Investing in precious metals 101

PM Daily Market Commentary – 10/25/2018

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  • Fri, Oct 26, 2018 - 02:45am



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    PM Daily Market Commentary – 10/25/2018

Gold edged down -1.90 [-0.15%] to 1238.91 on moderately heavy volume, while silver fell -0.04 [-0.27%] to 14.66 on moderately heavy volume also. The buck rose +0.28%, more than accounting for the move lower in the metals. Equities rallied sharply, up +1.86%, which seemed to weigh somewhat on the metals prices.


The spinning top candle was unrated, while forecaster dropped -0.43 to +0.29. Gold in Euros looks much stronger, making a new high, with the GC.EUR forecaster rising +0.07 to +0.63, which is a strong uptrend. Gold remains in an uptrend on both the daily and weekly timeframes, while gold/Euros is in an uptrend in all 3 timeframes. The strengthening dollar continues to hide a strong gold rally.  Today I’ll show you gold/Euros.  You’ll see what I mean.  GC.EUR has had a 7% move off the lows.

COMEX GC open interest rose +19,204 contracts. That’s a large increase.

Rate rise chances (December 2018) rose to 70%.

Silver mostly chopped sideways until about 9 am, when it dropped about 10c in 20 minutes.

Silver’s spinning top was unrated, while silver forecaster dropped –0.20 to +0.06; silver’s daily chart uptrend has become pretty feeble.  Silver is currently tracking sideways within a medium-term mild uptrend. Currently silver is in an uptrend only in the daily timeframe; weekly and monthly are both pointing lower.

COMEX SI open interest rose +3,855 contracts.

The gold/silver ratio rose +0.10 to 84.11. That’s slightly bearish; the current level for the ratio suggests PM could be at or near a long term low.

Miners were smashed today, with GDX plunging -4.38% on very heavy volume, while GDXJ dropped -3.30% on very heavy volume also. XAU dropped -4.88%, a really terrible day – especially seeing that gold itself only fell two bucks. What’s the deal? One possibility is GG (Goldcorp) missing earnings: it dropped 18% today alone. But AEM reported better-than-expected earnings, and it initially was up 7%, but then it too was pounded into the pavement. Goldcorp’s earnings miss didn’t look all that horrid to me, but what do I know? It turns out, Bill Fleckenstein – who does know – agrees. The miners were sold really hard for mostly unknown reasons. “Today was one of the most bizarre beatings relative to valuations and fundamentals that I have ever seen.” I don’t know who was doing the selling, but it was largely indiscriminate.

Technically, the move threw XAU into a downtrend in all 3 timeframes. The monthly swing low has more or less evaporated. XAU is now back below all 3 moving averages.

The GDX:$GOLD ratio plunged -4.23%, while the GDXJ:GDX ratio rose +1.12%. That’s bearish. Although – note that the juniors suffered a bit less from the pounding than the seniors. That suggests this move could just be a one-off from some large holder of mining shares that just wanted to get out of the space.

Platinum fell -0.40%, palladium dropped -2.21%, while copper rose +0.31%. Palladium printed a swing high today after making a new all time high just two days ago. Platinum is chopping sideways, while copper continues to slowly edge lower.

The buck climbed +0.27 [+0.28%] to 96.24, making a new high. The long white candle was a bullish continuation, and forecaster moved higher, indicating a strengthening uptrend. The buck is moving steadily closer to the previous high of 96.61 set back in July. The buck remains in an uptrend in all 3 timeframes. As I mentioned earlier, the dollar rally is – somewhat remarkably – not crushing the price of gold.

Crude moved higher today, up +0.55 [+0.83%] to 67.04. The fact that crude managed to move higher so soon after the bearish EIA report suggests we might – might – be relatively near to a low for crude, after seeing a $10 drop in the last month. The long white candle was unrated, while forecaster rose +0.20 to -0.33. Crude is in a downtrend in all 3 timeframes.

SPX rallied +49.47 [+1.86%] to 2705.57, managing to recoup some of yesterday’s losses. The bullish harami candle pattern could be a reversal (41%), and forecaster jumped +0.28 to -0.75. However, SPX remains in a downtrend in all 3 timeframes, and today’s rally did not change this at all. At end of day, SPX saw some selling pressure, and after market close, it dropped another 15 points – we are in earnings season, and things are fragile enough so that some large company missing unexpectedly could hit sentiment fairly hard.

Sector map shows that tech led higher (XLK:+3.44%) along with consumer discretionary (XLY:+3.02%) while utilities did worst (XLU:-1.56%). This was a bullish-buy-the-dip sector map today.

VIX fell -1.01 to 24.22.

TLT fell -0.42%, falling as expected on the days when SPX rallies. The drop was relatively minor, and TLT remains in an uptrend. TY fell -0.08%, a tiny move lower after the large rallies in recent days. TY remains in a downtrend in both weekly and monthly timeframes. The 10-year yield rose +1.2 bp to 3.14%.

JNK moved up +0.14%, a fairly feeble move given the selling yesterday. While JNK also printed a bullish harami, it was neutral, not a reversal pattern.

CRB rose +0.17%; 3 of 5 sectors rose, led by energy (+0.77%). CRB has meandered lower as equities fell, but the move in the commodity complex has been relatively benign – certainly by comparison anyways.

While gold in USD is meandering sideways with an upward bias, gold/euros makes a new high almost every day. This is what is keeping gold from doing its usual trick of having heart attacks whenever the dollar moves higher. There is a bid for gold over in Europe right now: Italian budgets (a 2.4% deficit! Unprecedented!), Spanish banks, the end of ECB money printing in sight, Merkel on the edge of losing power due to a “loss of trust” (i.e. migration), and of course BRExit. The Euro is slowly moving lower as a result of all these forces.

So money flows to the US – but not to risk assets. Who wants risk with all of the political chaos – elections in 2 weeks, with the prospect of endless impeachment proceedings (with prospect of equally endless, ratings-positive “bombshells”, day after day) to come? Fed is raising rates, so why not just buy one of those short-term T-bills that yield 2.2%?

By campaigning well for Republicans, Trump has proven himself as an asset to the Republican side of the swamp. Unless there is some “smoking gun” audio tape out there of him requesting that Russia interfere in the US electoral process, I think he’s pretty well immune to impeachment.  Based on the current set of facts in evidence, that is.

Gold and bonds – shorter term is probably better. But not gold miners. They sure were beaten like a rented mule today, for reasons unknown.  Sure equities rallied today, but – elections in 11 days.

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