PM Daily Market Commentary – 12/27/2016
Gold rose +4.30 [+0.38%] to 1139.50 on light volume, while silver climbed +0.23 [+1.49%] to 16.02 on light volume. Gold and silver both spiked sharply through resistance during the Asia trading session; by the end of the trading day, silver was able to keep most of its gains, while gold did not.
Gold spiked up through the 9 EMA at 15:48 JST in one of those high volume “manipulation” moves, hitting 1151.70 before falling back. While gold did manage to rise on the day, and the spike momentarily took gold through the 9 EMA, it was not able to close above it by the time the market closed. Candle print was a shooting star, which looked bearish (58% chance of marking a high). If I just looked at the candle print, I’d say that today’s price action was bearish, however given the large managed money short position, I rather think this may well be the start of a more extensive short-covering rally. Gold needs a close above 1140 to pull it above the 9 EMA.
Rate rise chances (May 2017) fell to 30%.
Gold open interest at COMEX rose +4,739 contracts.
Silver rallied along with gold, but managed to keep much of its gains into the close. Silver printed a “long white” candle which was just mildly bullish. Silver was not able to move above its 9 EMA, but silver’s out-performance managed to drag the gold/silver ratio down -0.79 to 71.13. That’s bullish. Silver needs a close above 16.12 to pull it above its 9 EMA.
Miners were quite strong, with GDX up +2.74% on moderate volume and GDXJ rallying +3.63% on moderate volume also. Today’s move took GDX up and out of its recent consolidation zone, and it also was able to close above its 9 EMA. These are both positive signs; since miners tend to lead, this suggests we may have some good news ahead for PM. Candle print was a “closing white marubozu” which does not mark a top.
Platinum rose +1.36%, palladium rallied +2.89%, and copper rose +1.86%. Copper made a new low, but ended up printing a long white candle which is quite bullish: 68% chance of a low here for copper, while palladium printed a fairly dramatic swing low. It was a decent day for the metals across the board.
USD was unchanged, closing at 103.00 exactly. This resulted in a doji candle print, which doesn’t help us as to direction. Trading range was quite narrow; really not much happened. USD remains above its 9 EMA and in an uptrend, although the upside momentum does seem to be slowing down.
Crude rallied, up +0.64 to 53.89, making a new multi-month closing high. Crude continues to drive higher, in the face of both shale producer hedging as well as a bearish inventory build from last week. Oil remains in an uptrend and it appears to be ready to break out to new highs in the near future. Energy equities are looking a bit tired, however; XLE rose just +0.22%.
SPX rose +5.09 to 2268.88. Materials (XLB:+0.54%) led while consumer staples (XLP:-0.02%) trailed, but it was a relatively quiet day. VIX rose +0.55 to 11.99.
TLT fell -0.32%; TLT is chopping sideways but with a downward bias. It remains below its 9 EMA. No buyers yet for bonds.
JNK fell -0.25% printing a “bearish harami” which the candle code thinks is most likely a top (64%). JNK remains in an uptrend.
CRB jumped up +1.17%, erasing 9 days of slow downside move at one stroke. 4 of 5 sectors rallied, with agriculture leading. CRB is now back above its 9 EMA.
Today’s picture is a mix of slow holiday trading, with some reasonably strong hints from the miners of a possible near term rebound in PM. Oil remains quite strong. Based on the COT report and the hints from the miners, I’m guessing that gold is getting ready to rebound. To help underscore the bearish sentiment, I point at articles (quoted by Mish) suggesting the “death of gold” – which is something I especially like to see after a long downtrend. Once writers feel confident enough to make sweeping statements, it suggests everyone is piled up on one side of the boat – all the potential sellers from 2016 have already been rinsed out.
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The assault on gold is by no means casual. The hunt for money and the global effort to eliminate cash to be able to increase taxation is also targeting gold. All the sales pitches that gold will survive have ignored the fact that government is well aware of gold and people using it to store wealth. China has imposed gold import restrictions, and India’s demonetization and gold confiscations have provided a blueprint for other government to follow, and the success to them is that there have not been riots and bloodshed in the streets of India like has unfolded in Venezuela. Now the European Commission has also proposed tightening controls on cash and have included precious metals transfers from outside the EU. They are using terrorism as the excuse that they need to shut down that route of funding of militant attacks on the continent. It was Winston Churchill who said – “Never let a good crisis go to waste.” Indeed, our politicians in Europe remember those words and they are indeed not allowing any terrorist attack in Europe go to waste. The USA followed this advice with 911, which they took part in, creating TSA, Homeland Security, and began seizing everyone’s phone calls as in the book 1984. The EU politicians are not letting any terrorist attack go to waste and see each event as an opportunity to do things they could not do before. Gold is rapidly becoming the target of confiscation in Europe following the Berlin Christmas attack.