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Job numbers hurting gold, helping the US Dollar

Cory
August 4, 2017

The job numbers today beat estimates and the markets are taking note. Doc is with me again to outline why he thinks the metals are in for a downturn and the dollar could continue its bounce from today.

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Discussion
88 Comments
    Aug 04, 2017 04:40 AM

    $indu:$gold off to the races as I suspected.

    GLD:SLV ratio is in a new bull market. That does not bode well for miners or PMS. The monthly charts looks bullish as can be.

    http://stockcharts.com/h-sc/ui?s=GLD%3ASLV&p=M&b=5&g=0&id=p62419149863&a=538011969&listNum=1

    2016 looks like it was nothing more than a test of the trendline (i.e., a correction) in an ongoing bear market in commodities and PMs.

    Aug 04, 2017 04:50 AM

    Fake job numbers hurt those who believe them.

      BDC
      Aug 04, 2017 04:25 AM

      If so, they tell which way the boyz want to go!

    Aug 04, 2017 04:55 AM

    Hi Doc, How low do your charts tell you AG can go? I am tempted to buy now, but things usually get a lot worse than I think. I couldn’t believe RGLD 2 years ago when it fell from 100 to 25, but now its up to 86. AG could have a similar recovery in 2 years.

      Aug 04, 2017 04:56 AM

      AG is selling off due to a bad revised 2017 guidance and the market didn’t like it. That’s what happened to EXK yesterday.

      It isn’t helping that the vast majority of the silver miners are getting trounced today.

        Aug 04, 2017 04:59 AM

        First Majestic Reports Second Quarter Financial Results
        August 3, 2017

        SECOND QUARTER 2017 HIGHLIGHTS
        (compared to First Quarter 2017)

        – Silver equivalent production decreased 9% to 3.9 million ounces
        – Silver production decreased 16% to 2.3 million ounces
        – All-in sustaining costs (“AISC”) increased 19% to $14.58 per payable silver ounce
        – Revenues decreased 13% to $60.1 million
        – Realized average silver price decreased 2% to $17.17 per ounce
        – Mine operating earnings decreased 86% to $1.4 million
        – Cash flow per share was $0.11 per share (non-GAAP), a decrease of 32% from the prior quarter
        – Cash costs increased 11% to $7.41 per payable silver ounce (net of by-product credits)
        – Net earnings of $1.4 million (Basic EPS of $0.01)
        – Adjusted net loss, excluding non-cash and non-recurring items, totaled $3.6 million (Adjusted loss per share of $0.02)
        – Strong treasury with cash and cash equivalents totaling $126.9 million at the end of the quarter

        “Our second quarter results were unfortunately burdened by a number of labour issues which have since been resolved,” stated Keith Neumeyer, President and CEO of First Majestic. “While weaker revenues and cash flows were realized as a result of these work stoppages and a strengthening Mexican Peso, our treasury remained relatively unchanged at a very healthy $126.9 million. Due to this unexpected weakness in cash flows, as a conservative measure, management has decided to reduce capital expenditures by $17.5 million for the year.”

        “Our focus in the second half of 2017 remains to be the construction of the new roaster system at our La Encantada mine which is on schedule for commissioning in the first quarter of 2018 as well as the renewed investments in underground development which has been lacking over the past few years. This increase in underground development, which started in mid-2016, will have a direct impact on improving production, however, the positive impacts of these types of investments are generally delayed by 12 to 24 months.”

        https://www.firstmajestic.com/news/2017/index.php?content_id=330

          Aug 04, 2017 04:02 AM

          The Company is projecting its 2017 AISC, as defined by the World Gold Council , to be within a range of $14.40 to $15.50 consolidated on a per payable silver ounce basis, compared to the previous guidance of $11.96 to $12.88.

    Aug 04, 2017 04:33 AM

    Most of the people in this sector (PM stocks) think of themselves as contrarians, yet if all of them are on the sidelines, it sounds to me like they’re waiting to become part of a herd, all buying in at the same time……….Does that really jive? JMO

      Aug 04, 2017 04:44 AM

      That’s a good point that gets complicated when we look at time frames. One could be a great contrarian from a long term perspective but a terrible sheep from a short term one — or vice versa. I think we’ve all been there and probably many times.

      The lynch pin of the sector is gold and it is holding up better than everything else…

      http://stockcharts.com/h-sc/ui?s=GLD&p=D&b=5&g=0&id=p22743927669

        Aug 04, 2017 04:53 AM

        Silver is the tell though, as is GDXJ. Both look terrible on basically every single timeframe out to the monthly charts (silver much more so).

        Once GDXJ breaks catastrophically below the 200 WMA, its bombs away. I admit though it may take a little bit of effort to finally kill off the last goldbug clinging to hope, but not too much effort.

          Aug 04, 2017 04:08 PM

          Aside from the iffy short term, things look great. So hope doesn’t play a role for me.
          Silver looks fine even though it lacks strength at the moment.

          http://stockcharts.com/h-sc/ui?s=%24SILVER&p=W&yr=3&mn=9&dy=11&id=p84039671490&a=500464214

            Aug 04, 2017 04:30 PM

            Silver looks terrible on the weekly chart. All key MAs are now in perfect bearish alignment. It couldn’t even manage to close above the 10 week EMA, indicating there is plenty more pain to come by month end.

            Aug 04, 2017 04:34 PM

            Also, a hell of a lot of damage can be done in the short run. You can’t deny the criticality of maintaining some of the trendlines. Once they are breached, the fall could be dramatic and the ensuing basing could (and will) take years to digest.

            Aug 04, 2017 04:45 PM

            I can’t come close to counting the number of trendline breaks that amounted to nothing more than shakeouts/fakeouts. They CAN matter a great deal but there’s usually more to the picture than just trendlines.

            Notice that gold would have to fall a long way to threaten its support:

            http://stockcharts.com/h-sc/ui?s=%24SILVER&p=W&yr=3&mn=9&dy=11&id=p84039671490&a=500464214

            BDC
            Aug 04, 2017 04:03 PM

            There are three primary elements to this: Price – Volume – Trend.
            Of course Trendlines are important!

            Aug 04, 2017 04:40 PM

            Trendlines are much more important to some than others. I am more interested in horizontal support/resistance levels. I look at the chart like a football field and am more likely to sell an upside breakout or buy a downside breakout since I sell strength and buy weakness.

            Tad
            Aug 04, 2017 04:28 PM

            To those of us holding since ’15 with some dry powder left it doesn’t matter that much. We’ll just double-up in a month or so if it breaks down into the $14s again. It’s a long game. It’s less stressful than day trading Apple et al, or watching it earn 0.01% in the bank.

            Aug 04, 2017 04:07 PM

            I enjoyed this trend-lines discussion and see them as a helpful tool, but not any more reliable than other tools like Fib retracements, moving averages, or watching candlestick action. It all has value, and it is when multiple chart patterns and indicators all line up that I put more weighting on a turn taking place or a trend to extend further.

    Aug 04, 2017 04:37 AM

    The dollar has been falling since the first week of the year and even took out the 200 week MA while becoming oversold on the weekly chart for the first time in 6 years. This was a perfect spot for a bounce regardless of the job numbers.

    I don’t know how high this bounce will go but I don’t believe the fall is over.

    http://stockcharts.com/h-sc/ui?s=UUP&p=W&b=5&g=0&id=p46401068583

    Aug 04, 2017 04:49 AM

    Looks like silver:gold is cooked to me:

    http://stockcharts.com/h-sc/ui?s=SLV%3AGLD&p=W&b=5&g=0&id=p95365230851&a=538021689&listNum=1

    All of the weekly MAs to be in bearish alignment soon. The 2016 bounce has been almost entirely wiped out and slv is ready to make new lows against gold.

      Aug 04, 2017 04:55 AM

      Huge outside week down too in slv:gld.

    Aug 04, 2017 04:49 AM

    Just finished listening to Craig Hemke on yesterday’s page. He and Cory were seeing lots of positive things if weekly closes on Gold and the USD were to end the week within their present (then) trends.
    Strange to me how everything automatically reversed today, supposedly because of a bunch of bartenders/waiters getting hired last week?? Gimme a break.

      Aug 04, 2017 04:22 PM

      The Fed will be shrinking its balance sheet in September. Yen is going to get smashed. The FOMC day to now was nothing but a pump and dump in the metals. Zero reason to get long on FOMC days. These rallies are never sustainable.

      You tell me why silver and gold should rally, The Fed is shrinking its balance sheet in September, yen and commodities are in well defined bear markets, the BoJ and ECB haven’t tightened at all…. Did I miss anything?

    Aug 04, 2017 04:52 AM

    Gold stalled at significant fork resistance this week:

    http://stockcharts.com/h-sc/ui?s=GLD&p=W&yr=3&mn=3&dy=22&id=p01188558436&a=534907616

      Aug 04, 2017 04:55 AM
        Aug 04, 2017 04:02 PM

        There is absolutely zero reason to be long until this ratio regains the the 50 DMA, at a minimum. Its 100% safe to short the crap out of miners here.

          Aug 04, 2017 04:11 PM

          Funny, I post a weekly chart and you counter with a daily one. Sorry, I won’t be trading my apple for your orange.

            Aug 04, 2017 04:24 PM

            The chart speak for itself. Miners are a crystal clear short right here unless and until that trendline is immediately regained.

            Aug 04, 2017 04:40 PM

            Yes, and the chart I posted speaks for itself. Your short term focus has nothing to do with my long term focus.

            Aug 04, 2017 04:42 PM

            And a long term focus anything shorter than a few years isn’t going to take away the damage done to EXK and AG this week. There was no miracle 2016 reversal this time. It will be YEARS before I recover from these losses, if ever.

            Aug 04, 2017 04:23 PM

            I don’t own those companies but I am confident you will be fine in months not years.

            EXK:

            http://stockcharts.com/h-sc/ui?s=EXK&p=D&yr=1&mn=1&dy=22&id=p64086439885&a=538037431

            Aug 04, 2017 04:37 PM

            At least the EXK monthly chart is now looking “balanced”. I think GDX and GDXJ will do something similar in time to “balance” out there monthly charts too.

            The correction after run up in 2016 came down too far and too fast to result in anything less IMO. GDX and GDXJ are going down deeply for at least this month or next. Not to mention the stochastics which still haven’t reached over sold. They most definitely will though before this is over.

            Aug 04, 2017 04:56 PM

            Good chat guys. I just picked up some $EXK into the carnage and have averaged down to a cost basis around $2.46 now. This is one of my newer Silver positions and I was in and out of it for quick trades in the past, but I believe this current pricing today looks like a good place to start accumulating a longer term position in Endeavour Silver. They have 3 producing mines, and 3 more Development projects in their pipelines, If things go well, they’ll have their 4th mine in production in 2018. If investors believe Silver will at least make it back up to $18-$20 then $EXK $EDR will do just fine in the next 6-12 months.

          GH
          Aug 04, 2017 04:54 PM

          “Its 100% safe” — Wow. You’ve been expressing unrealistic levels of certainty a lot lately, but this one takes the cake.

            GH
            Aug 04, 2017 04:55 PM

            And yet you’re long? Strange approach.

          Aug 04, 2017 04:16 PM

          By the time silver makes it back to $21, Endeavor won’t have any silver left to mine,

            Aug 04, 2017 04:17 PM

            Endeavour Silver won’t have an Silver left in 2018? Hmmmm………

    CFS
    Aug 04, 2017 04:11 PM

    It’s getting hotter downunder.
    https://www.youtube.com/watch?v=qjqTxziiY9A
    Or is it?

    Aug 04, 2017 04:41 PM

    My positions in AG and EXK have been utterly decimated the last 2 days (yeah I know, buy more!!!!). Now we just need AXU to catch down and the trinity will be complete.

    The thing is, I saw this coming from a mile away but held out hope that my overriding fear was a contrarian indicator. Well it sure as hell wasn’t.

      Aug 04, 2017 04:07 PM

      Spanky, I own all those too. Fear not. They are good companies and will soar when silver goes up one day. And perhaps my NSRPF will take me to the Emerald City by itself.
      ‘d like more AG and MUX and RPMGF.

        Aug 04, 2017 04:20 PM

        Bonzo Barzini good thoughts. I’ve been adding more Rye Patch lately, as they’ll continue ramping up Florida Canyon into a better seasonal trend in the metals this fall.

      Aug 04, 2017 04:10 PM

      I’ve been discussing $AG and $EXK over at ceo.ca most of the day. Their press releases hit at a bad time for both companies, but I averaged down hard in $EXK Endeavour today and have a cost basis not much above where things closed today, so I’m constructive moving forward.

    Aug 04, 2017 04:51 PM

    Hi : No president can really claim much credit for job creation or stock market rise or fall. the FED has low interest rates THAT is what makes Stocks rise. Now they are slowly moving short term rates up which at some point will cause a down market. I more and more think pence may refuse to accept Presidency which will pass it to speaker Ryan . That would be smart on pences part. he still will be vice PRES . Its an option. My prediction that Trumpet will resign or be impeached by years end. Hes attcking REPUBS as much as DEMS now, so they dont need him. Pray for sanity. Scott

    Tom
    Aug 04, 2017 04:07 PM

    EGO mkt cap now almost equivalent to their cash in the bank! 5 star rating at Morningstar!

      Aug 04, 2017 04:25 PM

      That’s why I give most of those rating services, like Morningstar, very little attention of the mining sector. They do better in Bluechip stocks that are less volatile, and they don’t even know how to handle illiquid stocks or most commodity-based stocks. Some of the larger commodity conglomerates may work for them, but the smaller producers, developers, explorers, or prospect generators don’t always go according to their report cards.

      Aug 04, 2017 04:31 PM

      This was posted earlier this week regarding the lackluster results from EGO:
      ____________________________________________________________

      3 Reasons Why Eldorado Gold Isn’t Panning Out
      By: Johanna Bennett – July 31, 2017

      “This Credit Suisse analyst has turned bearish on Eldorado Gold, downgrading the mining company for a second time in roughly a month. Here’s why….”

      http://www.barrons.com/articles/3-reasons-why-eldorado-gold-isnt-panning-out-1501507796

        Aug 04, 2017 04:41 PM

        Before buying EGO or any other mines in Greece, you should see “Zorba the Greek” or read the book and beware!

          Aug 04, 2017 04:46 PM

          I’m not buying (EGO) Eldorado Gold and have never held a positions. I don’t have hardly exposure to Greece and feel it’s a bit of a mess. Honestly, I’d like to make money speculating on other miners and then just buy a Greek island somewhere. 🙂

            Aug 07, 2017 07:55 AM

            Your island may be overrun with muslim boat people.

    Aug 04, 2017 04:08 PM

    I’ll pray for your sanity.

    It looks like $XEU is about to get clobbered, which could mean the EU and euro experiment is coming close to its end. I hope the disasterous / seditious Russia sanctions bill that congress passed comes back to haunt those time waisting morons. The contagion from Europe can include all world markets. And I hope the blame of it goes squarely on the Russia sanctions bill.

    Aug 04, 2017 04:47 PM

    IPT needs to close next week at .32 or higher to avoid setting up a move into the low .20s…

    http://stockcharts.com/h-sc/ui?s=IPT.V&p=W&yr=2&mn=11&dy=0&id=p09568462326&a=527962532

      Aug 04, 2017 04:53 PM

      There is nothing but air under IPT on the monthly chart. First target is the lower BB.

        Aug 04, 2017 04:49 PM

        That’s a spooky thought spanky.

          Aug 04, 2017 04:19 PM

          IPT (and EXK) fell precisely to fork support today. That’s not exactly nothing but air.

      Aug 04, 2017 04:00 PM

      It’s been down 7 months in a row. That is not bull market action, or at least imminent bull market action.

      I admit that on the weekly chart, its stochastics have been horribly oversold for 3 months now. They can of course stay oversold for even longer than that. Reminds me of 2013. The weekly MAs are wrecked, especially the 50 WMA. I don’t think it will breach that MA again for years.

    Aug 04, 2017 04:06 PM

    BDC:
    +1

    Aug 04, 2017 04:20 PM

    Meanwhile, platinum held up nicely today and it’s now less than $300 under the gold price for the first time in a while.

      BDC
      Aug 04, 2017 04:47 PM

      It could be that some of the auto industry is retooling for a switch back to platinum, among other factors.

    Aug 04, 2017 04:56 PM

    Some good points Spanky throughout. Im a PMs bull based on long term fundamentals but freely admit they remain in a long term bearmarket right now. That was a typical waterfall decline in the PMs, especially silver. Lets see how they go next week.

      Aug 04, 2017 04:10 PM

      That’s funny, I freely admit that PMs are in a new cyclical bull within a secular bull.

      Adam Hamilton gets it: “We’re interested in bull-market seasonality, because gold remains in its young bull today and bear-market action is quite dissimilar.”

      http://www.321gold.com/editorials/hamilton/hamilton080417.html

        Aug 04, 2017 04:22 PM

        Matthew..that 3 alarm fire has destroyed the building..time to go back to the firehouse and wait for the next alarm. It will be years before that building is reconstructed.

          Aug 04, 2017 04:21 PM

          That’s ridiculous, Gator. Did you happen to notice that GOEX is still 22% above its December low and well over 100% above its 2016 low?

        Aug 04, 2017 04:16 PM

        Hamilton was pumping gold stocks all the way down to the bottom, so his opinion for me at least is close to worthless.

        The gold stocks may not break the 2016 lows, so I guess that counts as a bull market in your eyes, but at least acknowledge some risk to your moonshot thesis. Your Impact is down what, 80%. “Tis but a scratch.” https://www.youtube.com/watch?v=RG1P8MQS1cU

          Aug 04, 2017 04:59 PM

          I’m not a subscriber of his but pumping is not what I got from his public articles. I think you’re pretty quick with your assumptions and loose with your interpretations.

          My Impact is down 73% from last year’s high (after a 1,000% move!). I sold over 70% of my position above one dollar so I don’t feel anything but good buying the current weakness. My stake is far bigger now than it was at 11 cents (after I had increased it nearly 7-fold in 2015).

          You shouldn’t be playing with this sector at all if you expect lottery gains but Dow-type pullbacks/volatility. That’s not the real world. The fact is, the vast majority will never win big consistently because they don’t do the work to understand what they are looking technically or fundamentally. It is easier to sell right if you buy right and most never buy right.

            Aug 05, 2017 05:26 AM

            Great comments Matthew.

            Agreed on Adam Hamilton (he is cautious from time to time and has warned of some pullbacks, but tends to stay on the bullish side of the fence to be fair).

            Volatile stocks like the Jr Silver Miners (Impact in your example above, but it is the same for Excellon, Santacruz, Alexco, Aurcana, Avino, Great Panther, etc…) are not going to be mild on their downside corrections. That is precisely why they can have such out-sized runs to the upside.

            Lastly, most speculators definitely do not by right, as you mentioned. When the stocks really start pulling back strong, losing investors sell their stocks on the cheap, and wise investors are mopping them up. When stocks really start to run 50-200% then investors start considering them, and when they surge even higher, then they jump on the bandwagon buying into the last part of the impulse leg up. I’m an early trimmer, so I likely am selling them their shares on the final push, but my profits are already booked, and while my weakness is leaving some on the table, my strength has always been buying when a stock or sector is out of favor (or even despised).

            The issue is it goes against momentum traders “feelings” because during those times the sentiment is in the toilet and they don’t want to be part of it. However, if a company looked attractive to investors last summer in the blow-off froth, it makes no sense to me why they struggle so much to buy that company back if it pulls back 50-70%??? It’s the same company, same assets, same jurisdiction, same team, etc…. the only thing that changed is that it is a far better place to acquire it.

            Maybe once these mining stocks run another 150% or 250% then the masses will say, you know what I need to own that. 🙂

            Look at what happened with Novo Resources lately. Jay Taylor, Bob Moriarty, Big Al & Cory, the Stateside Report, and many of us here on the KER were very enthusiastic about what they could have as far as a discovery (nobody cared because it had sold off so bad).

            …. Then the videos of some guys with a metal detector come out, and the stock really surges. Then John Kaiser comments on it, and more newsletter writers start gawking and the stock surges even higher. I sold during this phase, but was amazed at how many more retail investors decided to jump in AFTER the stock was up 150% (WTF??).

            That is how the whole mining sector was by last summer. I started selling a bit early in June – July, and had mostly trimmed back my positions when August rolled around, but I read many comments of all kinds of retail investors over at Ceo.ca and Seeking Alpha finally ready to deploy last July/August, so I can only assume they are now jaded bag-holders.

            Buying early when stocks are trashed and for me if they’ve pulled back to a key moving average, Fib retracement, or prior peak/trough is the easiest thing to do. The hardest thing is having the conviction to keep holding when everyone is screaming about $900 or $600 gold and $10 silver. 😉

          Aug 05, 2017 05:07 AM

          One more thing. Silver bottomed last month at roughly 5% above its bear market low while IPT has still not gone below triple its bear market low. If silver’s future is so dark, IPT should not be so holding up so relatively well. Markets are forward-looking, remember?

    Aug 04, 2017 04:22 PM

    The only reason I state that its in a bear market Matthew is because it still hasnt broken the downtrend that kicked into gear in April 2013. Am not an expert, just my opinion.

    Charts, tables, graphs, info etc are all a matter of interpretation on an individual level i guess. Ultimately we can all validate our opinions from whichever perspective suits.

    Always appreciate both sides of an argument on this site.

    Aug 04, 2017 04:53 PM

    Gold thoroughly tested its steeply rising 600 week MA at the end of 2015. That was the first test of that MA in almost 13 years and it was tested again at the end of 2016.

    If you can’t buy gold on what is roughly a 12 year MA, when CAN you buy?

    http://stockcharts.com/h-sc/ui?s=%24GOLD&p=W&yr=6&mn=3&dy=22&id=p73383904719&a=423222946

    Aug 04, 2017 04:00 PM
    Aug 04, 2017 04:02 PM

    There’s just not much cause for concern right here…

    http://stockcharts.com/h-sc/ui?s=%24GOLD&p=W&yr=4&mn=6&dy=0&id=p17078053002&a=429037531