.  The BB's were just defending the turf where the battle was that day.  Since then I think that the markets have more generally sniffed reflation.. hence Silver is catching a ride ahead of Gold.. as it probably should be.  Good sounding story, eh?    

Silver is not stopping.. 19.20 now.  Tomorrow will be interesting. 

I wonder how many folks have been waiting for months now for that next buying opportunity?  The right place to get back in?  One can never say for sure.. but it's looking more and more like that day is not coming.  

davefairtex's picture
davefairtex
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silver, gold, etc.

JimH-

I wonder how many folks have been waiting for months now for that next buying opportunity?  The right place to get back in?  One can never say for sure.. but it's looking more and more like that day is not coming.

Are you saying that silver will continue on its current track until it hits 50, with never a dip to be seen?

 

Jim H's picture
Jim H
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Buying opportunities in Silver and Gold

I didn't explain myself well Dave...  certainly there will be ups and downs... though I would not rule out a scenario where we get some kind of commercial signal failure and thus a single, step function increase in price that would set a new floor. 

What I was really thinking was this:  I don't think Silver will ever be $14 again.  What's going on now appears to me to be a controlled retreat. 

davefairtex's picture
davefairtex
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no more $14 silver

JimH-

What I was really thinking was this:  I don't think Silver will ever be $14 again.  What's going on now appears to me to be a controlled retreat.

Ah yes, the controlled retreat - known in literally every other market as "an uptrend."  :)

I agree - as long as the "slow burn" remains in place.  Negative rates means higher prices for gold and silver.  And the oil/commodity rebound will add a kicker to that as well - the fact that silver is now leading is a really good sign.  GSR is now 70.48, down from 83 back in Feb.

BRExit says: zero chance of an ECB rate increase.  Lower rates for the UK.  And...just perhaps...a rate cut by the Fed.  We'll know more after Nonfarm Payrolls next week.

The only risk I see is a massive deflationary crash.  I do worry about those Italian banks.  A massive bunch of bail-ins might be problematic.

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Jim H
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Uptrend vs. controlled retreat

Dave,  Your somewhat sarcastic statement serves to highlight for our readers that you and I always have a huge, underlying fissure between our views of this market. 

I believe that today's price has only the most tenuous connection to supply vs. demand based on the very visible (for those who would look) functioning of the paper futures markets.  I also believe that we are presently in a phase shift whereby physical demand is asserting it's influence again, via developments in the China market (Yuan fix, and arb. against it), etc.  I believe that a true price, which balances physical supply vs. demand, would be much higher, for both Gold and Silver vs. today's paper price.  Potential exists for a step function price increase.   

You Dave seem to believe that today's price is real.. i.e. that it is not just representative of supply vs demand of paper, but also of physical.    

One of us is right.. not both of us.  Time will tell.. my conviction is such that I am fully invested in Gold, Silver, PHYS, PSLV, and miners at this time.  I am not a short term trader.. though I had been in a lot of cash for a few years waiting for this new era to unfold.. and I believe it is here, now, unfolding.  Good luck to all. 

davefairtex's picture
davefairtex
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gold belief systems

JimH-

I believe that today's price has only the most tenuous connection to supply vs. demand based on the very visible (for those who would look) functioning of the paper futures markets.  I also believe that we are presently in a phase shift whereby physical demand is asserting it's influence again, via developments in the China market (Yuan fix, and arb. against it), etc.  I believe that a true price, which balances physical supply vs. demand, would be much higher, for both Gold and Silver vs. today's paper price.  Potential exists for a step function price increase. 

Yeah I know.   We each have our belief systems.

In my world, things are less complicated.  Western gold buyers didn't care about gold for quite a while, mostly because the promised-hyperinflation never happened, and instead we got a commodity price crash courtesy of China.  But after four years in the wilderness, Western buyers care again!  Western money is flooding into all the various gold products.  Some of that hits GLD, some PHYS, some little gold bars, and some COMEX contracts.

Those 50k contracts printed up by the bullion banks at COMEX stopped gold for all of three days.  Goldbug writers promised that the bullion banks had infinite power, and could stuff every rally.  Hmm.  Rally not stuffed.  "But Pope Goldbug told me this, and he sounded very authoritative!"

To me, its not about Yuan fixes or arbitrage or Virtuous Physical Demand or dusty bars or any of the other stories the goldbug writers love to tell.  Its simply about a ton of western money hitting the gold market from every direction after ignoring gold for four long years, while China and India continue to buy.

Bang.  Price goes up.

 

Jim H's picture
Jim H
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Nothing beliefy about it....

Today's price is a paper futures derived price.  This system of control is ending because the physical demand is too high.  We have seen very quantitative documentation of the fact that the London float is gone... in fact Gold flows into London have reversed... after years of documented drain.  Again.. this is a sign of change.  This is not a time to trade.. it is a time to get in a deep as you are willing, with physical and miners and ride it out.  

We are in the early innings of the phase change.  We are no where near the craze that is to come.  GLD is by the way just a paper derivative of Gold, and is meant to sop up a large amount of the brokerage account and IRA demand for Gold... I highly recommend PHYS/PSLV if you really want to hold Gold and Silver as shares in a brokerage account, as it is not held in the banking system.  GLD Gold will be all counterpartied when the time comes (I coined a new verb there).         

davefairtex's picture
davefairtex
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entirely about belief

JimH-

Unless you work in the belly of the beast yourself, this is entirely about belief.  Since you don't work there yourself, you either believe in Pope Goldbug's explanation of how the market works, or you don't.

I believe that if there is a shortage of physical gold in a location, premiums appear at that location.  I believe this because that's the way markets work everywhere.  If there's a shortage of anything, premiums appear.  (They call it profiteering if it happens during wartime, but its just supply & demand).  So if gold shortages occur everywhere, then premiums will appear everywhere.  Those premiums will pull COMEX prices higher.  Likewise, if money pours into COMEX, then the price for physical is yanked higher even though no physical shortage exists.  That's the way physical and paper interacts.

You (and Pope Goldbug) claim the current gold price move is about various tricks in China and big physical shortages.   How physical shortages occur without premiums appearing I'll never know - it runs directly contrary to common sense and our everyday experience.  This very thing happens at retail when the Eagles run low - premiums rise!  But somehow we are to believe that the wholesale market operates differently?  Massive shortages occur, but somehow, no premiums?  You may believe this because of your faith in Pope Goldbug's explanations, but I don't.  When there are shortages, premiums will appear.  If there are no premiums, then there is no shortage.

I believe the price move is all about western money pouring into COMEX, and GLD, and PHYS, and PSLV, and the usual flow of money into the India and China gold markets.  Demand for all gold products is higher than it was before, so, price rises.  That's my belief.

And before you go on about COMEX OI and how bullion banks can create infinite contracts to stuff any rally - you might want to look at aggregate mine production relative to the size of the existing COMEX OI.  Mine production happens every single year, and the entire COMEX paper gold supply was produced just once.

Net mine supply since 1980: 71,170 tons.  All of that gold remains as supply.

Net COMEX paper gold created since 1974: 1,800 tons.

I know Pope Goldbug says that 1,800 >> 71,170 and so you guys all dutifully nod your heads in unison.  But that doesn't make it so.  Back in the real world, "they" created 150 tons of paper gold, and it stopped the market for all of three days.

The only reason the commercials can affect prices in the short term and on the margin is by scaring managed money into bailing out.  If managed money doesn't bail out - the commercials have no power.

And that's why gold has rallied.

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Arthur Robey
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Posts: 3936
Rhodium

I like Silver because it is bulky and useful. 

At the opposite end of the spectrum is Rhodium at 5 times  the value of gold. Such a lot of value in such a small speck.  If ever there was a case for transmutation or asteroid mining it is Rhodium. (The k/t boundary is rich in Rhodium.)

From the shape of the recent rally in silver on the 5 year Kitco chart I think it looks more healthy than the faux rally in 2012. But  I am worried that it is too peaky, which would mean that it is is driven by speculators piling in .

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