PM Daily Market Commentary – 2/10/2015
Gold dropped -5.30 to 1233.40 on light volume, and silver fell -0.06 to 16.91 on moderately light volume. PM traded in a relatively narrow range, but with a downward bias. The 50 MA seemed to provide support for both gold and silver.
USD rose +0.15 to 94.82, inching higher. The dollar drew strength from weakness in CAD (-0.94%) and JPY (-0.72%) but the larger currencies were mostly unchanged on the day. The buck remains in its recent trading range.
Mining shares sold off today, with GDX off -1.89% on light volume, while GDXJ dropped -1.94%. Miners have dropped to the lower end of their trading range; a failure of support would likely lead to heavy selling.
SPX rallied today, closing up +21.85 to 2068.59; so far the market is ignoring that "swing high" marked yesterday, but it has not yet made a new high. Still, SPX closed above its 5-week trading range, which would seem to be a bullish outcome. VIX fell -1.32 to 17.23 – still somewhat elevated, especially since the market is only about one percent away from its all time highs.
Long bond ETF TLT dropped -0.80%, continuing its correction and seemingly headed for the 50 MA. Likely the drop in bonds was driven by the rally in equities.
The CRB (commodity index) fell -1.87%, dropping back down to its EMA-9, wiping out two days of gains but still remaining near term bullish.
WTIC fell -1.47 to 50.96. The oil rally seems to be having problems. Certainly, dropping rig counts are a good sign that US shale production will fall in the future, but the market is still oversupplied today, and there is a limit to the amount of storage available for oil.
I believe that PM and the currencies are awaiting the next installment in the Greek drama. Eurogroup FinMin meeting is tomorrow (Wednesday); ahead of that meeting, positions seem to be hardening.
Up for discussion is the "Bridge Loan", requested to avoid a near-term Greek default. With no bridge loan, it is not clear how long Greece lasts before it defaults on debt payments. Perhaps 30 days?
Greece had an agreement in place with the Troika that would get them 7.2 billion euros, but the conditions attached to that agreement would require them to adhere to the original terms of the Troika, which is a non-starter for SYRIZA.
Here are a few statements from the key players ahead of the meeting:
Tsipras [Greek PM]: there is "no way back" in Greece's quest to rewrite its bailout commitments.
Varoufakis [Greek FinMin]: "If you’re not willing to even consider a clash, you’re not negotiating."
Kammemnos [Greek DefMin]: "… if there is no deal and if we see that Germany remains unbending and wants to blow Europe apart, then we have the obligation to … get funding from another source." [US, Russia, China – in exchange for port concessions and/or military basing rights]
Schauble [German FinMin]: “We are not negotiating a new program. We already have a program,” he said. If Greece did not want a new aid program “then that’s it."
Pierre Moscovici [Brussels Fin Bureaucrat]: Eurozone finance ministers would listen to Greece’s proposals but that there would be little leeway.
I think that pretty well lays it out. No bridge loan, and things ratchet up to the next level. Greece gives Russia/China a naval base in the Med in exchange for funding, and/or the US ponies up some cash to keep Greece afloat for the next few months. Pot remains at "simmer" but does not boil over; this is likely gold positive, but not decisive.
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Thanks so much to CM and Dave Fairtex for the beautiful insights etc. I am not looking for investment advice but have a general question. As we all may know by now, only the USD outperformed gold as a currency in 2014. I personally believe the USD to be cooked McD's hamburger, pretty clearly bad after a few years but still pretty. I say the same for many other currencies too.
So I definitely am a gold bug, but, in the short run, might gold stocks with all their sketchiness, leverage etc. still be a better play for a world investment in gold but not currently USD denominated investment in gold?. Do American mining companies stand to benefit from a global demand for gold but no short run US demand for gold?
I am the type of person who is a contrary indicator for investments: if I say something, do the opposite, but still this question struck me as something I haven't heard discussed much.
Newbier than the Newbiest Newbie