PM Daily Market Commentary – 7/6/2015
Gold rose +4.10 to 1169.30 on moderate volume, and silver climbed +0.07 to 15.72 on light volume. Gold opened higher in Asia probably as a result of the Greek referendum results, but was unable to move higher. Silver looked a bit stronger, but neither metal was able to make much progress.
I have been reading various reports on physical gold buying, which seems to be substantially stronger than usual probably because of the Greek situation. Koos Jansen penned my favorite article: https://www.bullionstar.com/blogs/koos-jansen/global-financial-turmoil-gold-price-doesnt-move/
Gold managed to make a swing low today, closing above Thursday's close. Not by much, but it managed. Will gold rally now? Currently, gold seems to be moving mostly due to currency effects. First, take a look at gold in USD over the past 5 weeks – the trading range is relatively wide:
Now look at gold in Euros. Trading range is very tight – gold has been moving sideways during that same period. Largely, it appears that changes in EUR/USD is causing the moves in gold, rather than underlying changes in gold itself. So if you think the Euro will rally, then so will gold…unless those physical buyers manage to clean off the shelves…time to keep a close eye on premiums, I think.
The tight consolidation may be a sign of an official lid on prices coming out of Europe. Certainly the EU doesn't have many levers they can pull in this crisis, but this would be one. Sometimes when you can't do anything productive, a bad manager does "something" just to release their frustration at the situation being so out of their control.
Silver did not manage to put in a swing low today, and remains below its 9 EMA.
Senior mining shares managed to put in a swing low today, with GDX climbing +1.25% on moderate volume. GDXJ didn't do too well however, dropping -0.50% on light volume. The swing low in GDX is step #1 on the road to recovery; next step is a close above the 9 EMA. For me to be really happy, however, I'd like to see GDXJ outperforming GDX – the fact that it isn't casts a bit of a shadow on this rally. I don't like it when indicators point in different directions because it reduces the probability of this being an actual trend change.
The dollar rose today, climbing +0.19 to 96.48. The buck has been steadily climbing, and not just because of the Euro. Commodity currencies are having trouble: the AUD dropped -1.87% setting a new six-year low – last time AUD was here was in 2009. CAD isn't happy either, and it has been bumping along the bottom now for all of 2015.
SPX (US equities) were hit hard in the futures markets but rallied into the open in NY, and by end of day SPX closed off only -8.02 to 2068.76. Thats a decent performance on a day immediately following the Greek referendum; I expected a NO vote to cause a break of the 200 MA, which didn't happen. The Non-Manufacturing ISM report came out today at 10:00 EDT at the higher end of the range, which showed a services sector that continues to grow. SPX avoided printing a new low, although the e-mini futures did. It looks like SPX has a bid at the 200 MA. VIX rose +0.22 to 17.01.
Bond ETF TLT rallied strongly today, up +1.85%. Bonds are close to breaking out of their recent consolidation; likely this is Greek-referendum-driven safe haven buying.
The CRB (commodity index) was crushed today, dropping -2.98%, a truly massive one-day move, making a new low for this cycle. What's that about? Mostly energy [-7.43%], with a bit of industrial metals [-2.77%] thrown in on the side.
Did I mention we might have an oil sell-off? Well it finally really happened today. WTIC dropped -3.82 [-6.76%] to 52.68, a huge move which caused a lot of selling in oil equities, which have been selling off now for the past few months. Brent did even worse, dropping -4.94 [-7.99%] to 56.86. That's worth a chart – it shows what traders do sometimes when support breaks. In this case, a whole lot of longs capitulated. Next buy point might be at 54, although given the velocity here I'm not sure that will hold.
Platinum and palladium had some reasonably large moves too, with platinum down -2.08% and palladium off -1.75%, with platinum making a new multi-year low. Copper too sold off, down -3.87% making a new low as well. If you get the sense it was a bad day for commodities – you would be right. Gold and silver somehow managed to avoid the carnage; perhaps when viewed in that light, today's performance by the pair was actually pretty good.
The glass half-empty view says that gold and silver are pretty much refusing to rally, with miners giving us conflicting signals on where things go next. The glass half-full view says, "Boy, I'm sure glad I have gold and not oil. Or copper. Or platinum. Or palladium. Sheesh."
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Everything is being sold today, PM included. Silver is doing just about as bad as copper. Gold seems to have some support at 1150. SPX is through the 200 MA. Its looking like forced liquidation in several different areas…mostly commodity-related.
- Oil off -1.89 [-3.58%]
- SPX down -23.5 [-1.15%]
- Copper down -0.147 [-5.79%]
- Silver down -0.92 [-5.84%]
- Gold down -21.10 [-1.80%]
- Bonds up +1.29%
- USD +0.80 [+0.83%]
My guess is, Greece may be the trigger, but China is a contributing factor too.