PM Daily Market Commentary - 8/25/2016

davefairtex
By davefairtex on Fri, Aug 26, 2016 - 5:21am

Gold fell -2.10 to 1321.90 on moderately light volume, while silver rose +0.01 to 18.54 -0.30 to 18.53 on moderately heavy volume.  Both gold and silver made new lows, but managed to rebound, with silver doing a bit better than gold.

Gold dropped only modestly after yesterday's big sell-off; the trading range was fairly narrow and the new low wasn't particularly dramatic.  The "spinning top" candle print was not much help in figuring out if we have a low for gold, nor was there any new information from the chart.  Gold is slowly moving towards 1310 support, but at least the velocity has slowed.  One bit of good news is, with a narrow trading range like we had today, that makes printing a swing low a whole lot easier tomorrow.

Chair Yellen is scheduled to speak tomorrow at the Central Banker-fest at Jackson Hole at 10:00 Eastern.  I'm guessing that's when the text of her speech will be released.  What she says will likely affect both the USD, and gold.

Gold open interest fell by -6,817 contracts today.

Silver made a new low, but managed to rally just barely back into the green, printing a bullish harami candle pattern - although it wasn't all that bullish (17-30%).  Silver traded in a fairly narrow range today.  Its hard to know if this marks the low for silver; silver is oversold, but the chart for copper isn't looking particularly bullish right now.  Perhaps silver too is waiting on Yellen.

Miners managed to recover somewhat, with GDX up +1.26% on moderately heavy volume, while GDXJ rose +3.15% on very heavy volume.  Candle print was just a "spinning top", but my code really likes it in this instance, giving it a 32-47% chance of marking a low.  Its a rare spinning top that looks this strong.  GDXJ actually printed a "bullish harami" which my code also rates as fairly bullish.  Miners once again look best of the PM complex.

Platinum fell -0.48% making a new low, palladium rose +0.44%, and copper dropped -0.10%, also making a new low.  Things are slightly improved over yesterday - at least velocity seems to have slowed down somewhat.

The USD was unchanged at 94.71, printing a doji on the day.  The buck traded in a narrow range ahead of Chair Yellen's speech tomorrow at Jackson Hole.  I'm guessing it will pick a direction after 10:00 Eastern, the time the speech is released.

Crude managed to rise today, up +0.58 [+1.24%] to 47.38, managing to rebound after yesterday's drop that was driven by a semi-bearish petroleum status report.  While the candle pattern wasn't anything particularly exciting, I take comfort from the lack of follow-through off the bearish status report.  Normally, a bad report results in several days of selling, but that didn't happen this time.  It seems that that bullish indications from Iran + IEA "worldwide inventory draw" is trumping the somewhat bearish weekly status report.

SPX fell -2.97 to 2172.47, trading in a fairly narrow range on the day.  Sickcare continued to plunge (XLV:-0.84%) leading the market lower.  Its probably too much to expect that the jig might be up for Price Gouging Pharma Cartel, but traders definitely do seem to be worried at least for now.  VIX rose +0.18 to 13.63.

TLT fell -0.38%; still within the trading range, still moving sideways.

JNK rose +0.05%, also still moving sideways, quite near the top.

CRB rose +0.27%, with only energy in the green today.

We could get our PM trend change today, if Chair Yellen sounds dovish at Jackson Hole.   Certainly, silver and the miners are oversold and ready to bounce, while gold may be oversold "enough".  The other scenario is a hawkish-sounding Yellen who talks up a rate rise in September.  This would send the dollar racing higher, and - probably - gold clean through 1310 support, as well as driving the miners and silver to new lows.

Most likely this would also lead to a sell-off in US equities.  They do appear prepared to sell off, and the VIX has been bid up in anticipation.

I'm betting (have already bet) she won't do this just two months before Hillary is scheduled to be given the keys to 1600 Pennsylvania by our central planners, but...its a gamble for sure.  CME Fedwatch has the chances of a September rate hike at 21%.  That provides some amount of fuel for a reversal if she sounds dovish.

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6 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
Yellen Speech - strongly PM & crude positive

The much-awaited speech by Chair Yellen initially resulted in a strong dollar rally, up +0.50, which caused gold, silver, and crude to tank hard.

But once the speech was actually digested by traders, direction flipped about two minutes later, and the market reversed.  Buck is now red, oil up +0.64, gold up +20, silver up +0.52. and SPX up +12.

Its a strong move, and it looks like the shorts are scrambling to cover.

Miners are green, with GDX +3.26%.

 

dryam2000's picture
dryam2000
Status: Gold Member (Offline)
Joined: Sep 6 2009
Posts: 293
Not so quick

The Fed didn't get the initial reaction they desired.  So, they immediately march out Fed goon Fischer to "clarify" Fellon's speech which happened to be prepared with the utmost careful & thoughtful precision.  Alas, the Fed now has manipulated a very different reaction.

When the almighty Ponzi is at stake one must do what one must do.  There absolutely will not be a rate hike in September.  It's going the be the thickest smoke and most distorted mirrors by TPTB until at least the election.   

The Fed has painted themselves in a corner.  The are damned if they do and damned if they don't. So, their policy is going to attempt to be all things to all people by empty jawboning and never actually "doing" anything.  Should be fun to watch to say the least.

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5683
spoke too soon

And it turns out the market flipped again.  Buck is rallying relentlessly (DX +0.68), and it looks as though SPX is tipping over.  It broke below its recent consolidation area; if it closes here, it could get ugly next week.

FWIW I bailed out on the miners I bought yesterday - before my modest gains all evaporated.  That strong dollar is not something I want to fight.  If the dollar rally continues, miners move lower.

Anything with an interest rate is selling off too - utilities, REITs, etc.

I myself think the chances of a rate rise in September are zero - but unfortunately the market isn't paying much attention to my viewpoint; fedwatch has them at a big 36%. The big jump in the rate rise expectations explains the big dollar rally, and gold's retracement.

Currently, the FOMC still has credibility.  Regardless of how many times they've decided not to raise, the market still believes it might.

Will the dollar rally have legs?  That will probably determine if gold and silver sink further.  PM is holding up fairly well, all things considered.

 

 

Mark Cochrane's picture
Mark Cochrane
Status: Diamond Member (Offline)
Joined: May 24 2011
Posts: 1227
How to speak algorithm

In sum the Fed said absolutely nothing today which is exactly what they wanted to say without appearing completely mute. Does anyone or anything biological actually evaluate anything anymore? Baiting algorithms with strategically placed and timed buzzwords seems to be all the rage. Just look at oil price swings to see a prime example if Fed-speak isn't enough. No critical thought needed just chase the headlines...

Edwardelinski's picture
Edwardelinski
Status: Gold Member (Offline)
Joined: Dec 23 2012
Posts: 338
Venezuela signs 5.5 billion mining deal:

Reuters reporting both Barrick and Shandung are in the mix.Looks like they are selling every natural resource they have.China has been there every step of the way scooping it all up.All said and done it looks to be worth in the neighborhood of 20 billion.Barrick has no comment....

reflector's picture
reflector
Status: Gold Member (Offline)
Joined: Aug 20 2011
Posts: 279
falling silver premiums?

i am always on the hunt for lowest silver premium for my monthly buy.

it seemed like last year the best one could hope for was spot + .39-.49 cents.

over the last few months i've been seeing many deals at .39 over spot, like at sd bullion.

now, pinehurst coin exchange has 1 oz rounds on sale for .29 over spot, i've never seen silver retail for that close to spot before:

http://www.ebay.com/itm/Daily-Deal-Lot-of-100-1-Troy-oz-Silver-Round-999...

another silver dealer who posts at zerohedge tells me that larger bars 100oz-1000oz are getting real hard to move, he won't buy them unless he can get them for cheap, less than $1 *under* spot.

all anecdotal, i know, but my impression is that there's not a lot of silver buying going on lately and premiums are dropping. maybe we've gotten too used to being able to buy silver in the $15-ish range, now that it's close to $20 it seems less of a deal.

i still view buying an ounce of silver like buying a $100 bond for $20 though, just have to wait a bit for it to mature

 

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