PM Weekly Market Commentary – 12/06/2019
On Friday, gold fell -16.47 [-1.11%] to 1465.44 on moderate volume, and silver plunged -0.40 [-2.35%] to 16.63 on moderate volume. The buck moved higher [+0.29%], along with SPX [+0.91%], and crude [+1.34%], while bonds fell [10y yield +4.5 bp]. Copper was the big mover: up 3.14%.
The metals sector map has silver leading gold lower, with the miners stuck in the middle. This week both metals and the miners have fallen below both the 9 and 50 MA lines. PM has moved back into a medium-term downtrend. All items still remain above the 200 MA lines, which is the marker for the longer term trend, and that remains positive. Copper did best, which suggests optimism in the eternal wait for the US-China trade deal.
|Name||Chart||Chg (W)||52w ch||MA9||MA50||MA200||50/200||Last Crossing||last|
|Copper||$COPPER||3.49%||-0.27%||rising||rising||falling||rising||ma200 on 2019-12-06||2019-12-06|
|Palladium||$PALL||2.10%||60.01%||rising||rising||rising||rising||ema9 on 2019-11-18||2019-12-06|
|Silver Miners||SIL||0.84%||27.12%||rising||rising||rising||falling||ema9 on 2019-11-29||2019-12-06|
|Platinum||$PLAT||0.04%||13.58%||rising||falling||rising||falling||ema9 on 2019-12-04||2019-12-06|
|Junior Miners||GDXJ||-0.31%||39.71%||rising||falling||rising||falling||ema9 on 2019-12-06||2019-12-06|
|Gold||$GOLD||-0.36%||17.81%||falling||falling||rising||falling||ema9 on 2019-12-06||2019-12-06|
|Senior Miners||GDX||-0.41%||36.83%||rising||falling||rising||falling||ema9 on 2019-12-06||2019-12-06|
|Gold/Euro||$GOLD:$XEU||-0.68%||21.21%||falling||falling||rising||falling||ema9 on 2019-12-06||2019-12-06|
|Silver||$SILVER||-2.81%||14.34%||falling||falling||rising||falling||ema9 on 2019-12-04||2019-12-06|
This week, gold fell -5.27 [-0.36%] to 1465.44 on moderate volume. The shooting star candle was mildly bearish (35%), and forecaster moved deeper into its downtrend. Gold ended the week in a downtrend in all 3 timeframes, while gold/Euros is in a downtrend in just the daily and monthly timeframes.
The Dec 2019 forecast is now projecting no rate increase..
COMEX GC open interest fell -6,576 contracts on Friday, and +31K contracts this week. That was 14 days of global annual production in new paper added to the market. Current open interest for GC: 87% of global annual production, up +3.91% this week.
Gold commercial net fell -17K contracts, which was +30K more shorts, and +12K more longs. Managed money net rose +14K contracts, which was -123 fewer shorts, and +14K more longs. The COT report is not suggesting any sort of turning point for gold this week.
Silver fell -0.47 [-2.75%] to 16.63. The confirmed bearish NR7 pattern was bearish (46%), and forecaster moved into a slight downtrend. On Friday, silver broke down to a new multi-month low, which is a bearish sign. Silver has been in a pattern of lower highs and lower lows since late September, and Friday was yet another new low. Silver is in a downtrend in all 3 timeframes.
The gold/silver ratio climbed +2.11 to 88.12. That’s quite bearish.
COMEX SI open interest rose +1,751 contracts on Friday, and fell -1.5K contracts this week. Current open interest for SI: 116% of global annual production, down -0.87% this week.
Silver commercial net fell -426 contracts, which was -2.6K fewer shorts, and -3.0K fewer longs. Silver managed money net fell -4.0K contracts, which was +1.4K new shorts, and -2.6K fewer longs. Silver COT report is not suggesting any sort of turning point this week.
XAU dropped [+0.40%], the shooting star candle was mildly bearish (32%), and forecaster moved lower but remains in an uptrend. Friday’s daily swing high looked pretty ugly (63% bearish), which was enough to drop daily forecaster into a downtrend. Even so, XAU closed the week in an uptrend in both the weekly and monthly timeframes. Unlike silver, XAU has yet to make a new low.
The GDX:gold ratio dropped -0.05%, while the GDXJ:GDXJ ratio climbed +0.09%. That’s neutral. Miners are doing pretty well, considering.
The buck dropped -0.56 [-0.57%] to 97.27 on extremely heavy volume. The confirmed bearish doji pattern was quite bearish (68%), and forecaster dropped into a downtrend. Even though the weekly pattern looked pretty unpleasant, on Friday there was a strong dollar rally; daily candle pattern was a strong-looking bullish engulfing (50%), but it was not enough to pull daily forecaster back into an uptrend. The buck ended the week in a downtrend in both daily and weekly timeframes.
Major currency moves included: EUR [+0.33%], GBP [+1.47%], AUD [+1.15%]. The large move in GBP appears to be all about the increasing likelihood of Johnson remaining PM and executing on Brexit.
SPX rose +4.93 [+0.16%] to 3145.91 on moderate volume. The doji candle was a bullish continuation, and forecaster plunged but remained in an uptrend. SPX daily actually dropped into a downtrend mid-week due to the Monday-Tuesday selloff (based on Trump’s comment that he was considering waiting until after the election to make a trade deal with China), but bounced back by end of week when that comment was walked back. SPX ended the week in an uptrend in all 3 timeframes.
Energy [+1.39%] led, along with staples [+1.07%] while telecom [-1.91%] and defense [-1.24%] did worst. This was a somewhat bearish sector map.
|Name||Chart||Chg (W)||52w ch||MA9||MA50||MA200||50/200||Last Crossing||last|
|Energy||XLE||1.41%||-7.31%||falling||rising||falling||rising||ema9 on 2019-12-06||2019-12-06|
|Cons Staples||XLP||1.08%||13.08%||rising||rising||rising||falling||ema9 on 2019-11-26||2019-12-06|
|Healthcare||XLV||0.92%||8.05%||rising||rising||rising||rising||ema9 on 2019-12-04||2019-12-06|
|Financials||XLF||0.70%||18.59%||rising||rising||rising||rising||ema9 on 2019-12-06||2019-12-06|
|Utilities||XLU||0.25%||12.37%||rising||falling||rising||falling||ema9 on 2019-12-04||2019-12-06|
|Homebuilders||XHB||0.15%||32.57%||rising||rising||rising||rising||ema9 on 2019-12-05||2019-12-06|
|Materials||XLB||0.10%||12.99%||rising||rising||rising||rising||ema9 on 2019-12-06||2019-12-06|
|Gold Miners||GDX||-0.41%||36.83%||rising||falling||rising||falling||ema9 on 2019-12-06||2019-12-06|
|REIT||RWR||-0.41%||7.27%||rising||falling||rising||falling||ema9 on 2019-12-04||2019-12-06|
|Technology||XLK||-0.45%||31.06%||rising||rising||rising||rising||ema9 on 2019-12-06||2019-12-06|
|Cons Discretionary||XLY||-0.58%||14.25%||rising||rising||rising||falling||ema9 on 2019-12-06||2019-12-06|
|Industrials||XLI||-1.13%||16.09%||falling||rising||rising||rising||ema9 on 2019-12-02||2019-12-06|
|Defense||ITA||-1.24%||23.74%||falling||rising||rising||falling||ema9 on 2019-11-29||2019-12-06|
|Telecom||XTL||-1.91%||-2.24%||falling||rising||falling||rising||ema9 on 2019-12-02||2019-12-06|
The US equity market was dead last this week, with Latin America at # 1.
VIX fell -0.90 to 13.62.
Rates & Commodities
TLT fell [-1.47%], the doji candle was a bearish continuation, and forecaster dropped into a downtrend. The 30-year yield rose +8 bp to 2.29%.
TY also fell, losing -0.39%, the confirmed bearish NR7 pattern was bearish (58%), and forecaster moved lower into a slight downtrend. The 10 year yield rose +6.6 bp to 1.84%. TY ended the week in a downtrend in all 3 timeframes. The chart of gold, and the 10-year, look pretty similar.
JNK fell [-0.07%], the spinning top candle was mildly bullish (35%), and forecaster ended the week in an uptrend. As with SPX, JNK fell hard on Monday and Tuesday, but recovered most of its losses by end of week. BAA.AAA differential fell -3 bp to +88 bp. There are still no real worries about credit quality right now.
Crude jumped +3.59 [+6.48%] to 58.96 on heavy volume. The opening white marubozu was a bullish continuation, and forecaster jumped strongly back into an uptrend. Crude ended the week at a new multi-month high, and crude is now in an uptrend in all 3 timeframes.
This week’s EIA report was somewhat bullish: crude -4.9m, gasoline: +3.4m, distillates: +3.1m, but the moves in crude came this week as a result of the OPEC+ meeting, where it was agreed the group would cut production by 500 kbpd. When the market seemed to have some doubts about how that would work out given the cheating that has gone on, on Friday the Saudis announced they were going to continue to over-comply with their production quota, and then oil broke out to new highs.
Physical Supply Indicators
* The GLD ETF tonnage on hand fell -4.98 tons, with 892 tons remaining in inventory.
* ETF Discount to NAV:
PHYS 11.70 -1.16% to NAV [increase]
PSLV 6.08 -1.45% to NAV [increase]
CEF 13.93 -3.57% to NAV [decrease]
* Premium for physical (via Bullion Vault: https://www.bullionvault.com/gold_market.do#!/orderboard) vs spot gold (loco New York, via Kitco: https://www.kitco.com/charts/livegoldnewyork.html) shows a $1 premium for gold, and a 4 cent premium for silver.
* Gold dealer big bars premiums were: gold [1kg] 1.19% and silver [1000oz] – which was sold out!
Grey Swans & Geopolitics
- US-China trade: On Monday, Trump made a comment that suggested he was thinking about waiting until after the 2020 election to do the “phase one” trade deal. He later walked that back after the market sold off. The House passed the Uighur Act this week by a veto-proof majority. Bill goes to the Senate for reconcilation. Tea-leaf readers suggest the CCP hates this bill more than the Hong Kong Act because it threatens to put sanctions on China’s security companies, which hits directly at the wallets of the high-ranking party members who own these companies. (Security in China is a $176 billion dollar/year business). Just imagine if Trump owned Boeing, and the EU decided to sanction Boeing for whatever reason; Trump would definitely be annoyed. https://www.reuters.com/article/us-usa-china-xinjiang/us-uighur-bills-threat-to-surveillance-economy-puts-china-on-offensive-idUSKBN1Y92TV
- Fed Not-QE: balance sheet 4065B, +12.8B [+0.32%] w/w. Rate is slowing, but printing continues; this week marked a new multi-month high in the balance sheet size.
- Hong Kong: was quiet this week after pro-democracy candidates won 90% of the seats in the recent district elections. A protest march is scheduled for this Sunday, which was approved by the Hong Kong police department. Leader Carrie Lam defeated an impeachment vote 36-26.
- Iran: In contrast to the mostly death-free protests in Hong Kong, Iran’s security forces may have killed more than 1000 protesters during the recent unrest following the gasoline price increase in that country. When the cameras are on the security forces, they behave better, it would seem. https://www.nbcnews.com/news/world/u-s-says-iran-may-have-killed-1-000-protesters-n1096666
- Italy – migration: 2 more “migrant Sea Taxis” unloaded 100 migrants this week, some of whom will be distributed to other countries in Europe.
- BRExit: election next week. Tories are heavily favored to win, with Johnson promising Brexit within 100 days.
- Yield Curve Inversion: the 1-10 spread rose +10 bp to +28 bp this week. 1Y: 1.56% (-4 bp), 10Y: 1.84% (+6 bp). Inversion seems to be a thing of the past. This could be due to the Fed’s “operation reverse twist” (buying short term bills, and letting the 10 year notes roll off).
- North Korea: DPRK is promising a mysterious “Christmas Gift” for the US – with the specifics of the gift dependent on how the US acts between now and then. KJU also went riding on his white horse to the sacred mountain again, this time with his generals. Tea-leaf-readers suggest that 2020 could be an eventful year. Attached find some pictures of KJU on a well-appointed horse – picture #2 is best: https://www.reuters.com/article/us-northkorea-politics/kim-jong-un-rides-again-as-north-korea-warns-us-against-using-military-force-idUSKBN1Y80FM
- Nonfarm Payrolls: headline +266K [+0.17%] m/m (prior +0.10% m/m), avg hourly earnings , +0.07 [+0.25%] m/m (prior +0.35% m/m), manufacturing +54K [+0.42%] m/m (prior -0.34% m/m), PTW/Only PTW Work Available -116K [-2.68%] m/m (prior +1.98% m/m), PTW/Slack Work, -121K [-4.60%] m/m (prior +6.03% m/m). Both of the “PTW” series I watch declined; this is expansionary.
- Durable Goods, new orders: headline [+0.53%] m/m (prior -1.49% m/m), capital goods new orders (excl aircraft) [+1.06%] m/m (prior -0.54% m/m), shipments [-0.02%] m/m (prior -0.68% m/m). Orders projects expansion for next month.
Gold and silver and the miners fell this week, with silver leading the pack lower, which is bearish for PM overall. Silver actually broke down to a new low on Friday, which looks pretty unpleasant. Add to this that the buck dropped fairly substantially, and so the poor PM performance looks even worse when viewed in Euros.
Payrolls looked strong, and the durable goods report forecasts expansion next month. No recession on the horizon, at least not that I can see.
Futures are forecasting that the Fed will hold rates steady – the FOMC meets next week, with the usual announcement on Wednesday at 2pm.
Not-QE continues, although this week’s $13 billion increase is slower than it was in prior weeks. Perhaps the $305 billion they’ve already printed was enough to mostly paper over the secret problem that has Powell pretending nothing serious is going on. Maybe. I’m guessing all that new money looking for a home has helped equities to avoid selling off. That, and all the stock buybacks. Fed meets next week; I wonder if the feckless press will ask him more than one question about the money printing.
Big bar premiums on gold have declined, and the big COMEX silver bars at the dealer I watch were sold out! I haven’t seen that for a while. ETF discounts have increased somewhat. Seems like physical silver buyers are buying the dip.
Gold OI jumped again this week, with most of the new paper appearing on the day of Trump’s comment about waiting until after the election to do the deal with China. Hmm. No, not intervention at all.
As I’ve said earlier, I think a US-China trade deal probably doesn’t get done. The problem could have to do with enforcement. Given the history of the CCP, any agreement that gets signed will be ignored by the CCP when it becomes convenient to do so. US knows this, and wants enforcement. China, well, it doesn’t want enforcement. And of course the issue of tariff rollbacks remains as well.
And yet – both parties (Trump, and the CCP) seem content to keep the deal “very close to completion” but not actually signed – and also not actually rejected. What will happen on Dec 15, when the new tariffs are scheduled to take effect? Any bets Trump kicks the can down the road due to “progress”? It is hard to know. For Trump, its about levitating SPX, and for the CCP, its about tariffs and the feared mass exodus of US globalized companies out of China that a tariff increase would likely bring about. Both win when hope still remains – so, hope remains, in spite of all the acts that might otherwise derail the process.
I am left looking at the silver breakdown to 16.63. My stuff all suggests this is not a low. Of course, we’re in a news driven market, so headlines might intervene, but absent a rescue by failed trade talks, silver’s breakdown suggests we will probably see lower silver prices ahead. That’s annoying, since I’m long silver, but what can you do? 🙂
Weekly trends (in order of strength):
Uptrend: copper, SPX, NDX, crude, platinum, miners, DJI, gold/Euros.
Downtrend: USD, gold, bitcoin, silver, 10-year treasury.
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Mish had a post this weekend which suggested that the “nonfarm payrolls” for small shops (1-19 employees) was giving off a recession warning. True?
Well, maybe. Problem is, this series has a very short history – it dates back to 2005 – but it does seem recessionary based on the 2008 event.
But there is another confounding factor – small business in the US is being slowly strangled by the Fed over the past 10 years, because the ultra low rates during that period favors big bloated monster businesses (who can get really cheap credit) over the smaller operators who cannot.
Anyhow, here’s the series.