PM Daily Market Commentary - 8/4/2016

By davefairtex on Fri, Aug 5, 2016 - 4:51am

Gold rose +2.70 to 1362.40 on moderately light volume, while silver fell -0.06 to 20.38 on moderate volume.  Both metals sold off in Asia trading, only to bounce right back immediately after the BOE announced they were cutting rates and engaging in a new QE program in an attempt to counteract a slowdown in the UK following the BRExit vote.

In gold today, we see a relatively bullish "high wave" candle print that looks like a cross between a doji and a hammer.  I think the important part was the lower shadow, which shows that prices were driven down to the support of the 9 EMA following through off yesterday's sell-off.  That is where the buyers showed up; the support for gold happened well prior to the BOE announcement.  Then, the new round of money printing announced by BOE caused prices to jump back into the green.

There always seems to be some new event that is bullish for PM.  Rates only ever move lower, money printing only ever increases.  There is no one earth-shattering event, but rather its the death of a thousand cuts, and as a result gold remains in an uptrend.  Our six year "expansion" is long in the tooth, central banks are out of your choices are either a 20 year treasury @ 1.84% or gold.  (Or the flock of negative-yielding sovereign bonds from other nations that involve you having to own Euros or Yen.  Such joy).

Gold open interest increased by +88 contracts today.

Silver underperformed gold again today - after suffering the bearish engulfing yesterday, silver plunged through its 9 EMA, only managing to close back above it because of the BOE announcement.  Today's candle print is a "high wave", like gold, but silver is definitely looking a bit weaker.  Silver also printed a swing high today - at least with my data anyway.  That's mildly alarming.  Possibly copper's drop today had some effect on silver.   The reason I always talk about copper and silver together is that over the long haul, they are well correlated.  However, that influence has waned recently because silver and gold are even more tightly coupled; gold beats copper in the tug-of-war over silver's price, but copper still retains an influence.  Or so it seems to me.

Both miner ETFs rallied modestly today, with GDX up +0.94% on moderately light volume, and GDXJ up +1.39% on moderate volume.  Yesterday's swing high didn't seem to lead to much of anything.  Today's spinning top candle (which looks a bit like a shooting star, but is too short to qualify) doesn't tell us much about direction.  Until that uptrend line is broken (and or the 9 EMA is crossed), miners remain in an uptrend.

Platinum fell -0.39%, palladium dropped -1.10%, and copper lost -1.11.  Copper continues to fall, making a new low today.  Copper peaked three weeks ago and has now resumed its downtrend.

The USD continued moving higher today, up +0.19 to 95.72, managing to close back above its 50 MA.  Mostly this was because of the pound (XBP:-1.60%) and the Euro (XEU:-0.19%), the pound dropping hard because of the rate drop and the money printing announced by the BOE today.

WTIC rallied again, up +0.64 [+1.55%] to 41.81, managing to close back above its 9 EMA.  Crude printed a two-candle swing low pattern today which my code generally liked: 43-61% chance of marking a low.  Why is oil apparently putting in a low with all the talk of "gluts being back" and so forth?  I have no idea.  I try to avoid the talk, and watch the prices instead - on FETV, you know they are lying to you when their lips are moving.  We aren't guaranteed a rebound here, but we've seen two positive signposts: a swing low, and an MA crossing, plus the rally off the petroleum status report.  Oil helps silver, more often than not.

SPX rose just +0.46 to 2164.25, printing a very boring spinning top candle which provides us no clues at all.   In spite of oil's rally, energy equities sold off slightly.  VIX fell -0.44 to 12.42.

TLT jumped +0.75%, moving back above its 9 EMA.  Perhaps I jumped the gun on calling for a decline in bonds?

JNK rallied +0.67%, jumping back above its 9 EMA and apparently resuming its uptrend.  The two week correction in junk debt appears to be over.  Risk on.

CRB followed oil, closing up +0.87% and jumping back above its 9 EMA.  Like oil, CRB also printed a swing low.  If we can get a low in commodities, that should help silver.

These days, its always something that helps PM - if its not one thing, its another.  Today it was the BOE printing more money and dropping rates.  Tomorrow?  Interestingly enough, we have the Nonfarm Payrolls report coming at 08:30 tomorrow morning.  I guess I buried the lead there.   Do we expect great news from Payrolls?  I'd say, probably not.  That's likely gold positive.  Of course, payrolls could surprise, so be prepared for prices to bounce around.  The last time I was cocky going into payrolls it led to some short term pain...

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1 Comment

davefairtex's picture
Status: Diamond Member (Offline)
Joined: Sep 3 2008
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Nonfarm Payrolls: +255k

At first glance it appears to be a good report.  Especially noted was the average hourly earnings, which gained +0.03% - annualized that's almost a 4% gain.  That's happy news.

Predictably, this caused the buck to scream higher - right now it is up +0.60 to 96.18.

And equally predictably, gold was hammered; the lowest point was a $20 loss (1347) - now it is hovering around $1353.  Good news = bad news for gold.

If the buck holds onto its gains, likely gold will also retain its losses, at least for now.

Both gold and silver are through their 9 EMA lines as of this moment.


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