PM Daily Market Commentary – 10/3/2015
Gold plunged -16.20 to 1117.20 on heavy volume, while silver dropped -0.15 to 15.26 on moderate volume. Gold tried rallying during the Asia session, but then declined steadily throughout London trading, finally bottoming in the afternoon in NY at 1113.60.
Selling at COMEX in gold has accelerated; Managed Money is bailing out of their long positions as usual, and based on the current decline velocity, I don't think the uptrend line will hold. Gold still has a chance to maintain upward momentum if the decline stops prior to the previous low at 1097. If not, gold will likely move back into a downtrend once it does manage to bounce, simply because traders will return to selling rallies rather than buying dips. I certainly don't see any dip-buying happening right now at the COMEX.
Silver followed gold lower, but did not decline nearly as dramatically. Silver made a new low, but stopped dropping right around the 50 MA at 15.20 – silver bounced twice off that level intraday. The rebound was unspectacular, but compared to gold, silver did well simply by not declining very much. The gold/silver ratio actually fell on the day. For some reason, Managed Money does not seem to be liquidating their long silver contracts with the same enthusiasm they are in gold. Volume is also declining. These are relatively positive things for silver – especially compared to what is happening in gold.
In spite of the heavy selling in gold, traders in GDX seemed uninterested in liquidation today. GDX closed down just -0.53% on light volume. Normally when gold sells off hard the way it did today, the miners follow along and sell off even harder, but there was hardly any volume at all in the miners and the move lower was quite tame. Whomever is holding mining shares right now isn't particularly interested in selling. That's got to be bullish. Perhaps miners are sniffing out an upcoming low in gold? That's me being an optimist.
The buck found support on its own 9 EMA and rallied +0.24 to close at 97.24. Buck continues to remain in an uptrend, although it did not make any new highs today. The dollar uptrend helps to keep pressure on gold and silver.
SPX rallied weakly today, climbing just +5.74 to 2109.79. The previous all time high, set in May, was at 2134.74 and we are not so far away from there. Failure to make a new high will likely lead to selling, but based on how things have gone recently, any dip will probably be bought. VIX rose +0.39 to 14.54.
JNK rose +0.05%, but remains below the high made last week in spite of the rally in crude oil. It is not signaling "risk on" – if anything, its saying the opposite.
Bond ETF TLT broke below support today, losing -0.82% and marking a new low. Bonds are not looking great – they are clearly in a short term downtrend at this point. Still, bonds are not a great bargain, with the 30 year yielding just 3%. Bonds should rally when equities finally top out.
The CRB rallied +1.36% today, moving back above both the 9 EMA and the 50 MA. CRB has been both above and below its moving averages several times in the past month – this suggests just a move sideways. And pulling back to the weekly chart that's what we see – CRB moving sideways, bumping along the bottom.
WTIC rallied strongly today, rising +1.60 [+3.47%] to 47.68. Over the past two months, oil has head-faked first higher to 50, then lower to 42, and is now moving back up to the top of its recent 44-48 trading range. Oil equities are on a minor tear right now, with the energy sector ETF "XLE" up +2.56% and breaking out to a new cycle high. Buying in the majors has been strong; Chevron rallied 3.35% just today, as an example, on high volume. Is "the low in" for oil? I don't know. But my computer is long, both oil and oil equities.
Gold continues to sell off. While we might be tempted to buy gold right now because its cheap – certainly it is cheaper than it was two weeks ago anyway – its safer to wait for all that selling at the COMEX to calm down, and for the buyers to finally show up (and/or for the shorts to start ringing the cash register). Hopefully they will do this while the uptrend remains intact. If the current gold uptrend ends up being broken, gold probably continues moving downhill in the medium term, and it then becomes unsafe to "buy the dip" except just as a short term trade.
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PM's plummeting but who really cares! Almost all here are in for the long haul or maybe looking to buy. If you're taking the long view then any short term antics are irrelevant. If you are a buyer well its all good news for now. I was astounded to hear silver was below $16 earlier in the year. I paid attention for a while on a daily basis and bought some more. But unless we get a BIG drop I'll remain an amused and detached observer. PMs are something to put aside and forget about while the leviathan thrashes its self to death. There are plenty more important things to focus on.