PM Daily Market Commentary – 8/28/2014
Gold closed up +6.30 to 1290.00 on moderately heavy volume; silver was up +0.10 to 19.53 on very heavy volume. Both metals rallied strongly in early London trading sending shorts running for cover; gold held half of those gains into the close in NY, but silver – up maybe 50 cents on the day at one point, fell back almost to its starting point. It was another failed rally for silver.
So while silver managed to break its downtrend line today, the failure to hold on to its big gains during a second big rally doesn't look so promising. The shorts are surely vulnerable to a squeeze here, but the longs aren't interested in chasing prices higher. This continued behavior is not the stuff of which sustainable rallies are made. Intraday, I can see shorts being squeezed out on the way up, but then a few hours later, I see even more longs bailing out on the way down.
Either not enough longs are ready to chase prices higher just yet, or "they" are unwilling for the silver price to rise just yet. ("They" might be traders interested in picking up mining shares at a cheaper price – certainly if silver does rally, mining shares will probably attract a lot of bids – and so the incentive would be to keep the price of silver down while they accumulate). I speculate on "they" only because I see continued good strength in mining shares, it seemed like silver was really ready to pop, and then the rally today failed once again.
The dollar closed up +0.01 to 82.50, with a decent-sized trading range on the day but ending flat. The dollar is still showing signs of strength right now – various other currencies are struggling to find lows; the pound, the euro, the yen are all in the process of attempting to rebound. The outcome is still in flux – the momentum for the buck remains up until a reversal occurs, which it hasn't yet. However, the buck's moves today did not cause the failed rally in silver.
GDX closed up +1.34% on light volume, while GDXJ was up +1.54% on moderately light volume. Miners looked cautiously optimistic, although it seems without a stronger signal from the metals, the mining shares are not going to race higher. Still the fact that the senior mining shares were able to rally through to the close even though half of gold's move had evaporated by 10am EDT tells me that interest in mining shares continues. It is what makes me at least somewhat suspicious about the moves in the metal itself, too.
The SPX had a rare down day, closing off -3 to 1997. SPX had an early morning selloff only to encounter the usual set of dip-buying that dragged the index back up by end of day. After market close, the futures continued rising. The equity market definitely still has a bid underneath it. VIX inched up on the day to 12.05; it was up a lot more than that earlier, but lost its gains as the market rallied. September is coming; a lot of bad things have happened during September over the years, so traders are always a bit nervous.
Long term treasuries (TLT) were were up once again, this time up +0.52% setting yet another cycle high. That marks 19% on the year for TLT. While SPX still has a bid underneath it, it is nothing to bonds these days. In TLT, traders seem eager to chase prices ever higher. There is a lot of money coming into bonds. Before that included high yield bonds, but JNK's outperformance stopped in early July. Even with the rally back, JNK is now underperforming its less-junky cousin IEF.
Brent crude was down -0.26 to 102.46 – it is chopping sideways, still not sure if it wants to rally. WTIC was up +0.91 to 94.58; it looks somewhat more enthusiastic, breaking above its recent trading range just today.
Note: If you're reading this and are not yet a member of Peak Prosperity's Gold & Silver Group, please consider joining it now. It's where our active community of precious metals enthusiasts have focused discussions on the developments most likely to impact gold & silver. Simply go here and click the "Join Today" button.
Here is a video of two precocious minds talking over each other in the pursuit of gems. China is the Manipulator. Of Cause! Who benefits?
Shades of Nicolle Foss in the discussion- It will be all about Claims to the underlying asset.
The central banks have one last trick up their sleeves, the international FDRs. So the buying opportunity will continue for some time until that progresses to it’s inevitable conclusion.
My thought (ex Zerohedge, I think) is that the governments will place a “windfall tax” on all sellers of GLD at the point of sale.
Good back and forth and overview of the financial structure. Fast moving interview. Rickards sees things from a broad perspective. Schiff did a pretty good job not talking over Rickards.