PM Daily Market Commentary – 3/11/2014
Gold closed up +9.60 to 1349.50 on heavy volume, while silver closed +0.05 to 20.88 on moderately heavy volume. Gold and silver rallied in asia but then followed copper lower just before mid-day in New York. Gold buyers showed up and pushed gold right back up again, but silver was not so fortunate. Gold's better performance pushed the gold/silver ratio higher by +0.32 to 64.63.
The buck closed up +0.02 to 79.77. It tried to rally and failed. All three moving averages have turned down for the dollar. It is interesting that with all the fuss in the Ukraine right now, there is no "safe haven" dollar move.
GDX was up +0.62% on moderately heavy volume, with GDXJ up +0.56% on moderate volume. Miners continue to track sideways within that consolidation zone much as they have done for the past 4 weeks, waiting to break one way or the other.
Commodities dropped -0.17%, down just a bit. Copper continued its dramatic move lower, plunging right through 3 support on very heavy volume, closing at 2.95 – a level not seen since June 2010. The break of long term support tells me the copper market is probably unnerved by China's debt situation along with the bad export numbers. I'm starting to become a believer in the big China blow-up story. Rumor has it that Chinese businesses have loans that are collateralized by these piles of metal whose price is now dropping at 3% per day. Of course selling the pile of metal to repay the loan simply adds fuel to the fire, driving prices even lower.
In spite of all the fuss with copper, gold still has a strong bid underneath it. Since Friday, gold has had three good-sized spikes down, two of which were bought pretty convincingly. And now in asia morning trading, gold has broken out to a new cycle high of 1359.40, stopping out 4000 short-side contracts in a one-minute burst.
"Short assaults" like these that happen during an uptrend aren't noticed, mainly because the longs treat them like meat dropped into a shark tank. The dips simply get bought, and the shorts get hosed. Of course the same short assault that happens during a downtrend results in more selling and ever-lower prices, and this generates a whole lot of complaints from mainstream goldbugs who are sure every downspike is a sign of the devil at work. Hopefully during the next downtrend, we all remember these up-spikes that we're enjoying so much right now.
Looking at Shanghai gold, I see premiums down a bit (today it is a -0.57 discount to COMEX) but deliveries remain strong. So far, there is no significant selling of gold in China.
Bottom line – gold looks good, copper bad, while silver is caught somewhere in between.
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Our favorite yellow metal has broken above the important 1361 resistance level and appears to be continuing higher. Copper seems to have hit bottom at 2.90 and has rallied back (perhaps China is coming to the rescue of its banks once again), and all of this has encouraged even silver to move higher, although it is still badly lagging gold.
My read: since miners are (relatively speaking) lagging gold, and silver too is lagging gold, this is all about gold dragging everything higher with it – which is not a recipe for an inflation-driven gold move like we saw in 2009-2011.
Is this all to avoid a COMEX default? Is this about negative GOFO rates finally making themselves felt 8 months later? Gold moving from east to west, massive physical demand from Shanghai? None of these stories did one bit of good when the shorts were in charge but now? Gold seems unstoppable and yet none of these stories have materially changed. In fact, the Fed appears dead set on slowing down the money-printing train.
Does anyone else out there find this interesting?
…for the obligatory PM smackdown.
Don't count on obligatory smack downs. The gold fixer, Scotia Mercata, is being hit with a class action suit and some of the big boys are taking a serious look at the smack downs that have occurred in a more than coincidentally timed fashion. Like clock work, literally.. It's the new Libor scandal.
Whether anything comes of it or not, you can count on the fact that as long as they know they are under scrutiny, the gold market riggers will change their behaviour.
The bottom is in for gold, for the most part. Swing traders are being flung out and presently clinging to the same chandeliers hoping for some more wall bashing fun.