Investing in precious metals 101

PM Daily Market Commentary – 9/28/2017

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  • Fri, Sep 29, 2017 - 01:58am



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    PM Daily Market Commentary – 9/28/2017

Gold rose +4.30 [+0.33%] to 1289.90 on moderately heavy volume, and silver climbed +0.11 [+0.66%] to 16.90 on moderate volume. The buck fell -0.26% today; the currency move accounted for most of gold’s rally.

Gold made a new low to 1280.40 in Asia alongside the falling Euro, but once the Euro started to rebound, so did gold. Candle print was a long white, which the code felt could be a reversal: 52% chance. Forecaster bounced too, rising +0.18 to -0.20. My Mk 1 eyeball also sees the pace of the decline in gold slowing down. RSI confirms this at least a little bit – there is a faint bullish divergence there.

COMEX GC open interest fell -5,352 contracts.

Rate rise chances (Dec 2017) remains at 76%.

Silver fell alongside gold making a new low to 16.70, and then rallied as the Euro climbed. Silver did better than gold, printing a bullish engulfing candle – but the code felt it also had a 52% chance of marking a low, same as for gold. Silver’s forecaster jumped +0.45 to -0.09, which almost moves silver back into an uptrend.

Open interest in COMEX SI contracts fell by -535 contracts.

The gold/silver ratio fell -0.24 to 76.33. That’s bullish.

Miners traded in a range but moved generally higher; GDX climbed +0.74% on moderately light volume, while GDX rose +0.92% on moderately light volume also. Both ETFs printed spinning top candles, which were neutral. Forecasters: GDX +0.32 to -0.16, GDXJ +0.21 to -0.17. The bullish RSI divergence that gold is only hinting at is much more visible in the miners. It appears as though the pace of the downtrend is slowing significantly. I suspect if the Euro stops dropping, the miners will rally nicely.

Today, the GDXJ:GDX ratio was rose, as did the GDX:$GOLD ratio. That’s bullish.

Platinum rose +0.38%, palladium climbed +1.80%, and copper rose +1.76%. Copper broke its downtrend today, jumping back above its 9 and 50 MA lines, and its forecaster moved up +0.68 to read +0.38. Big volume on copper’s move today. Platinum printed a hammer candle which had a 57% chance of marking the low. The other-3 metals are looking a bit better. Are they forecasting a bounce in PM? Probably, it depends on the buck.

I think platinum might be a buy here (h/t Nate); it has dropped almost $100 over the last 3 weeks, and it looks as though the selling pressure might be slowing. It could drop another $20 to 900, or it could reverse here. Longer term, the platinum/gold ratio is at a 40-year low – the long term trade concept is, “things eventually revert to the mean.” The only caveat: 43% of annual platinum demand is in auto catalytic converters. If IC cars are really slated to vanish over the next 20 years, then that will be a secular pressure on the price going forward.  “It is not without risk.”

USD fell -0.24 [-0.26%] to 92.93. Yesterday the candle code felt it might be a top; I didn’t think so, but perhaps the code was right. Today’s print was a dark cloud cover, which has a 48% chance of marking a top. That’s just a medium-unpleasant rating for this candle pair. USD forecaster fell -0.14 to +0.40, which is still a reasonably strong uptrend.

Crude fell today, dropping -0.44 to 51.59. Crude actually rallied sharply early in London making a new high to 52.86, but the rally failed, selling off hard into the US session. Crude printed a spinning top candle which had a 51% chance of marking the top. The forecaster was quite unhappy with this, plunging -0.66 to -0.32; forecaster clearly thinks oil has topped out. Oil remains above all 3 moving averages, and remains comfortably above 50 – but intraday, seeing the wall of selling hit that rally it is enough to make one worry. BHI rig counts come out tomorrow at 1pm; the report should provide some sense how the US shale industry is reacting to oil above 50. Increasing rig counts will probably cause a fair amount of selling in crude.

SPX climbed +3.02 to 2510.06. SPX sold off overnight in the futures markets, but rallied for most of the day, closing near the highs. Materials led (XLP:+0.71%) while cyclicals trailed (XLY:-0.12%. Not much happened as far as I could see.

VIX fell -0.32 to 9.55.

TLT fell again today, dropping -0.30%. Bonds gapped down at the open, but then rallied steadily during the day, recovering much of the overnight loss. Candle print was a long white candle, which the code feels had a 56% chance of marking the low. TLT remains well below its 50 MA, and is in a downtrend, but may be putting in a low here.

JNK was unchanged on the day, remaining at its recent cycle high.

CRB fell -0.47%, dropping back down below its 200 MA. 3 of 5 sectors dropped, led by energy (-0.80%).

Just when I thought the buck was off to the races, we see a down day. Does it mean anything? I’d say, not yet. We have hints of a low coming from the heavily-pummeled platinum, as well as positive signs from gold, silver, and the miners, but I suspect none of it will work out well unless that buck stops moving higher. Currently, the buck remains in an uptrend.

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  • Fri, Sep 29, 2017 - 02:49pm



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    fun bitcoin factoids

So I ran some code trying to correlate different things about bitcoin in trying to teach my computer how to predict bitcoin prices. 

Here are the adjustments my code made for "day of week", with positive numbers correlating with higher bitcoin prices.  (i.e. on average, on Tuesday you'd expect the price to rise, and Saturday you'd expect it to drop).

  • Monday: +2
  • Tuesday: +3
  • Wed: +2
  • Thu: -1
  • Fri: -3
  • Sat: -3
  • Sun: -1

Isn't human nature interesting?

ETH is a bit different.  Perhaps all those ICOs were on Wednesday.

  • Mon: -1
  • Tue: +2
  • Wed: +4
  • Thu: +3
  • Fri: -1
  • Sat: -3
  • Sun: -4

Buy ETH on Sundays, sell it on Thursdays.


  • Fri, Sep 29, 2017 - 05:05pm


    Chris Martenson

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    Here’s your “”market”” update

Presented in daily form via the small caps and then the S&P (in eMinis) on a one-minute time frame.

I'll ask it now:  Any questions?

And next:

  • Fri, Sep 29, 2017 - 07:15pm



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So I've been in correlation land now for the past week.  For many markets, I've been able to teach my computer to read the rhythms of the given market.  Gold, silver, crude oil, bitcoin, ethereum, and…

Ok, not SPX.  I just can't get it to work.  Mind you, it works for other equity markets (say, the SET 50), but not SPX.  The trained net I construct tends to generate sell orders right at the lows – right when the market reverses.   Its seriously the most frustrating index ever.

Another fun – and related – observation.  Over history, platinum is closely correlated with gold – not quite as closely as silver, but pretty closely.  Platinum has been absolutely hammered over the past 3 weeks.  Here's the fun part.  Platinum is a much smaller market.  The PL contract is 50 oz.  Total OI for platinum is about 70k contracts; about a $3.2 billion market at COMEX.  Gold's OI is 534k @ 100 oz per contract = $68 billion at COMEX.

So, you have a closely correlated pair (GC/PL), and PL is 1/20th the size, and over the past 3 weeks, PL has just been smashed.  The gold/platinum ratio is at 40 year lows.  Does anyone care about platinum?  I suppose if you're a platinum miner, you might, but that's about it.

I come at this (once again) from my desire to read the market.  Here's the chart my code comes up with for platinum.  You can see that sometimes it is very well-behaved – my code generates pretty good buy & sell signals.  And then sometimes it isn't – those areas I circled.  Sometimes platinum suffers repeated, large headfakes down, several times each week.  It bounces back, but then it gets smashed again.  Like with SPX, the model I end up creating doesn't work on platinum.

Something is disturbing the rhythm of this market.

I don't study platinum, not seriously, certainly not intraday.  Not like I track silver and gold.  Does it suffer spike attacks?  I don't know.  I'm starting to wonder.  Certainly platinum is now very cheap w.r.t. gold.  Did it get this way from a steady, relentless pounding because of its close correlation to gold?

Ok, enough tinfoil hattery for one day.

"Give me a lever long enough and a fulcrum on which to place it, and I shall move the world."

  • Sat, Sep 30, 2017 - 12:25am



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    CPM Group on Pt & Pd

CPM Group see Pt's negative fundamentals factored into the price so limited downside but consider Pd overbought by speculators.

  • Sat, Sep 30, 2017 - 02:06am


    Cold Rain

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    Interesting Thoughts

Dave, very interesting stuff.  I would guess that most of these markets are manipulated, which seems like it would make it more difficult to find true and consistent correlations.  Anyway, looks like gold and silver are headed straight down.  The golden cross for silver will have been averted again by a couple of pennies.  And in the blink of an eye, gold is down about $100 bucks from its high a couple weeks back.  Awesome.

  • Sat, Sep 30, 2017 - 12:10pm



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    CAT Broke 700 P/E

CAT on Friday Broke TTM P/E 700.   Is it an internet stock now?

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