Investing in precious metals 101

PM Daily Market Commentary – 1/29/2014

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  • Thu, Jan 30, 2014 - 05:51am



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    PM Daily Market Commentary – 1/29/2014

Gold closed +16.80 to 1267.60 on heavy volume, silver up +0.20 to 19.70 on moderately heavy volume.  Gold/silver ratio rose yet again, +0.21 to 64.35, another new cycle high for the GSR.  Gold opened lower in asia, but then steadily moved higher all day long.  Gold's intraday uptrend was disturbed for an hour following the Fed meeting, but it recovered relatively quickly, and gold ended up closing near its highs.

Silver, alas, is the poor stepchild.  It tried moving higher as well today, but was unable to hold its highs.  On the daily chart, silver is looking quite weak – and that's undiminished by today's price action – while gold continues looking strong.  As a result the gold/silver ratio continues to climb, which is a symptom of this relative weakness in silver.  Oddly enough, the silver mining stocks are actually doing pretty well.

Notice how gold remains above its 20 day EMA (the green line) seemingly pulling it higher, while silver now appears to be leading its 20 EMA ever lower.  Gold: bullish, silver: bearish.  Perhaps silver is following copper, which has also had an unfortunate last few weeks.

The Fed decided to continue tapering by 10 Billion, reducing the amount of bonds it was buying each month.  Now anyone who survived last year's gold bear market would remember that the merest mention of a tapering would have caused gold to have a seriously bad day.  Isn't it interesting that today, the actual fact of tapering resulted in gold moving up?  We must conclude, gold is no longer driven by tapering concerns.

Perhaps its about money flows.  Today the SPX dropped -18 points, or about 1%, and it closed quite near its lows of the day.  It could be just that simple – the equity market is definitely starting to look tired, and perhaps traders have decided to move money from stuff that did well last year, into stuff that did poorly.  I thought the equity market would rally for sure today, and it didn't.

It could also be about the safe haven trade.  Recent emerging markets currency devaluations are gold-price supportive, especially in the countries where they have them, and it might explain the divergence between silver's downtrend and gold's uptrend.

Bonds which did poorly last year are continuing their New Year rally – and this of course causes rates to fall.  10 year treasury rates dropped 7 basis points today, down to 2.59%.  Only 30 days ago we were all expecting the 10 year rates to move past 3%, and now all they do is drop.  One would expect a Fed taper to worry the bond market, but that's not what is happening.

This series of counter-intuitive move in all these markets are why a) trading is difficult and b) people imagine markets are all manipulated.  (They are, but just not in the way people think).  Traders call this a "sell the news" event, meaning everyone bought in anticipation of a particular event occurring, and so when the news finally hits as expected, no new buyers remain to push prices higher and so price ends up dropping.

This sort of thing happens all the time in markets, and the more you see it, the more you learn to expect it.  Its a clue about what the market's views are, and it is why the following saying is favored by traders: "its not the news that is important, it's the market's reaction to it."  That is because the market's reaction to a news event gives us a window into the aggregate thinking of the market.

"Taper 10 billion = gold moves up" implies that the Fed's taper was already baked into the cake, rather than some nefarious entity is manipulating the price of gold higher.

The USD had a large trading range today, but ended almost unchanged, +0.02 closing at 80.66.  It closed right at its 50 MA.  The feeble rally after the buck's big day down last week makes me think that the buck's future is lower.  Again, I'd have expected the buck to perform better after the tapering news, but it did not.

GDX closed up +2.61% on heavy volume; GDXJ was up +4.28% on extremely heavy volume.  Mining shares opened up strongly, were hammered at the time of the FOMC meeting announcement, only to instantly recover and continue moving modestly higher into the close.  Traders viewed lower prices at 1400 EST as a buying opportunity.  This strong response in the face of what "should be" bad news for gold and mining shares tells me that miner dips should probably be bought.

GDX:$GOLD is strongly bullish, GDXJ:GDX recovering back to its bullish mode, gold price is clearly above its climbing 20 EMA – it all looks good for gold right now.  A move above the spike high at 1280 is the next hurdle for gold.  Silver needs to move above 20.50 at a minimum before we can get excited about it.


  • Thu, Jan 30, 2014 - 06:25am



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    US dollar index symbol question

Hi Dave and all,

I am trying to add the US dollar index to a list of symbols that I watch.  I have tried DXY and USDX in Yahoo finance, with no luck.  I have also tried putting a ^ in front of them.  

Do you (or does anyone) have a suggestion?



  • Thu, Jan 30, 2014 - 06:43am



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    USDX symbol


A google search for "yahoo finance DX dollar index" turns up:‎

So the futures contract for the USD is called "DX" and this DX-Y.NYB seems to be related.


  • Thu, Jan 30, 2014 - 02:16pm



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    US dollar index symbol

.DXY (dotDXY) seems to work in my trade application.


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