PM Weekly Market Commentary – 7/27/2019

Login or register to post comments Last Post 0 reads   16 posts
Viewing 10 posts - 1 through 10 (of 16 total)
  • Sun, Jul 28, 2019 - 09:58am

    #1

    davefairtex

    Status Diamond Member (Offline)

    Joined: Sep 03 2008

    Posts: 3152

    count placeholder1+

    PM Weekly Market Commentary – 7/27/2019

On Friday, gold rose +4.87 [+0.34%] to 1431.15 on heavy volume, and silver moved down -0.02 [-0.15%] to 16.41 on moderate volume. The buck moved higher [+0.20%], along with crude [+0.48%] and SPX [+0.74%], while bonds were mostly unchanged [10Y yield +0.7 bp].

This week silver led gold, but the miners were at the bottom of the heap. Since miners tend to lead, this suggests either a pause, or a retracement in the current PM uptrend. The strong showing by platinum – well I have my theories on that. I’m just guessing that Big Money has finally noticed just how cheap platinum really is. So – either a pause, or a correction for PM. In dollars, that is. Gold/Euros continues to move steadily higher.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Platinum $PLAT 2.24% 5.00% rising rising rising rising ema9 on 2019-07-12 2019-07-26
Palladium $PALL 1.77% 65.72% falling rising rising rising ema9 on 2019-07-26 2019-07-26
Silver $SILVER 1.11% 6.59% rising rising rising rising ema9 on 2019-07-12 2019-07-26
Gold/Euro $GOLD:$XEU 0.45% 21.74% rising rising rising rising ema9 on 2019-07-26 2019-07-26
Gold $GOLD -0.40% 16.22% rising rising rising rising ema9 on 2019-07-25 2019-07-26
Silver Miners SIL -0.73% 2.60% rising rising rising rising ema9 on 2019-07-26 2019-07-26
Copper $COPPER -1.82% -4.06% falling falling falling falling ema9 on 2019-07-25 2019-07-26
Junior Miners GDXJ -2.33% 20.87% rising rising rising rising ema9 on 2019-07-26 2019-07-26
Senior Miners GDX -2.50% 27.54% rising rising rising rising ema9 on 2019-07-25 2019-07-26

Gold fell -5.75 [-0.40%] to 1431.15. Gold entered a daily downtrend on Monday, but the weekly chart continues to look relatively strong. The weekly dark cloud cover pattern was actually a bullish continuation, and forecaster inched lower but remains in an uptrend. Gold remains in an uptrend in both daily and weekly timeframes.

Gold/Euros looks significantly stronger than gold/USD; it remains in an uptrend in all 3 timeframes, and it also ended the week above the 9 MA. Gold/Euros actually rallied this week, up +0.49%. That tells us that gold’s drop was just a currency effect.

The July rate-cut chance is 100% for one cut, and 21% for two cuts; the Dec 2019 rate-cut chance closed at 100% for one cut, 87% chance of 2 rate cuts, and a 51% chance of 3 rate cuts. While near-term projections are little changed, longer term projections have weakened more substantially.

COMEX GC open interest rose +7,673 contracts on Friday, but fell -31,462 contracts this week. We are approaching first notice day, and so the OI is a less reliable signal of what is really happening.

The COT report showed commercial net fell -10k, which was basically all new shorts. Managed money net was little changed. Commercial shorts are suggesting a major top for gold.

Silver moved up +0.18 [+1.11%] to 16.41. Silver did make a new high, but it is starting to see some selling pressure. Daily forecaster went back and forth, ending the week in a slight downtrend. The weekly long white candle was bearish (80%), but forecaster remains in a very strong uptrend. Monthly too – leaving silver in an uptrend in both weekly and monthly timeframes.

The gold/silver ratio fell -1.42 to 86.89. That’s bullish.

COMEX SI open interest rose +1,595 contracts on Friday, and +4,554 contracts for the week.

The silver commercial net dropped -16.8k contracts, which was +12.7k new shorts, and -4.1k fewer longs. This was a fairly large change. Managed money net climbed +23.9k contracts, half new longs (+11.8k) and the other half fewer shorts (-12k). This week’s changes were enough to put silver COT at a “near-term top”, but we are still a ways away from a major top.

Miners fell 3 days out of 5 this week, but XAU only fell -0.19%. Daily forecaster dropped into a downtrend on Thursday, but the weekly spinning top was unrated, and while forecaster moved lower, XAU ended the week in a reasonably strong uptrend. XAU is in an uptrend in both weekly and monthly timeframes. Both uptrends continue to look strong.

The GDX:$GOLD ratio fell -2.11%, and the GDXJ:GDX ratio rose +0.18%. That’s a bit bearish.

USD

The buck climbed +0.88 [+0.91%] this week, moving higher all 5 days. The buck broke above 2 previous highs, and made a new multi-year weekly closing high too. The buck is right on the edge of a breakout. The long white candle is bearish (57%), but forecaster jumped higher and is now in a strong uptrend. The buck ended the week in an uptrend in both daily and weekly timeframes. The monthly, for some reason, is still lagging.

The big currency moves: EUR [-0.89%], GBP [-0.84%], AUD [-1.93%], CAD [+0.80%], JPY [-0.85%]. The buck moved higher across the board, it would seem.

SPX rose +49.25 [+1.65%] to 3025.86. SPX moved higher 4 days out of 5 this week, hitting a new all time high on Friday. The long white candle was beraish (63%), but forecaster moved higher and is now in a moderate uptrend. SPX ended the week in an uptrend in all 3 timeframes.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Telecom XTL 3.21% -0.12% rising rising falling rising ema9 on 2019-07-23 2019-07-26
Financials XLF 2.68% 2.21% rising rising rising rising ema9 on 2019-07-23 2019-07-26
Technology XLK 2.35% 12.98% rising rising rising rising ema9 on 2019-06-26 2019-07-26
Industrials XLI 1.36% 3.29% rising rising falling rising ema9 on 2019-07-19 2019-07-26
Cons Discretionary XLY 1.14% 10.38% falling rising rising rising ema9 on 2019-07-26 2019-07-26
Materials XLB 1.11% -0.77% rising rising rising rising ema9 on 2019-07-18 2019-07-26
REIT RWR 0.99% 7.12% falling rising rising falling ema9 on 2019-07-26 2019-07-26
Cons Staples XLP 0.72% 13.24% rising rising rising rising ema9 on 2019-07-26 2019-07-26
Healthcare XLV 0.34% 3.92% falling rising falling rising ema9 on 2019-07-26 2019-07-26
Defense ITA 0.22% 6.34% rising rising rising rising ema9 on 2019-07-19 2019-07-26
Energy XLE -0.49% -18.85% falling falling falling rising ema9 on 2019-07-25 2019-07-26
Utilities XLU -0.65% 13.58% falling rising rising rising ma50 on 2019-07-26 2019-07-26
Homebuilders XHB -0.74% 5.82% falling rising rising rising ema9 on 2019-07-19 2019-07-26
Gold Miners GDX -2.50% 27.54% rising rising rising rising ema9 on 2019-07-25 2019-07-26

Sector map had telecom and financials leading, with homebuilders and utilities bringing up the rear. This was a bullish sector map.

The US equity market did best this week, with Latin America at the bottom of the pile.

VIX plunged -2.29 to 12.16.

Rates & Commodities

TY fell -0.09% on the week. The bearish harami is bearish (51%), and forecaster inched lower but remains in an uptrend. While the longer term uptrends for TY are definitely weakening, TY remains in an uptrend in both weekly and monthly timeframes.

DGS10 (inverse of TY – the 10-year yield), rose +2 bp to 2.07%. The short white/NR7 candle was unrated, but forecaster moved higher, and is now in a slight uptrend. DGS10 remains in a downtrend in the monthly timeframe. Bonds are slowly starting to reverse.

JNK jumped +0.73%, moving back into an uptrend on Monday. JNK is rallying alongside equities.

BAA.AA differential plunged -9 bp this week, dropping down to 0.91%. Money appears to be racing into lower-quality debt. This is a sign of a relaxing credit environment. Nobody right now is concerned about defaults. Over in Europe, the ECB appears to be willing to keep the zombies alive indefinitely, while the US is not even close to recession. So – what me, worry? In spite of the very weak German ISM manufacturing number this week, the credit markets got a whole lot more relaxed.

Crude rose +0.36 [+0.64%] to 56.27. Crude tried to rally this week but failed. A bullish-looking EIA report (crude: -10.8m, gasoline: -0.2m, distillates: +0.6m) didn’t seem to help very much at all. The weekly doji candle was unrated, and forecaster moved slightly higher but remains in a downtrend. Daily forecaster did inch into an uptrend on Friday, but it doesn’t look all that strong. Crude ended the week in an uptrend in both daily and monthly timeframes, but it is still below all 3 moving averages, which is not a great sign.

Physical PM Supply Indicators

* The GLD ETF tonnage on hand fell -2.35 tons, with 818 tons in inventory.

* ETF Discount to NAV:

PHYS 11.37 -1.38% to NAV [decrease]
PSLV 6.05 -1.26% to NAV [decrease]
CEF 13.67 -3.37% 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 no premium for gold, and a 10c discount for silver (London).

* Gold dealer big bars premiums were: gold [1kg] 1.21% and silver [1000oz] 3.43%.

Grey Swans & Geopolitics

  • Ebola: total cases 2612, with 1756 deaths (CFR: 67%). That’s 90 new cases this week, which is an increase over last week. More than 50% of all new cases in the past 21 days were reported in Beni, which had a smaller outbreak 9 months ago that seemed to have been more or less brought under control. Clearly that is no longer true. Cases in other previously high-case areas seem to be declining, but the delay in detection and reporting means that the current data may not be an accurate representation of what is really going on right now. https://www.who.int/csr/don/25-july-2019-ebola-drc/en/
  • Iran: No news.
  • Italy – migration: at a meeting of EU interior ministers, a number of countries agreed to accept “asylum seekers”, but France refused to open French ports to the “migrant sea taxis” saying any rescued migrants need to go to the “nearest safe port” – i.e. Italy or Malta. There was also agreement to provide financial assistance to help return migrants not entitled to asylum, but no details were provided. Salvini, who boycotted the meeting in protest, branded the meeting “a flop.”
  • US-China: Trump suggested that China may not agree to a trade deal before the 2020 election; he said they are using stalling tactics and he doubted that a deal would be reached anytime soon. https://www.cnbc.com/2019/07/26/reuters-america-update-2-trump-says-china-may-try-to-delay-trade-deal-until-2020-election.html
  • BRExit: Boris Johnson is now PM of the UK. He fired some of the Remainers in the cabinet, other Remainers resigned, and he said that all the ministers had now committed to leaving the EU on or before 31 October “no ifs, no buts.” While he said he would “much prefer” to leave the EU with an agreement, the priority is to prepare the country for a no deal Brexit. The theory seems to be, if you wish for peace, you must first prepare for war.
  • Yield Curve Inversion: the 1-10 spread fell -5 bp to +7 bp.
  • North Korea: more missile launchings from North Korea this week; it does not seem as though Trump’s impromptu meeting with KJU last month resulted in any meaningful forward movement.

US Recession Watch

Here are the economic reports for this week:

  • US PMI Composite (Flash): headline 51.6 (up from 50.6 in June), with manufacturing 50.0 (down from 50.1 in June), and services 52.2 (up from 50.7 in June). Manufacturing flat, services expanding. Not recessionary.
  • Durable Goods Orders: +2.0% m/m, core capital goods +1.9% m/m. Positive outlook for manufacturing. Not recessionary.
  • 2Q GDP: headline +2.1% y/y, with consumer spending +4.3% y/y. That’s a strong reading for consumer spending. Core CPE: +2.4%.

The “flash” numbers are a glimpse at the current month’s situation. GDP looks back at last quarter’s activity. Neither are recessionary. The flash numbers suggest that manufacturing remains flat, services remain expansionary. The positive durable goods orders hints at improvement to come in manufacturing. That’s not recessionary either.

Summary

Equities broke out to another all time high this week, money rushed into lower-quality debt, and the buck charged higher, and is right on the edge of a breakout to multi-year highs. An ECB meeting occurred where Draghi talked about printing money, of course, but the perhaps-unintended message is that there was disagreement behind the scenes as to where things go next. So with all due respect to Draghi’s desire to print money, he is almost out the door, and as a result, the markets are not paying attention to what he’s saying anymore. More or less anyway.

PM looks as though it might be taking a break going into next week’s FOMC meeting. The markets are expecting a 25 bp drop in rates; if the Fed wasn’t going to comply, they would have mentioned something already. The big unknown is what they project going forward. That, and what reasoning are they using to justify this cut. There is no recession – not projected, not current, not past. That leaves those “cross-currents”: in the US-China trade war, and the manufacturing recession overseas.

Big bar gold premiums on both gold and silver were mostly unchanged, and ETF discounts fell. No shortage of gold or silver at this time.

The COT report shows gold at a longer term COT high, especially when looking at the commercial shorts, where the levels are getting close to historic. Silver is now at a near-term high.

So with the setup being “no recession”, how will the PM and other markets react to whatever the Fed has to say? An old trader I know would remind us that it is never the news that matters, but instead, it is the market’s reaction to the news that counts most. A rally on bad news: very bullish. Avoiding a sell-off on bad news: bullish. Selling off on good news: very bearish. A failure to rally on good news: bearish.

I’m expecting quasi-bad news from the Fed, with respect to PM. One rate cut and then they’ll be “patient” awaiting the resolution of the “cross-currents.” How the market reacts to this news is the key.

Weekly trends (in order of strength):

Uptrend: silver, USD, miners, platinum, DJI, SPX, gold/Euros, gold.

Downtrend: crude, bitcoin, copper, 10-year Treasury.

Note: If you’re reading this and are not yet a member of Peak Prosperity’s Gold & Silver Group, please consider joining it now. It’s where our active community of precious metals enthusiasts have focused conversations on the developments most likely to impact gold & silver. Simply go here and enjoy the daily reports & discussion.

  • Sun, Jul 28, 2019 - 11:23am

    #2

    Eannao

    Status Bronze Member (Offline)

    Joined: Feb 28 2015

    Posts: 152

    count placeholder2+

    Dalio's paradigm shifts

Hi Dave,

Thanks for this Weekly Commentary… I always eagerly await your weekly wrap.

Have you read Ray Dalios recent piece about the paradigm shifts each decade since 1920? I’m dubious about some of his previous stuff (eg his ‘beautiful deleveraging ‘) but I thought this piece was very interesting. Perhaps that’s just my bias though, as he concludes that the upcoming paradigm shift will see gold outperform! I’d be interested to hear your thoughts.

https://www.linkedin.com/pulse/paradigm-shifts-ray-dalio/

 

 

  • Mon, Jul 29, 2019 - 01:26pm

    #3

    Chris Martenson

    Status Platinum Member (Offline)

    Joined: Jun 07 2007

    Posts: 4663

    count placeholder3+

    Friday news Release – ECB Ditches 20-year Old Gold Agreement

Friday is the best time to catch the news release they’d rather not garner any attention.

According to Reuters, this major piece of news should take you 1 minute to read.

I’ve quoted the article in its entirety below.

Europe’s central banks ditch 20-year-old gold sales agreement

FRANKFURT, July 26 (Reuters) – European central banks have ditched a 20-year-old agreement to coordinate their gold sales, saying they have no plan to sell large amounts of the metal, the European Central Bank said on Friday.

The Central Bank Gold Agreement was originally signed in 1999 to coordinate gold sales by the various central banks and help stabilise the market for the precious metal.

“The signatories confirm that gold remains an important element of global monetary reserves, as it continues to provide asset diversification benefits and none of them currently has plans to sell significant amounts of gold,” the ECB said in a statement.

(Reporting by Francesco Canepa; Editing by Jan Harvey)

“Yeah, we’re ditching this agreement because it’s a gold sales agreement, not a gold purchasing agreement.  Nobody seems to be selling anymore so…adios agreement!

I think this is big news.

The brevity of the article makes me a tad more certain of that.

No quotes, no research, no meaty statements of any sort.  Just the banker equivalent of the police saying “we’ve investigated ourselves and found no wrongdoing.”

At a minimum we can determine that there’s not enough selling by central banks to continue with the agreement.

Next we might note that the reverse is actually true.  The banks are accumulating gold, at least according to all the news snippets I’ve read.  China, Russia, Poland…on and on.

Further, we might speculate that some of the central banks, now that they are done “selling” their gold might actually want it back, which means big leasing arrangements will have to be undone and reversed.

  • Mon, Jul 29, 2019 - 04:07pm

    #4

    Adam Taggart

    Status Platinum Member (Offline)

    Joined: May 25 2009

    Posts: 2583

    count placeholder

    Sudden gold gap up in aftermarket

Gold just popped up $12/oz in the aftermarket. Something’s afoot.

Don’t know the cause yet, but am searching around for it…

  • Mon, Jul 29, 2019 - 04:18pm   (Reply to #4)

    #5
    CrisisMode

    CrisisMode

    Status Member (Offline)

    Joined: Dec 21 2011

    Posts: 22

    count placeholder

    re: Sudden gold gap up in aftermarket

Not seeing that on Bloomberg or Kitco . .

What is your quote feed?

 

  • Mon, Jul 29, 2019 - 04:19pm   (Reply to #4)

    #6

    Adam Taggart

    Status Platinum Member (Offline)

    Joined: May 25 2009

    Posts: 2583

    count placeholder

    re: re: Sudden gold gap up in aftermarket

Finviz (click here)

  • Mon, Jul 29, 2019 - 04:27pm   (Reply to #4)

    #7
    CrisisMode

    CrisisMode

    Status Member (Offline)

    Joined: Dec 21 2011

    Posts: 22

    count placeholder

    re: re: re: Sudden gold gap up in aftermarket

That Finviz quote is an anomaly.

Non of the other PM sites are verifying that gap level jump.

 

  • Mon, Jul 29, 2019 - 09:09pm

    #8

    davefairtex

    Status Diamond Member (Offline)

    Joined: Sep 03 2008

    Posts: 3152

    count placeholder

    contract roll

That’s the contract roll.  We are approaching first notice day.  GCQ19 (August) is rolling to GCZ19 (Dec).  For me, the contract roll happened at the open.

These kinds of jumps is why you see me use “CW” on some of my instrument names.  That means “calendar weighted” prices, so we don’t get large, surprising jumps – instead the code “knows” about the contract expiration, and adds small amounts to the current contract price as first notice day approaches.

 

 

  • Mon, Jul 29, 2019 - 09:16pm   (Reply to #3)

    #9

    davefairtex

    Status Diamond Member (Offline)

    Joined: Sep 03 2008

    Posts: 3152

    count placeholder

    re: Friday news Release – ECB Ditches 20-year Old Gold Agreement

Chris-

Thanks for that on the “gold sales agreement”.  I agree with your assessment, FWIW.  On Friday, “nothing to see here”, etc.

As always, we will only know the reason for the big gold rally/gold trend change to bullish long after the fact.  This is why we should not wait for some “news signal” to act.  Instead, we should assume that well-connected insiders already have the story, and their combined actions anticipating these events will result in price moves that end up telling everything.

Or put more simply, once price broke through 1382 (or 1400, take your pick), that puts gold into a bull market.

Regardless what our Fed does on Wednesday, I will not be a seller of gold – either mining shares or metal – even if there’s a sizeable correction.

Not financial advice, of course.  🙂

  • Tue, Jul 30, 2019 - 04:52am   (Reply to #2)

    #10

    davefairtex

    Status Diamond Member (Offline)

    Joined: Sep 03 2008

    Posts: 3152

    count placeholder

    re: Dalio's paradigm shifts

E-

Thanks for the link.  I read his piece.  His central thesis is that:

* they will have to monetize the debt

* bonds will suck (as will cash) as a result – they will act as a “wealth tax”

* equities are overvalued, and won’t continue to climb due to the inability to continue debt-funded buybacks.

* its best to have something – “not bonds” – to place your cash in.

Along with that, I’m going to paraphrase: “the next 10 years aren’t going to be like the last 10 years.”  And, he claims, this is always the case.

I didn’t look closely enough at his tables.  Perhaps there is some more “mean reversion” evidence in those tables that provides some overarching historical lesson we can draw.

It is interesting that these sorts of things happen within a few years of a decade boundary.

Viewing 10 posts - 1 through 10 (of 16 total)

Login or Register to post comments