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PM Weekly Market Commentary – 9/6/2019

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    PM Weekly Market Commentary – 9/6/2019

On Friday, gold fell -8.90 [-0.58%] to 1519.76 on extremely heavy volume, while silver plunged -0.51 [-2.72%] to 18.24 on extremely heavy volume also. The buck was virtually unchanged [-0.03%], as was SPX [+0.09%], while crude rallied [+1.13%] and bonds moved slightly higher [10Y yield -1.5 bp].

Friday’s plunge in gold and especially silver was follow-through from Thursday’s “risk-on” US-China trade news; talks are apparently back on, and will re-start face-to-face in early October – immediately following the CCP’s 70th birthday celebration scheduled for October 1st.

This week’s metals sector map has copper in the lead, while miners led metals lower, and silver led gold lower. This is bearish for PM; we may be entering a correction. It is still early, as the PM elements have only dropped below the 9 MA – and copper has only crossed back above its own 9 MA also. This nascent correction was driven by the positive news from the US-China trade situation.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Copper $COPPER 2.91% -0.10% rising falling falling falling ema9 on 2019-09-04 2019-09-06
Platinum $PLAT 1.85% 20.45% rising rising rising rising ema9 on 2019-08-21 2019-09-06
Palladium $PALL 0.36% 59.91% rising rising rising falling ema9 on 2019-08-30 2019-09-06
Gold $GOLD -0.73% 25.90% falling rising rising rising ema9 on 2019-09-05 2019-09-06
Gold/Euro $GOLD:$XEU -1.16% 32.59% falling rising rising rising ema9 on 2019-09-05 2019-09-06
Silver $SILVER -1.35% 28.56% rising rising rising rising ema9 on 2019-09-06 2019-09-06
Silver Miners SIL -3.34% 25.17% rising rising rising rising ema9 on 2019-09-05 2019-09-06
Junior Miners GDXJ -4.48% 46.47% falling rising rising rising ema9 on 2019-09-05 2019-09-06
Senior Miners GDX -4.62% 59.64% falling rising rising rising ema9 on 2019-09-05 2019-09-06

Gold fell -11.10 [-0.73%] to 1519.76. Most of this week’s drop happened on Thursday. The long black candle was mildly bearish (38%), and forecaster dropped hard, entering a downtrend. Gold is now in a downtrend in both daily and weekly timeframes.

Surprisingly, gold/Euros remains in an uptrend in both weekly and monthly timeframes.

The September rate-cut chance is 91% for one cut; the Dec 2019 rate-cut chance is at 99% for one cut, a 80% chance of 2 rate cuts, and a 33% chance of 3 rate cuts.

COMEX GC open interest rose +1,812 contracts on Friday, and +10,580 contracts on the week.

The gold commercial net fell by -4k contracts; it was a very small change, but the short position is now at the highest level ever. Managed money net rose by +5k contracts; +7k longs, and +2k shorts. The commercial short position continues to signal a top for gold.  How much short-covering took place on this week’s sizeable correction?  We won’t know until next week’s COT report.

Silver fell -0.24 [-1.30%] to 18.24. All of the losses came on Thursday and Friday following the US-China trade news. The shooting star candle was bearish (53%), and forecaster moved lower but remains in an uptrend. Silver ended the week in an uptrend in both weekly and monthly timeframes.

The gold/silver ratio rose +0.48 to 83.32. That’s bearish.

COMEX SI open interest fell -158 contracts on Friday, and -2,263 contracts for the week.

The silver commercial net fell -3k contracts, which was -5.3k fewer longs, and -2.3k fewer shorts. The managed money net rose +5k contracts, which was -3.2k fewer shorts, and +1.9k more longs.

XAU fell -4.77% this week, dropping into a daily downtrend on Thursday. The weekly swing high pattern was quite bearish (72%), but forecaster inched higher and is now in a slight uptrend. This puts XAU in an uptrend in both weekly and monthly timeframes.

The GDX:$GOLD ratio fell -3.92%, and the GDXJ:GDX ratio rose +0.15%. That is very bearish.


The buck fell -0.53 [-0.54%] to 97.95. The fall in the buck came on Wednesday, prior to the US-China trade news. The bearish harami was bearish (51%), and forecaster fell but remains in an uptrend. The buck is now in a downtrend in the daily and monthly timeframes.

The big currency moves: GBP [+1.11%], EUR [+0.44%], AUD [+1.86%], JPY [-0.51%], CNY [-0.54%]. USD/CNY dropped to 7.12; the currency pair seems at least somewhat optimistic that some sort of progress on trade will be made.

SPX rose +52.25 [+1.79%] to 2978.71. The long white candle was neutral, and forecaster moved back into an uptrend. This was enough to pull SPX monthly into a (slight) uptrend also; SPX ended the week in an uptrend in all 3 timeframes. September is here, but the US-China trade deal appears to be dominating.

Sector map had discretionary and energy leading (with tech and financials close behind), while utilities and sickcare trailed. This is a bullish sector map. Many items are back above all 3 moving averages.

Name Chart Chg (W) 52w ch MA9 MA50 MA200 50/200 Last Crossing last
Cons Discretionary XLY 2.75% 6.30% rising rising rising rising ma50 on 2019-09-04 2019-09-06
Energy XLE 2.70% -18.93% rising falling falling falling ema9 on 2019-08-29 2019-09-06
Technology XLK 2.48% 10.39% rising rising rising rising ema9 on 2019-09-04 2019-09-06
Financials XLF 1.93% -3.24% rising rising rising rising ma50 on 2019-09-05 2019-09-06
Industrials XLI 1.90% -0.81% rising rising rising falling ma50 on 2019-09-05 2019-09-06
Telecom XTL 1.56% -9.61% rising rising falling rising ema9 on 2019-08-29 2019-09-06
REIT RWR 1.49% 7.42% rising rising rising rising ema9 on 2019-08-29 2019-09-06
Cons Staples XLP 1.19% 12.78% rising rising rising rising ema9 on 2019-08-28 2019-09-06
Defense ITA 1.12% 6.63% rising rising rising rising ema9 on 2019-08-19 2019-09-06
Materials XLB 0.97% -3.59% rising falling rising falling ema9 on 2019-08-29 2019-09-06
Homebuilders XHB 0.86% 5.08% rising rising rising falling ema9 on 2019-09-04 2019-09-06
Healthcare XLV 0.74% -1.23% rising falling falling falling ma200 on 2019-09-05 2019-09-06
Utilities XLU 0.37% 14.68% rising rising rising rising ema9 on 2019-08-15 2019-09-06
Gold Miners GDX -4.62% 59.64% falling rising rising rising ema9 on 2019-09-05 2019-09-06

Globally, US equities did worst, with Latin America doing best.

VIX plunged -3.98 to 15.00.

Rates & Commodities

TY fell -0.29% this week; daily forecaster dropped into a downtrend on Monday. The weekly spinning top was somewhat bearish (40%), and forecaster dropped but remains in an uptrend. TY is now in an uptrend in the weekly and monthly timeframes.

DGS10 (the 10-year yield, inverse of TY), rose +7 bp to 1.57%. The bullish engulfing pattern was bullish (54%), and forecaster moved higher, but remains in a downtrend. DGS10 remains in a downtrend in the weekly and monthly timeframes.

The 30-year yield rose +10 bp, ending the week at 2.06%.

Bonds are starting to retrace, although unlike gold, they have yet to actually reverse direction on the longer-term timeframes.

JNK rose +0.02% on the week; JNK cratered on Monday, and spent the week recovering. JNK ended the week in an uptrend.

BAA.AA differential was unchanged, ending the week at +91. The credit market remains unconcerned.

Crude rose +1.52 [+2.77%] to 56.45. The spinning top candle was bullish (48%), and forecaster jumped into an uptrend. Crude ended the week in an uptrend in both daily and weekly timeframes, and is now back (just barely) above all 3 moving averages. The EIA report on Thursday looked reasonably bullish (crude: -4.8m, gasoline: -2.4m, distillates: -2.5m) but it didn’t move price; it seemed as though price had already rallied in advance of the report.  Mostly crude’s move had to do with the US-China trade optimism.

Physical PM Supply Indicators

* The GLD ETF tonnage on hand rose +11.44 tons, with 890 tons in inventory.

* ETF Discount to NAV:

PHYS 12.23 -1.30% to NAV [increase]
PSLV 6.61 -2.46% to NAV [increase]
CEF 14.77 -4.20% to NAV [increase]

* Premium for physical (via Bullion Vault:!/orderboard) vs spot gold (loco New York, via Kitco: shows no premium for gold, and a 6c discount for silver (London).

* Gold dealer big bars premiums were: gold [1kg] 1.15% and silver [1000oz] 2.69%.

Grey Swans & Geopolitics

  • Ebola: total cases 3054, with 2052 deaths (CFR: 67%). That’s 57 new cases this week, which is a decrease over last week. A mother and child traveled from DRC to Uganda for medical treatment, and the child was diagnosed with Ebola. A small number of contacts are under surveillance; no further confirmed cases in Uganda have been found.
  • Iran: US Sec Def Esper suggested that Iran was “inching towards that place where we could have talks.” At the same time, Iran is now enriching uranium in violation of the old nuclear deal. Iran appears to be taking slow, calculated steps down the road towards getting a nuclear bomb – which is their response to the US sanctions regime.
  • Italy – migration: Salvini is out; it appears he overplayed his hand, as 5-Star and PD have formed a new government. Platform includes: a minimum salary, no VAT increase, more spending on education, research, and welfare, a web tax on multinationals, and a creation of a public bank to help boost development in the south. The elephant in the room: how will the new government will handle migration? Nobody knows. How long will mortal enemies be able to work together? Nobody knows that either, but they share a common motivation: they’ll both lose power to Salvini if a new election is held. And holding power is paramount.
  • US-China: As mentioned, the US and China will resume face to face negotiations in early October. But there is a new concept floating around out there: decoupling. “The decoupling push is quite different than any U.S. efforts to get China to open up more of its economy to American companies. Instead, it focuses on reducing America’s extremely heavy reliance on China for so much of its manufacturing needs.” This concept may now be going mainstream. Certainly it is now appearing in mainstream media, and if it starts to become “accepted wisdom” in US policy circles, it will give Trump astonishingly large leverage in the talks to come.
  • BRExit: Remainers in Parliament successfully passed a bill ordering PM Johnson to ask the EU for an extension. 21 Remainer Tories voted in favor, and were promptly kicked out of the party. (So much for the concept of “Tory ‘Meatloaf’ Remainers”; they went and “did that”). Johnson attempted to call for a new election, but the attempt failed. GBP/USD rallied in response. What comes next? Stay tuned…the drama almost certainly isn’t over yet.
  • Yield Curve Inversion: the 1-10 spread rose +10 bp to -16 bp. The yield curve remains inverted, although it improved substantially this week – mainly because of the the US-China trade talk news.
  • Hong Kong: Carrie Lam said she would withdraw the offending extradition bill in early October, as well as adding two more people to an ongoing investigation of police brutality. Protesters have 5 demands: withdraw the bill, stop prosecuting protesters, stop calling them “rioters” (which increases the criminal penalties if prosecuted), an independent police inquiry, and free elections. It appears as though Beijing (via Lam) has finally, after 14 long weeks, said yes to the first item, which is what started the problem in the first place. Will this reduce the size of the protests? I suspect it will. There now. Was that really so hard to do?
  • North Korea: no progress, no missile firings.

US Recession Watch

Here are the economic reports for this week:

  • ISM Mfg Index: headline 49.1, previously 51.2. New orders 47.2, and new export orders 43.3. That’s all recessionary, and things are headed lower – that’s what the “new orders” numbers say.
  • ISM non-Mfg Index: headline 56.4, previously 53.7. Finance, sickcare, education – all continue to do well. Not recessionary – in fact, quite strong.
  • Nonfarm Payrolls: headline +130k (previously 164k), manufacturing +3k, avg hourly earnings +0.4% m/m (4.8% annualized). Headline number well below consensus of 163k. While the headline number looks weak, but ok, the “working part time/slack work” series (LNS12032195) rose +293k; this could be signaling an impending recession.


The potential resumption of US-China trade talks caused a reversal in gold, silver, and the mining shares this week, as well as a rally in equities. Is this simply a mirage, put in place by China attempting to distract the US from Hong Kong, or is this an attempt by China to avert “decoupling”, which would result in millions of manufacturing jobs lost in China, transferred to other countries that are not potential geopolitical rivals? We won’t know for a few months.

In the meantime, US manufacturing continues to weaken, while services remain strong.

China has relented and has allowed Carrie Lam to withdraw the extradition bill. This should reduce the pressure on the HKG/USD peg, and also reduce the chances that things blow up spectacularly. It only took them 14 weeks to figure this out, but they finally did.

We have an ECB meeting next week. A money-printing campaign driving rates even more deeply negative should help gold, in spite of the US-China news. If the ECB coughs up the money printing, this should ensure that gold’s correction will be shallow, especially viewed in Euros.  That’s the theory anyway.

The COT report continues to show a high for gold, while the COT report for silver looks much more ambivalent.

Big bar premiums on both gold and silver are mostly unchanged, and ETF discounts increased. There is no shortage in gold and silver at the moment.

Weekly trends (in order of strength):

Uptrend: platinum, silver, DJI, NDX, SPX, 10-year Treasury, gold/Euros, USDX, crude, bitcoin, miners.

Downtrend: gold.

  • This topic was modified 6 months, 3 weeks ago by davefairtexdavefairtex.
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