PM Daily Market Commentary – 10/20/2020

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  • Wed, Oct 21, 2020 - 04:03am

    #1

    davefairtex

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    PM Daily Market Commentary – 10/20/2020

Gold climbed +2.63 [+0.14%] to 1914.66 on moderately light volume, and silver rallied +0.25 [+1.02%] to 24.84 on moderately light volume also. The buck fell hard [-0.41%], SPX rallied [+0.47%] as did crude [+0.78%], while bonds edged lower [the 10-Year yield rose +1.0 bp].

Gold chopped sideways in a relatively narrow range. The short white candle was bullish continuation, and forecaster was unchanged and remains in a downtrend. Gold is in a downtrend in both the daily and weekly timeframes.

Gold/euros dropped -5.04 [-0.31%] to 1618.24 on moderately light volume. The short white candle was a bearish continuation, forecaster fell, dropping into a downtrend. Gold/euros is in a downtrend in both the daily and monthly timeframes.

COMEX GC open interest rose +813 contracts. Current open interest for GC: 52% of global annual production, up +0.08% today. 500 GC contracts stood for delivery at COMEX today.

Gold’s minor move was entirely a currency effect. In fact, gold did relatively poorly, given the strong move lower in the buck. Gold ended the day right at the 9 MA.

Silver moved slowly higher for much of the day, giving up some of its gains in the afternoon in New York. The short white candle was unrated, forecaster climbed, moving higher into its uptrend. Silver is in an uptrend in the daily and monthly timeframes.

COMEX SI open interest rose +811 contracts. Current open interest for SI: 91% of global annual production, up +0.47% today. 32 SI contracts stood for delivery at COMEX today.

The gold/silver ratio dropped -0.68 to 77.08. That’s bullish.

Silver is moving slowly higher, and is now above the 9 MA. It looks more bullish than gold.

The miners gapped up at the open, then chopped sideways with a slight positive bias. GDX moved up +0.77% on moderately light volume, and GDXJ rallied +1.06% on moderate volume. XAU climbed +1.13%, the bullish harami pattern was a bearish continuation, forecaster climbed, but remains in a downtrend. XAU is in an uptrend in the weekly and monthly timeframes.

The GDX:gold ratio climbed +0.62%, and the GDXJ:GDX ratio climbed +0.29%. That’s mildly bullish.

The harami pattern wasn’t a bullish reversal; harami candles are usually pretty weak. XAU remains well below the 9 MA, and today’s modest rally did not do much to erase yesterday’s drop. Short term, the miners look mildly bearish; longer term they remain in an uptrend.

Platinum rose +19.05 [+2.16%], and palladium jumped up +66.08 [+2.72%]. It was a strong move by platinum – which jumped back above both the 9 and 200 MA lines, and is now in an uptrend. Palladium looked strong as well. Perhaps the platinum rally is a positive signal for the PM group overall?

Copper shot up +0.06 [+1.95%] to 3.14 on moderate volume. The opening white marubozu candle was a low-percentage bearish reversal (28%), forecaster climbed, moving higher into its uptrend. Copper is in an uptrend in all three timeframes.

Copper broke out to a new multi-year high today dating back to early 2018; the bearish signals we saw at the end of September are now in the rear view mirror.

The buck fell -0.38 [-0.41%] to 93.03 on moderate volume. The short black candle was a bearish continuation, forecaster fell, dropping into a downtrend. The buck is in a downtrend in all three timeframes.

Major currency moves included: CAD [+0.36%], EUR [+0.45%].

The buck made a new 4-week low today; so much for my prediction of an impending plunge in the Euro. The falling buck doesn’t seem to be helping gold very much at all.

Crude rose +0.32 [+0.78%] to 41.27 on moderate volume. The long white candle was a possible bearish reversal (36%), and forecaster dropped, but remains in an uptrend. Crude is in an uptrend in the daily and weekly timeframes.

Crude made a new 6-week high, but couldn’t hold on to the gains through end of day. It remains above all 3 moving averages, but the candle print did look a bit bearish.

SPX climbed +16.20 [+0.47%] to 3443.12 on moderate volume. The bear harami cross candle was a bearish continuation, and forecaster climbed, but remains in a downtrend. SPX is in an uptrend in the weekly and monthly timeframes.

Energy [+1.17%] led, along with financials [+0.81%], while staples [-0.11%] and sickcare [+0.13%] did worst. This was a bullish sector map.

The VIX rose +0.17 to 29.35.

While the harami pattern was not a bullish reversal, forecaster thought it was positive. NYSE advance ratio was 69%, which was moderately bullish. All of the move came in the futures markets overnight; an intraday rally was entirely erased by end of day.

TLT dropped -0.95%. The short black candle was a bearish continuation, forecaster dropped, moving deeper into its downtrend. TLT is in a downtrend in both the daily and weekly timeframes. The 30-Year yield rose +4.0 bp to +1.59%.

TY inched down -0.06%. The short black candle was a bearish continuation, forecaster dropped, moving deeper into its downtrend. TY is in a downtrend in all three timeframes. The 10-Year yield rose +1.0 bp to +0.79%.

Bonds continue to move lower.

JNK climbed +0.34%. The spinning top candle was a bullish continuation, forecaster climbed, rising into an uptrend. JNK is in an uptrend in the daily timeframe.

This looks to be a mild bullish reversal for crappy debt.

Physical Supply

The GLD ETF tonnage on hand dropped -2.92 tons, with 1270 tons remaining in inventory.

ETF Discount to NAV:
* CEF -2.91%
* PHYS -0.22%
* PSLV -2.96%
Gold dealer big bar premiums:
* gold [1kg]: +1.10%
* silver [100 oz]: +6.05%

Discounts shrank for the physical ETFs; at the same time, premiums on the big bars declined. At 6%, the big bar premiums for silver are quite low compared to where they back in the summer.

Summary

Gold, silver, and the miners all moved higher today, with silver and the miners looking substantially better than gold, which lagged today in spite of a strong decline in the buck. Both platinum and palladium did quite well – better than the rest of the group, actually.

Risk assets were generally positive; SPX moved higher (although all the gains happened in the futures markets overnight), crappy debt moved higher, and so did crude, while copper broke out to a new 2-year high.

Bonds continue to look weak. I’m concerned they might break down fairly significantly in the near future.

Mostly, today’s moves seem to have been about hopes for more stimulus; will Nancy get her wishlist or not? It is hard to say. The market seems to be saying: it’s a strong maybe. The buck appears to be voting “yes”, but gold is voting “maybe not.”

I’m thinking that maybe McConnell is signing up to be the bad guy in this drama.

The bond weakness really could be something interesting. Armstrong sees “perpetual bonds” in our future. That is, bonds they never have to pay off – they just pay interest on them. This is basically a default, but without calling it a default. Only the government “gets” to do this.

Something to think about if you own them. And eventually want to get your cash.

  • Wed, Oct 21, 2020 - 04:46am

    #2
    phusg

    phusg

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    PM Daily Market Commentary – 10/20/2020

> Something to think about if you own them. And eventually want to get your cash.

Just sell them to the next sucker when you want your principal sum back, what’s the problem 😉

More seriously, not sure I understand how perpetual bonds are any different from 30 year bonds they roll over perpetually (with or without QE).

  • Wed, Oct 21, 2020 - 05:21am

    #3

    davefairtex

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    conversion to perpetual

Well, as the former proud holder of 6 month and 12 month treasury bonds, it would mean a great deal of difference to me.  If rates increase, how much of a discount would I have to pay to get my cash back? It could be quite substantial.  Especially since they no longer expire.

“All that 6-month debt is now perpetual.”

The other implication is, they get to fix interest rates without engaging in QE.  If the secondary market exists, great.  If not – oh well.  You’re stuck.

 

  • Wed, Oct 21, 2020 - 07:00am

    #4
    Nate

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    great reset

Armstrong frequently mentions the great reset.  Due to a host of reasons it appears this will take place in Europe first, then Japan, and finally in the US.  Having the world’s reserve currency and many dollars floating around abroad just might allow us to view who gets hosed worst abroad before the storm hits here.  And just maybe provide enough time to make some changes.  At least at the margins.

Elected officials (well, their owners) will decide winners and losers.  Where is the low hanging fruit?   Perpetual bonds seems like an easy target.  Pensions, insurance companies, foreign governments get hosed.  Continued raising of income and property taxes.  Probably a wealth tax (unless you are part of the billionaire club).  So you really need all your social security?  What’s Medicare?  And of course a digital currency to complete the deal.

Long ago (1980) I had a discussion with the wise man in our community.  He was a conservative and was really upset that Reagan was spending money he didn’t have.  Where will this lead us?  I told him a lower standard of living in the future.  Pretty simple.

As Chris has mentioned, this doesn’t have to be a bad thing.  Each of us needs to make sure we have taken care of the essentials.  The other stuff won’t matter.

  • Wed, Oct 21, 2020 - 08:54am

    #5
    ao

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    recent interview of Doug Casey

Casey is a very smart guy and one of the small club of pundits I consistently follow, based on the track record of his past predictions.  In a recent interview, he cited the present triple risk of bonds:

1) currency risk

2) interest rate risk

3) default risk

He recommended selling them ASAP, FWIW.

 

  • Wed, Oct 21, 2020 - 10:27am

    #6
    phusg

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    PM Daily Market Commentary – 10/20/2020

Sounds pretty hasty to panic out of US bonds already, assuming you’re talking about treasuries, given that I agree Europe and Japan would blow up first.

> Long ago (1980) I had a discussion with the wise man in our community. He was a conservative and was really upset that Reagan was spending money he didn’t have. Where will this lead us? I told him a lower standard of living in the future. Pretty simple.

I’m not sure I agree. I think abusing your currency until it dies actually makes for a higher standard of living in the short to medium term, given that debt allows us to bring forward consumption. That is what we now see across vast swathes of the world; consumption of resources as never before. During any currency reset(s) there may well be a lower standard of living for some years, but I’m afraid we’ll still be back to full throttle consumption as soon as we possibly can. If only we could target 0% inflation, then people may well feel less need to spend their cash as much, but just be happy saving some cash or other stores of wealth and enjoying a decent pension at the end of it.

  • Wed, Oct 21, 2020 - 04:53pm

    #7
    Nate

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    phusg

I’m not sure I agree. I think abusing your currency until it dies actually makes for a higher standard of living in the short to medium term, given that debt allows us to bring forward consumption. That is what we now see across vast swathes of the world; consumption of resources as never before. During any currency reset(s) there may well be a lower standard of living for some years, but I’m afraid we’ll still be back to full throttle consumption as soon as we possibly can. If only we could target 0% inflation, then people may well feel less need to spend their cash as much, but just be happy saving some cash or other stores of wealth and enjoying a decent pension at the end of it.

We don’t live in a world of infinite resources.  A currency reset without a resource reset will derail full throttle consumption in the future.  Maybe not in our lifetime, but it will at some point in the future.  Remember, 10 calories of energy (mostly fossil fuels) to produce one calorie of food.  Berman does not think we will ever reach the production levels of energy on the fracking peak years.

Retirement (and pensions) are an artifact of fossil fuels.  So are 7.5 billion people on a finite planet.

 

  • Thu, Oct 22, 2020 - 01:02am

    #8
    phusg

    phusg

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    PM Daily Market Commentary – 10/20/2020

> A currency reset without a resource reset will derail full throttle consumption in the future.

100% agree. But which is more significant, the lack of resource reset or the currency reset? That’s my point.

> Remember, 10 calories of energy (mostly fossil fuels) to produce one calorie of food.

Lot’s of food photosynthesizes or eats the products of photosynthesis, so I doubt it’s ‘mostly’ fossil fuels, although I agree that we really need to stop using fossil fuels to boost our production of calories at the expense of soil quality. Do you eat ‘organic’ food?

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