PM Daily Market Commentary - 7/29/2014

By davefairtex on Tue, Jul 29, 2014 - 6:17pm

Gold closed off -5.40 to 1298.60 on heavy volume, while silver was off -0.01 to 20.61 on moderate volume.   Gold actually rallied strongly into the London trading session until 940 EDT when gold was repeatedly hammered lower until finding support around the 1300 level.

I don't know what caused the move at 0940, but it appears to be some sort of news-related event.  Gold lost $10 in about 25 minutes - not in one single 1-minute stop-gunning assault, but it does look to me that something changed around that time that drove prices lower.  Bloomberg had a lame story which didn't tie in with the price action - sometimes I wonder if reporters ever examine an intraday price chart when they write these pieces.

The USD rose once again, up +0.19 to 81.32,  slightly, off -0.02 to 81.12.  The dollar continues driving higher, making life more difficult for gold, but definitely not the proximate cause for today's drop.  The dollar is driving higher in an almost straight-line move.  This is not just a "weak euro" phenomenon: yes the euro was down -0.22%, but the pound was off -0.23%, canadian dollar -0.48%, aussie dollar -0.23%, and the yen also down -0.23%.  Right now - the dollar is just simply strong.  Pick your storyline as to why the buck has been rising, but the price trend is clear.  And its not particularly positive for gold.

GDX was up initially, but sold off along with gold at 0940, closing down -0.85% on light volume.  GDXJ was hit harder, down -2.34% on moderately heavy volume.  The selling wasn't quite strong enough to overcome the move from yesterday, but it was not an ideal outcome if you are a PM bull, and the down-day volume was definitely higher than yesterday's up-day volume, which is not the best sign.

After yesterday's buy-the-dip event, I expected SPX to continue moving higher.  It tried, it was green in the first hour of trading in NY, but sold off as the day wore on, and dropped steadily into the close, actually ending the day at the low, below its 20 day EMA.  Volume was relatively high, and the failed rally after yesterday's bounce was a disagreeable signal for the bulls, especially on a day where the dollar was rallying.  VIX climbed to +0.72 to 13.28.

Long term treasuries (TLT) continued rising, up +0.36% with another new high for this cycle.  Looks like I should have bought the breakout rather than waiting for the dip - but that's how things go.  Are long bonds telling us anything?  Money flowing into USD is going into treasuries.

Brent crude was up +0.15 to 107.72, still within its trading range of the past two weeks.

Tomorrow at 0830 EDT we have the 2Q GDP estimate release, and then at 1400 EDT we have the FOMC rate decision and outlook.  These are both possible market-moving events; consensus expectations for 2Q GDP is 1.5% - 2.6%.   Three months ago, the econo-geniuses predicted 2.3-4.0% for Q1 GDP, and we saw the (twice revised) -2.9% print even with the silly-low inflation numbers which ended up skewing GDP substantially higher than it otherwise should have been.  "Only missed it by 5.2%."  A dartboard would have done a better job, yet I didn't hear of anyone getting fired for their poor prediction.  I'm left wondering if the last three days of mild sell-off is a reflection of some small amount of worry from traders that 2Q GDP print tomorrow might not come in as rosy as the consensus estimates suggest.



1 Comment

davefairtex's picture
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Joined: Sep 3 2008
Posts: 5740
Q2 GDP +4.0%

Well the surprise today was in the other direction, with Q2 GDP reported at +4.0%.  I'll wait for consumer metrics to dissect it for me, but we certainly didn't get a big move down on the result; e-mini (SPX) futures are now up +9 before market open.

Gold initially wasn't happy, dropping $7 but bounced back 15 minutes later and is back $1300.

Dollar is up significantly (+0.24) to 81.56 - right at a previous high. 

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