PM Daily Market Commentary – 12/1/2015
Gold rose +4.30 to 1068.30 on moderate volume, while silver climbed +0.10 to 14.16 on moderate volume too. Both metals rallied today, but neither were able to break out conclusively. A drop in the dollar likely helped.
Gold spiked higher in Asia, but then dropped for the rest of the day, keeping only about half its gains by the close in NY. Gold has managed to claw back from its Friday breakdown, and is now back to displaying imminent technical signs of a reversal. It is possible that Friday's breakdown was just a headfake. Bullish RSI divergence is present, as is a bullish MACD crossover. Gold needs a close above 1070.70 to mark a close above the 9 EMA.
Silver rallied briefly above its 9 EMA, but could not hold its gains into the close, ending the day just one penny below the 9 EMA. Silver is displaying the same bullish RSI divergence as gold, and has also executed a bullish MACD crossover so it too appears ready to reverse.
Miners had another good day, with GDX up +2.91% on moderate volume breaking out of its ascending triangle formation, while GDXJ rose +2.38% on moderately light volume. Miners look strong here; volume is steadily increasing, and the GDX:$GOLD ratio is moving higher.
The buck dropped -0.37 to 99.84, printing a swing high on the day, and finding support on its 9 EMA. A close below 99.75 would be bearish for the dollar. The ECB is having a meeting in two days where we get to see just how much more base money ECB Chairman Draghi will create. Will he really "do what it takes?" Momentum in the buck has slowed in advance of the meeting. A reversal in the buck is just what gold needs to trigger a rally.
SPX rallied sharply today, climbing +22.22 to 2102.63, after moving sideways for the past six days. We had two reports today; a construction report was bullish, while the manufacturing ISM report showed contraction – an impact of the stronger dollar. It appears that the market may have decided that the good news from the construction sector outweighed the decline from manufacturing.
JNK rallied sharply today, jumping +0.46% which took it cleanly above its 9 EMA. This hints more than a little at a risk-on posture.
Bond ETF TLT staged a big rally today, up +1.35% vaulting over both the 200 and 50 MAs, clearly moving into bullish territory. Long rates have been slowly dropping over the past month, but that really accelerated today. Its almost as if bonds were eyeing the bad ISM report, while equities were happy at the good construction report.
The CRB rose +1.02%, moving back into the middle of its recent consolidation range. CRB's downside momentum has slowed way down, but it has yet to start moving higher. If it did, that would definitely help support a reversal for PM.
WTIC moved little today, dropping -0.03 to 41.65. It flirted with a breakdown several times, but buyers showed up whenever price fell to 41. The OPEC meeting on December 4 might help decide direction in crude. The Petroleum Status Report tomorrow might also provide some direction.
To me the COT report from yesterday is key; COT reports are not great timing tools, but from a historical perspective, once the commercials close out their short positions, rallies in the metals are usually not far behind. Gold's price chart is slowly becoming less bearish and the technicals are signaling that a reversal could be imminent. Most likely the reversal will be a symphony of interactions – the buck will start to fall, CRB will rally, and at that point gold will take off like a startled rabbit, probably led by the mining shares, as the commercials rip the market higher (causing Managed Money to cover) to start the next gold cycle.
After all, those commercials can't make their money if price only drops.
Timing drivers involve the following upcoming events:
- Dec 3: ECB Rate Decision
- Dec 4: OPEC meeting
- Dec 4: Nonfarm Payrolls
- Dec 16: FOMC Rate Decision
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Big dollar move this morning – three economic reports released today all said more or less the same thing, which is that employment is looking strong, unit labor costs are rising, and that suggests a strong Nonfarm Payrolls report tomorrow – all of which increases the likelihood of a Fed rate rise on the 16th.
Buck has broken to new multi-decade highs and is now trading up +0.52 to 100.40. The last time we were at 100.40 was back in 2003. Gold is not happy, down almost $10, and looks to be heading towards a test of the 1052 low.
As long as the buck continues its uptrend, gold will have a hard time reversing direction, even with the COT report clearing the decks.
Miners are holding up pretty well, all things considered, down only -1.27%.
Yellen, in a speech today, said "labor market gains bolster confidence on inflation – delaying liftoff too long risks abrupt tightening later."
When this news hit the wires, it spiked gold down about $5 in 1 minute, making a new low for gold of 1049.70 and chasing out about 4700 longs. Buck spiked higher 0.14 at that moment to 100.54.
Looks like the market still isn't convinced that Fed will raise rates; every new indication that comes across the wires that suggests they really, really will raise rates this time sends the dollar higher, and gold lower.