PM Daily Market Commentary – 11/17/2014
Gold dropped -1.30 to 1186.60 on heavy volume, silver was down -0.18 to 16.12 on moderately heavy volume. Gold traded in a relatively narrow range and printed a doji candle. This doesn't sound too exciting, but after Friday's strong rally, one might have expected gold to retrace a bit, and if you add today's strong dollar rally, it would not have been surprising for gold to drop seriously based on recent behavior in gold. The fact that gold printed a doji and barely reacted at all under those circumstances seems quite bullish to me.
USD rose +0.43 to 88.01; early in Asia, the dollar dropped significantly, then rallied back strongly right into the NY session, printing a clear hammer candle. The dollar looked quite strong today. This was all about Euro weakness, which tried to rally, failed, and ended up closing down -0.61% vs the dollar.
As I mentioned, in spite of the dollar strength, gold performed well. If the dollar breaks out to new highs, as it might based on price action today, will this gold strength continue? If it does, that strongly suggests that a new factor is at work in the gold market. Perhaps that factor is the Swiss referendum. It is hard to know the root cause of the behavior change, and one day does not a trend make, but when the dollar-gold linkage that has been operative for months suddenly stops working, it is something that definitely gets my attention.
Both silver and platinum both dropped today. That's why I suspect this is something more focused specifically on gold itself rather than something that is more generally PM-supportive.
Mining shares did well today even though gold was flat, and the dollar was quite strong. This behavior is remarkable given recent history, where just last week a more moderate dollar rally caused mining shares to more or less collapse. Yet today, GDX rallied +1.95% on moderate volume, and GDXJ rallied +4.36% on moderately heavy volume. Even SIL (the silver miner ETF) rallied +2.34% in the face of a -1.10% drop in silver. Imagine that.
The strength in the mining shares caused the GDX:$GOLD ratio to rally as well, and the outsized strength in GDXJ caused the GDXJ:GDX ratio to rally too. These are all signs of "risk on" in the PM space.
SPX tracked sideways, as it has done for the past week, closing up +1.50 to 2041.32. I think that's a new all time closing high by some small margin. VIX closed up +0.68 to 13.99.
TLT dropped -0.25% remaining in its trading range, while JNK continued falling, down -0.18%. I don't look for good things from SPX when JNK is in a downtrend, as it is now.
The Commodity index dropped -0.12% today, closing just above its EMA-9. WTIC was down -0.46 to 75.47, while Brent was down -0.10 to 79.31. Oil still hasn't found a bottom, and remains in a downtrend.
I read an article from Salon (referenced in the Daily Digest) that suggested there's a Saudi/US alliance to push oil prices lower for geopolitical reasons – to hose Russia and Iran together. (Russia is supporting the Iranian nuclear program – not a popular position in the Kingdom of Saudi Arabia – and lower oil prices nail both Russia and Iran at the same time; a two-fer). Since KSA is a swing producer and can pump more oil on demand, and since the oil market was on the cusp of a glut anyway and only needed a slight push to send it over the edge, the story does hang together. Tough noogies for the other oil producing states, and the shale producers in the US get nailed as a side effect. Assuming the story is true, of course.
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A strange incident that took place just after the Ukraine presidential coup:
Tonight, around at 2:00 am, an unregistered transport plane took off took off from Boryspil airport. According to Boryspil staff, prior to the plane's appearance, four trucks and two cargo minibuses arrived at the airport all with their license plates missing. Fifteen people in black uniforms, masks and body armor stepped out, some armed with machine guns. These people loaded the plane with more than forty heavy boxes.
After this, several mysterious men arrived and also entered the plane. The loading was carried out in a hurry. After unloading, the plateless cars immediately left the runway, and the plane took off on an emergency basis.
Airport officials who saw this mysterious "special operation" immediately notified the administration of the airport, which however strongly advised them "not to meddle in other people's business."
Needless to say there was no official confirmation of any of this taking place, and in fact our report, in which we mused if the "price of Ukraine's liberation" was the handover of its gold to the Fed at a time when Germany was actively seeking to repatriate its own physical gold located at the bedrock of the NY Fed, led to the usual mainstream media mockery.
And today, from the head of the Ukraine Central Bank:
In an interview on Ukraine TV, none other than the head of the Ukraine Central Bank made the stunning admission that "in the vaults of the central bank there is almost no gold left. There is a small amount of gold bullion left, but it's just 1% of reserves."
Later, the editors were called by one of the senior officials of the former Ministry of Income and Fees, who reported that, according to him, tonight on the orders of one of the "new leaders" of Ukraine, all the gold reserves of the Ukraine were taken to the United States.
Some numbers: Ukraine gold reserves were 1.29M oz = 40 metric tons = $1.5B with gold at 1195.
Ukraine Foreign Currency Reserves = $14.4B (and falling) down from $35B in 2012.
Ukraine gold reserves numbers last updated on July 2014.
Sand_puppy, thanks for the report. I notice that the expanded story in ZH shows a list of official reserves by country. Initially my eyebrows went up a bit when I noticed that Portugal, Venezuela & Greece have sky high % reserves. However, this probably isn't surprising when one considers the recent economic strife in peripheral economies and the possible outflow of foreign reserves.
The ZH article also mentions the previous fabrication of reported Ukrainian central bank gold holdings. Given the above, the opaqueness of China's official reporting, and the (apparent) absence of a Fort Knox reserves audit for a long time, who knows where all the gold really is? If – repeat, if – Ukrainian gold did actually end up in US vaults then it's not impossible that in future the financial repression of the private citizenry could be extended to that of other sovereign states, with future settlements being denominated in PMs. Depressed price levels would make this an opportune action.