PM Daily Market Commentary – 9/23/2015
Gold rose +5.60 to 1129.50 on moderate volume, while silver climbed +0.03 to 14.76 on light volume. Gold popped higher a few hours before US market open, and held its gains through to the close. Silver tried to follow, but sold off into the close instead.
The dollar fell today, which probably helped gold to some degree.
Gold found buying support at the 1120 price level and the 9 EMA; if it can close above 1140 that will be a bullish sign. Headwinds include a weakening commodity complex and an uptrending dollar.
Silver is having trouble finding buyers – at least at the COMEX anyway. The weakening commodity complex isn't helping. If commodities continue to tumble, I think silver will continue to fall.
Miners opened higher on the rise in gold, but then sold off all day long. GDX fell -0.75% on light volume, while GDXJ dropped -0.46% on light volume as well. It seemed to me that traders viewed the higher miner open price as an opportunity to dump their mining share holdings and that's never a good sign. The only positive sign is that the volume was relatively light – possibly there aren't so many traders left to sell.
The USD rally appears to have been stopped by the 50 MA; the dollar tried moving above it but only briefly. USD closed down -0.24 to 96.21. A break above the 50 will cause problems for PM. Most currencies fell against the buck today – only the Euro rose.
SPX inched lower, dropping -3.98 to 1938.76. There wasn't a lot of activity today in the equity market; a calm day but not a particularly bullish one. VIX fell -0.31 to 22.13.
Bond ETF TLT were flat, dropping just -0.01%. While the US equity market seems to be headed lower, bonds can't seem to rally much. In 2008 bonds did extremely well when the equity market corrected, but I'm not convinced history will repeat – at least its not doing so right now anyways.
The CRB (commodity index) had a bad day, dropping -1.25% and clearly breaking below its recent consolidation range. Commodities look to be heading to retest their lows, and that's not a good sign for PM.
WTIC (oil) sold off hard, falling -1.96 [-4.21%] to 44.61, the selling starting about 30 minutes after a bullish-looking Petroleum Status Report was released at 10:30. Oil rallied briefly after the report, but then just collapsed, closing at or near the lows for the day. Even after today's sell-off, oil remains within its trading range, and the 44 price level is key support. A close below that and oil probably sells off hard.
HAA has 100 oz gold bars right now in NYC at 1159.45/oz [+2.05% over spot], and 1000 oz silver bars in NYC at 15.37/oz [+3.75% over spot]. Eagles in NYC are quoted at 20.54 [+37.09% over spot]. Premiums on the big bars fell, while Silver Eagle premiums climb higher every day. In Sydney, they are 40%!
Gold looks to be holding up relatively well, while silver is looking iffy, miners are selling off, copper is not far from a retest of its lows, and the rest of the commodity complex is in retreat. Its not a recipe for PM success, at least not at the moment.
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Well I tossed that price level of 1150 in there just for fun in yesterday's report, but it looks like gold has broken above that level and has managed to touch 1155…that's really good news. Miners are up 5% at this point, and even silver has almost erased the losses from two days ago.
Gold is sometimes negatively correlated with SPX, and US equities are off 24 points today. Buck is off too – perhaps the gold traders were worried (as I was) about a dollar rally, and this second day of dollar selling is making them feel more relaxed. Its hard to know. Even oil is back from the dead, after hitting a low of 43.71 it is now back above 45.
Any way you slice it, PM is looking quite strong today. Surprisingly!
If gold can retain its gains and close today above 1150, the shorts will be nervously eyeing the 1170 level…
Martin Armstrong penned an article today that suggested the failure of Deutche Bank was a real possibility. He said that DB failed the US Fed's bank stress test in March, the two co-CEO's of DB resigned three months later, DB is now laying off a quarter of its staff, and he described the event as a new Lehman event that would hit Europe really hard.
He also suggested that gold's rally may be linked with DB's situation, rather than a move in the dollar, etc.
If DB failed, it would be a BFD. As in, the Euro loses 20% of its value almost instantly, as money flees potential contagion and bail-ins to – probably the USD. The TBTF US banks would probably be affected by derivative links and related counterparty risks.
This rumor mill has been going on and it doesn’t stop. The crushing blow to Europe will be the failure of Germany’s biggest bank. Yes, Deutsche Bank is quietly being talked about in every circle that it is facing bankruptcy. Since March, the rumors have flown since Deutsche Bank had failed the US regulatory stress test which was followed by the resignation of its head in June. A collapse of the Deutsche Bank is profound and very likely to impact Europe to the point everyone is calling it behind the curtain a new Lehman Moment. Sources tie this with the Fed’s decision not to raise rates fearing they would be seen as the cause of its failure. Germany clearly faces a major shock and if this combines with Volkswagen for the turning point next week, well here we go again.
On Armstrong: I read the same thing today. Michael Snyder has also been talking about this on his blog.
On Silver Eagles: I was wondering what people's thoughts are on why they're rising so steeply. Dave, I understand your position on not worrying about a silver shortage until we see it manifest in the bigger bars, which makes sense, but still – these seem like very big premiums to me. Since I'm relatively new to owning silver, how often have premiums spiked like this in the past and under what conditions? Often where there's smoke there's fire and I'm wondering what these premiums might be signaling. If it is just a localized supply issue, why in the heck are people paying so much? Why not just wait until supply comes back?
We saw the same thing after the 2013 gold & silver smash. Premiums on the retail items shot through the roof, and people who paid attention only to those forms concluded this was the endgame – a divergence between physical and paper, COMEX default was imminent, etc. It passed after about four months, and nobody said "boo" – nobody even asked why their predictions didn't pan out, what they did wrong, etc.
See, as far as I can tell, gold & silver promoters are never wrong about anything. Manipulation explains away all their mistakes – there are no mistakes as far as I can tell.
There just isn't that much retail silver coin & bar inventory, from what I understand. It runs out quickly, when demand triples overnight because of some event. And the machinery for producing more retail bars & coins can't be rapidly ramped up, because the machines are costly and normally margins are thin and demand is likely to fall off after the excitement passes and then the machines will be sitting idle.
Or so the theory goes anyway. It could also be that the government is deliberately trying to keep silver away from the people!
100 oz bars (8.3 pounds) are 6.40% over spot. Philharmonics are 18.6% over spot. Eagles are 36.76% over spot. Which form would you like?
Thanks – It seems to make sense every time I hear you say it. I just can't imagine paying that kind of premium when other forms are so far less!
PS: I'm thinking of changing my name so that I'm no longer referred to as "BJ" on this site, haha.