PM Daily Market Commentary – 9/22/2015
Gold fell -8.70 to 1123.90 on moderate volume, while silver lost -0.47 to 14.73, also on moderately heavy volume. PM traded sideways until mid-day in London, when silver more or less dropped off a cliff. Gold followed about half an hour later, and they both kept dropping until just before market open in NY.
There were a lot of things that sold off during that time: US equities, copper, oil, along with gold and silver. European equities had a bad day as well. The buck rallied relatively strongly too, which didn't help.
Gold actually fared well relatively speaking, falling only -0.77% on the day. It remains above its 50 MA, and it has retained a good chunk of its recent rally. Volume remains subdued, which is also a positive sign. If gold can find support on its 50 MA around 1116, that would be a positive outcome.
Silver is looking substantially weaker than gold, having been driven through its 50 MA on relatively heavier volume. Interestingly, my computer told me that silver had reversed yesterday, while gold did not, and perhaps that is the difference between the selling in silver vs gold. Also, copper had a terrible day, which probably did not help silver.
Miners had a terrible day, with GDX off -4.57% on heavy volume, while GDXJ dropped -3.53% on moderate volume. If the strong dollar and the selling in gold continues, miners will most definitely test the lows in the relatively near term, and I'm not particularly hopeful that the lows will hold. There was no good news in the miner chart today. The GDX previous low of 13 is a key support level; go through that, and we will probably see a large amount of selling.
The USD continued climbing, rising +0.41 to 96.45, with the rally stopping right below the 50 MA which also happens to be a previous high. If the buck breaks through the 50, and based on the recent velocity of the dollar I'd say the odds are pretty good it will do just that, it will be bad news for PM and especially the miners.
SPX fell -24.23 to 1942.74, breaking sharply below the recent uptrend line. Almost all of the selling in SPX happened in the futures markets long before US market open, appearing to track losses in European equity markets. By comparison to Europe, losses for SPX today were relatively modest: DAX was off -3.80%, CAC dropped -3.42%, FTSE fell -3.14%. VIX rose +2.30 to 22.44.
Bond ETF TLT rallied +1.39%, managing to put in a decent gain because of the fall in the major equity markets today, but TLT has been unable to rally above its recent trading range. I think the only way bonds will materially rise is if we see a really large loss in equity markets.
The CRB (commodity index) dropped -1.03%, dropping slightly below its recent trading range; its not a terrible performance given the strength in the buck, but I fear commodities will not do well if the dollar continues to rally.
Copper was part of the problem; it broke sharply lower, losing a big -3.81% on heavy volume, dropping below its 50 MA and is seemingly headed for a retest of the lows. Copper frankly has me a bit concerned; both silver and gold tend to be correlated with copper, silver more so than gold.
WTIC (oil) had a volatile day, but it finally managed to close down just -0.15 to 46.57 after being down more than $1.40 earlier in the day. Oil remains above its 50 MA and so far it is refusing to break down in spite of the strong dollar and weakening commodities.
HAA has 100 oz gold bars right now in NYC at 1148.35/oz [+2.28% over spot], and 1000 oz silver bars in NYC at 15.27/oz [+3.86% over spot]. Eagles in NYC are quoted at 20.54 [+36.53% over spot]. Premiums on the big bars rose slightly, while Silver Eagle premiums seem to be rising more than 1% per day.
Gold's fall today wasn't particularly bad, but silver is looking quite weak, and I wouldn't be surprised to see new lows for the miners if the buck continues to rise. While my computer doesn't like the near-term prospects for SPX, longer term it sees a rally.
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Most of Europe voted to share the immigration burden of 120,000 refugees – ignoring or overriding the strenuous objections of the four nations who had a history of fighting long and bloody "fault line" wars against the culture from where those refugees were coming. [Presumably, meekly accepting a batch of refugees would be political suicide for the leaders of those countries.] Ok, that's my summary. To get the actual, more politically correct explanation, you will have to read the article.
I don't know that this will be easily solved. Perhaps the EU will simply ignore the revolt and just pretend it didn't happen. If they push the matter, and then we have a downturn, things could blow up most unexpectedly.
The European Union approved a plan on Tuesday to share out 120,000 refugees across its 28 states, overriding vehement opposition from four ex-communist eastern nations.
Slovak Prime Minister Robert Fico said pushing through the quota system had "nonsensically" caused a deep rift over a highly sensitive issue and that, "as long as I am prime minister", Slovakia would not implement a quota.
And Czech Interior Minister Milan Chovanec tweeted: "We will soon realize that the emperor has no clothes. Common sense lost today."
French President Francois Hollande said there would be consequences for countries that refused to implement the deal.