Investing in precious metals 101

PM Daily Market Commentary – 7/23/2018

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  • Tue, Jul 24, 2018 - 02:07am

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    davefairtex

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    PM Daily Market Commentary – 7/23/2018

Gold fell -7.40 [-0.60%] on very heavy volume, while silver dropped -0.17 [-1.06%] on moderate volume. The buck rose +0.21, and the prices of gold and silver more or less tracked the moves in the buck today, although the magnitude of the moves in PM were substantially larger.

Gold staged a brief rally in Asia, and then moved lower in fits and starts, ending the day relatively near to its lows. More or less, it followed the track of the Euro, which fell -0.28% on the day. Candle print was a bearish harami, which was actually not all that bearish. Forecaster dipped -0.13 to -0.16, suggesting that gold might be about to resume its downtrend.  Gold really needs a close above its 9 MA.

COMEX GC open interest plunged -18,261 contracts. That’s a huge change. Could it be short-covering here at the lows? Maybe.

Rate rise chances (September 2018) rose to 88%.

Silver tracked gold, moving lower with a bit more enthusiasm. Silver’s long black candle was also neutral – really more of a bearish continuation, but forecaster moved up +0.09 to -0.14. I’m not sure what the forecaster saw. Silver remains in a downtrend in all 3 timeframes.

COMEX SI open interest rose by 691 contracts today. No short-covering in silver.

The gold/silver ratio rose +0.92 to 79.75, which is very bearish.

Miners fell, with GDX of -2.07% on very heavy volume, while GDXJ dropped -1.22% on moderately heavy volume. XAU made a new low, and its long black candle was a bearish continuation. Forecaster dropped -0.13 to -0.29. Today’s drop pulled the monthly into a downtrend; XAU is now in a downtrend in all 3 timeframes. The miners are starting to look weaker; GDX:$GOLD has retraced its breakout, and may be headed for a more significant selloff. If that happened, we could see the miners start to behave the way they did back in 2013-2015, which would not be any fun at all.

The GDXJ:GDX ratio rose +0.87%, while the GDX:$GOLD ratio dropped -1.47%. That’s bearish.

Platinum rose +0.62%, palladium jumped up +2.03%, while copper fell -0.33%. Metals were mixed, but both palladium and copper forecasters issued buy signals today, with platinum having done so yesterday. Copper looks the weakest of the three, and it is probably most important in terms of needing to put in a low before the metals complex can start to rebound.

The buck rose +0.20 [+0.21%] to 94.31. It was just a modest-sized move, but it was enough to send both gold and silver lower; both metals seem quite sensitive to moves in the buck right now. While the long white candle was mildly bullish (a 36% bullish reversal), forecaster rose +0.06 to +0.05, which is a tepid buy signal for the buck, which may have found support on the 50 MA. Its hard to say if this is the start of a real move higher or not.

Crude fell -0.34 [-0.50%] to 67.80, rallying strongly during the London session (and making a high to 69.31) but then falling back in the US. The shooting star print was actually neutral, but forecaster edged down -0.07 to +0.03. Crude is hovering just above stall speed in the daily timeframe, in a downtrend on the weekly, but remaining in an uptrend on the monthly. API report due out tomorrow.

SPX rose +5.15 [+0.18%] to 2806.98. SPX fell -11.13 [-0.40%] to 2804.49. Print today was a feeble-looking swing high (38% bearish reversal), but forecaster agreed, dropping -0.34 to -0.10, which is a sell signal for SPX. Financials led higher (XLF:+1.38%) with tech a distant second (XLK:+0.51%), while utilities did worst (XLU:-0.71%). The leaders moved higher, but there were a collection of sectors that did poorly (industrials, materials, energy) that pulled the averages lower.

VIX fell -0.24 to 12.62.

TLT was hammered again, falling -1.23%; the strong line candle was quite bearish. TY confirms the move, dropping -0.38%. Daily is in a strong downtrend, while the weekly is just about to issue a sell signal. The 10-year yield rose +7.0 bp to 2.97%. Boy, that 10-year yield is moving back towards 3 in a big hurry. So much for the concerns over the inverted yield curve.  Blink, and you miss the trend change.

JNK was unchanged today, moving sideways – forecaster dipped -0.32 to -0.22, which is a sell signal for JNK.

CRB fell -0.07%; only 1 sector moved lower, and that was PM (-0.52%).

So is the low for the metals in? What new evidence did we get today?

On the negative side, you have the miners, followed by gold and silver. They all did relatively poorly today, with the miners looking worst of all.  Miners made new lows, which is a bad sign.

On the positive side, it does look like copper, platinum, and especially palladium may be putting in lows. If they do this, it should help pull PM higher. And there is that mysterious drop in gold’s open interest, which suggests a fair amount of short-covering. And of course there is the COT report, which shows a record number of managed money shorts – the COT looks a lot like what it looked like back in December 2015. And there’s the triple-RSI buy signal from last Friday.

I’d say the odds are, the reversal is still on – although it looks as though it might be more of a process than a V-bottom.

But it all still might depend on what happens to the buck.

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