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PM Weekly Market Commentary – 3/15/2019

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  • Sun, Mar 17, 2019 - 05:35am

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    davefairtex

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    PM Weekly Market Commentary – 3/15/2019

On Friday, gold rose +6.53 [+0.50%] to 1307.19 on very heavy volume, while silver climbed +0.11 [+0.72%] to 15.29 on moderate volume. The buck fell [-0.21%], while equities [+0.50%] and bonds [+0.66%] climbed.

This week saw a rally in the other metals – palladium and platinum – but gold and silver went nowhere.  Most items are above all 3 moving averages, and have executed golden crosses, so all that looks fairly positive.  Not much changed this week – just that both gold and silver are looking a bit weak.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Palladium $PALL 2.92% 54.16% rising rising rising rising ema9 on 2019-03-11 2019-03-15
Platinum $PLAT 1.59% -12.98% falling rising falling rising ema9 on 2019-03-15 2019-03-15
Silver Miners SIL 1.29% -11.33% rising rising falling rising ema9 on 2019-03-12 2019-03-15
Gold $GOLD 0.31% -1.02% rising rising rising rising ma50 on 2019-03-14 2019-03-15
Copper $COPPER 0.26% -6.94% falling rising falling rising ema9 on 2019-03-14 2019-03-15
Junior Miners GDXJ 0.09% 2.54% rising rising falling rising ema9 on 2019-03-08 2019-03-15
Senior Miners GDX -0.31% 3.96% rising rising rising rising ema9 on 2019-03-08 2019-03-15
Gold/Euro $GOLD:$XEU -0.45% 8.02% rising rising rising rising ema9 on 2019-03-08 2019-03-15
Silver $SILVER -0.46% -6.74% rising falling falling rising ema9 on 2019-03-15 2019-03-15

Gold rose +4.06 [+0.31%] this week. Gold managed to move briefly above the 50 MA on Wednesday following the ECB meeting (“negative rates forever”) but then fell relatively hard on Thursday. The weekly swing low could be a bullish reversal (60% chance), while forecaster moved higher, but came up a bit short of a buy signal. Gold is now in a downtrend in both the daily and weekly timeframes.

The March 2019 rate-cut chance is at 1%, and the Dec 2019 rate-cut chance is 28%. The December rate-cut prediction continues to increase.

COMEX GC open interest rose +16k contracts this week, with a large (12k) drop coming on Friday.

The COT report shows little change in the commercial net – commercials increased both shorts (+31k) and longs (+36k) by a roughly similar amount. Managed money changes were smaller – mostly it was managed money going short (+11k). The COT is not suggesting any sort of turning point right now.

Silver fell -0.07 [-0.46%] this week. All of the damage happened on Thursday – it was a big down day, and Friday’s rally only managed to claw back some of the losses. The weekly high wave candle was a bearish continuation, and forecaster moved higher, but not enough for a buy signal. Silver ended the week in a downtrend in all 3 timeframes.

The gold/silver ratio rose +0.60 to 85.38. That’s somewhat bearish.

COMEX SI open interest fell -4,977 contracts this week. Shorts continue to cover.

Commercials covered short again this week, but only 7k contracts; much smaller than last week’s 28k. Managed money net fell 8k – roughly 5k new shorts and 4k fewer longs. I think silver needs a week or two more before the COT report starts looking bullish.

Miners were little changed this week; XAU rose +0.26%, which barely shows up on the chart at all. The long legged doji was neutral, while forecaster did manage to rise, but it was not enough for a buy signal. XAU ended the week in a downtrend in both the daily and weekly timeframes.

GDX:$GOLD fell -0.62%, while the GDXJ:GDX ratio rose +0.41%. That’s neutral.

USD

The buck fell -0.75 [-0.77%] to 96.03. This week’s plunge almost entirely unwound last week’s rally. The dark cloud cover candle was somewhat bearish (36% reversal) and forecaster dropped hard issuing a weekly sell signal. The buck ended the week in a downtrend in both daily and weekly timeframes. So much for that breakout to new highs. Perhaps that only happens on a hard BRExit.

The big currency moves: GBP: +2.16%, EUR: +1.06%, CAD: +0.70%, AUD: +0.61%. Mostly Brexit, with hints of oil and risk on. Can maximum chaos in the UK – leading to (perhaps) May’s Unconditional Surrender BRExit – save the Euro for a time? Parliament voted down hard Brexit this week, at least in a non-binding sort of way.

Brexit, yellow vest protests, Salvini, Orban, Trump, and now AOC – all signs that the status quo is coming undone. 10 years of asset-boosting money printing, negative rates, along with wage-destroying globalization and migration have led to some pretty unequal outcomes.

Even if Brexit doesn’t happen today, I think it is just a matter of time before it does. I’m only looking at the longer term trend here.  It is towards the national and away from the global.

SPX jumped +79.41 [+2.89%] to 2822.48. SPX made a new high this week, erasing last week’s correction and then some. The long white candle was a bullish continuation, and forecaster moved slightly higher, remaining in a shallow uptrend. SPX ended the week in an uptrend in all 3 timeframes.

Tech and sickcare led, with financials not far behind, while defense did worst – that was about Boeing, which saw another 737 MAX 8 crash which caused BA stock to plunge by 10%. Ouch.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Technology XLK 4.56% 4.42% rising rising rising rising ema9 on 2019-03-11 2019-03-15
Healthcare XLV 2.90% 7.35% rising rising rising rising ema9 on 2019-03-12 2019-03-15
Telecom XTL 2.80% -2.33% falling rising rising rising ma200 on 2019-03-15 2019-03-15
Financials XLF 2.54% -8.01% rising rising falling rising ema9 on 2019-03-13 2019-03-15
Energy XLE 2.52% -2.50% falling rising falling rising ema9 on 2019-03-13 2019-03-15
Cons Discretionary XLY 2.02% 4.73% falling rising rising rising ema9 on 2019-03-12 2019-03-15
REIT RWR 1.90% 13.64% rising rising rising rising ema9 on 2019-03-11 2019-03-15
Cons Staples XLP 1.84% 2.19% rising rising rising rising ema9 on 2019-03-11 2019-03-15
Materials XLB 1.22% -6.70% rising rising falling rising ma200 on 2019-03-14 2019-03-15
Utilities XLU 1.11% 15.92% rising rising rising rising ma50 on 2019-01-31 2019-03-15
Homebuilders XHB -0.29% -8.11% falling rising falling rising ema9 on 2019-03-13 2019-03-15
Gold Miners GDX -0.31% 3.96% rising rising rising rising ema9 on 2019-03-08 2019-03-15
Industrials XLI -0.38% -3.26% falling rising falling rising ema9 on 2019-03-04 2019-03-15
Defense ITA -1.52% -0.35% falling rising falling rising ma200 on 2019-03-15 2019-03-15

The US was second from the bottom in terms of regional equity moves. This week’s equity market rally was a worldwide thing, not just something that happened in the US.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Latin America ILF 4.88% -7.51% rising rising rising rising ema9 on 2019-03-11 2019-03-15
Europe IEV 3.44% -6.85% rising rising falling rising ma200 on 2019-03-14 2019-03-15
Eurozone EZU 3.41% -10.75% rising rising falling rising ma200 on 2019-03-15 2019-03-15
Emerging Asia GMF 3.23% -10.74% rising rising falling rising ema9 on 2019-03-11 2019-03-15
United States VTI 2.85% 2.54% rising rising rising rising ema9 on 2019-03-11 2019-03-15
Developed Asia VPL 1.66% -11.22% falling rising falling rising ema9 on 2019-03-15 2019-03-15

VIX plunged -3.17 to 12.88.

Rates & Commodities

TLT moved up +0.15%, which was very little change. TLT ended the week in an uptrend, and above all 3 moving averages. TY climbed +0.21%, making a new high on Friday. The spinning top candle was a bullish continuation, and the forecaster moved higher into its uptrend. TY is engaging in a slow-motion breakout – this, in the face of a reasonably strong equity market breakout. The 10-year yield fell -3.2 bp to 2.59%. What is going on with bonds? How can they be rallying along with equities? I don’t know.

JNK rose +0.73%, just failing to make a new high. JNK isn’t quite as enthusiastic about risk on as are equities, but it remains in an uptrend – as does cousin HYB.

Crude jumped +2.40 [+4.25%] to 58.89. Crude made a new high on Friday. The EIA report looked bullish (crude: -3.9m, gasoline: -4.6m, distillates: +0.4m), and that seemed to help prices move higher. Crude is in an uptrend in all 3 timeframes.

An article (https://oilprice.com/Energy/Crude-Oil/US-Oil-Production-Is-Headed-For-A-Quick-Decline.html) suggested that US shale was going to decline next year, due to a fairly dramatic drop in the money being raised by the shale producers. Money invested leads to oil production with a 2 year lag – so a drop in money invested will lead to reduced production by 2020.

Physical Supply Indicators

* The GLD ETF tonnage on hand rose +4.45 with 771 tons remaining in inventory.

* ETF Discount to NAV:

 PHYS 10.50 -1.02% to NAV [increase]
 PSLV 5.59 -2.53% to NAV [decrease]
 CEF 12.76 -2.65% 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 $3 discount for gold, and no premium for silver.

* Gold dealer big bars premiums were: gold [1kg] 1.31% and silver [1000oz] 3.67%.

Grey Swans & Geopolitics

  • Ebola: total cases 927, with 584 deaths, which is 20 new cases this week. The number of new cases declined significantly over the past month. Although the epidemic has cases spread over a large geographic area, it appears that the teams are finally managing to bring the outbreak under control. Some 87,632 people have been vaccinated to date. https://www.who.int/csr/don/14-march-2019-ebola-drc/en/

  • EU – Migration: no news.

  • EU – Elections: a BRExit delay would allow the UK to re-elect “73 Nigel Farages” to the EU parliament. Meanwhile, according to Foreign Affairs, the debate has changed: instead of departing the EU, the rest of the nationalist party leaders (Salvini, Orban, etc) want to change the EU into a “Europe of sovereign nations” – increasing sovereignty while maintaining trade relations. And, as I like to point out, the global economy has yet to seriously turn down. What happens when it does? https://foreignpolicy.com/2019/03/12/the-eus-next-big-election-is-heading-for-disaster/

  • China – Tariffs: Lighthizer (the USTR) said in testimony to Congress that he could not predict the outcome of the ongoing talks. “We’re either going to have a good result or we’re going to have a bad result before too long.” Amusingly, Democrats are now trade hawks; in the past they largely ridiculed Trump for making the effort, and now they are demanding that Trump not settle for a quick deal. (It’s either not worth it, or Trump’s deal will not go far enough. Hard to satisfy these people – perhaps by design.) Enforcement of the agreement is a primary sticking point. Trump wants to maintain the right to re-impose tariffs if China doesn’t live up to the bargain. https://www.reuters.com/article/us-usa-trade-lighthizer/deal-or-no-deal-u-s-china-trade-talks-may-end-in-weeks-lighthizer-idUSKBN1QT1WH

  • BRExit: Two weeks until exit. Lots of votes this week: Hard Brexit was voted down, a second referendum was overwhelmingly voted down, May’s Unconditional Surrender was voted down – the only positive vote was on a request for an extension of at least 3 months from the EU. None of these votes were binding. Next week: more votes. May, ever the optimist, wants Parliament to vote once more on Unconditional Surrender. May seems to be saying: “my BRexit is the only Brexit you’re going to get.” https://www.theguardian.com/politics/2019/mar/16/brexit-what-could-happen-next

  • Yield Curve Inversion: the 2-10 spread fell -1 bp to 16 bp. Not much change.

  • North Korea: a senior official of the DPRK said that North Korea may break off talks with the US and resume nuclear testing, but that “personal relations between the two supreme leaders are still good and the chemistry is mysteriously wonderful.” (!) The issue: At the summit in Hanoi, DPRK wanted 5 key economic sanctions to be lifted in exchange for destroying one nuclear site, but the US claimed that DPRK wanted all sanctions lifted in exchange for destroying that one site.

  • Mueller Investigation: in a non-binding vote, the House voted 420-0 for the Mueller report to be made public. Two more staffers left the investigation, hinting the investigation may be nearing an end. Manafort got another jail term for another non-Russian-collusion charge. Failing to register as a lobbyist, I think.  Sucks to be in the crosshairs.

Summary

This week was all about the rally in both equities and crude – and these days, crude seems to have a strong effect on equity prices. The buck moved lower, mostly due to the hope that the UK wouldn’t be actually leaving the EU after all – but the drop in the buck didn’t seem to help gold and silver much at all.

Big bar gold premiums on gold remain low, and most ETF discounts declined. There is no shortage of gold or silver at these prices.

The COT reports don’t show either gold or silver at any sort of turning point, and there was not much change in positioning this week.

The big puzzle for me is the slow-motion breakout in the 10-year Treasury.  How can that be happening alongside the move higher in equities?  It does seem as though money continues to flow into bonds – this while the Fed is rolling off its balance sheet, and the US government is running record deficits.  And this week, the buck even fell, signaling that money left the US.  Bonds are a bet – on the currency, fallling rates and a falling economy.

It sure seems as though big money is betting on a recession.  So how is that recession watch going?

The INDPRO release showed a very minor increase: +0.15%, which is almost the same as going nowhere.  More or less the same thing for PPIACO – basically sideways movement.  Retail sales: same thing.  No improvement, but no decline.  So things haven’t become worse, but neither have they become better.

But that interest rate cut forecast in the futures market definitely suggests that the big money is slowly becoming more bearish about the overall economy – in spite of higher equity prices.

Weekly trends (in order of strength):

Uptrend: crude, 10-year Treasury, SPX, gold/Euros.

Downtrend: platinum, USD, miners, silver, copper, gold.

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