PM Daily Market Commentary - 8/20/2014

By davefairtex on Wed, Aug 20, 2014 - 10:39pm

Gold closed down -3.70 to 1292.50 on moderately light volume, while silver was up +0.05 to 19.45 on moderately heavy volume.  While silver closed up today, the overall price action today was that of a failed rally; at one point silver was up +0.20 but failed to hold its gains, which I consider generally bearish.  Silver's downtrend remains intact, and gold is now starting to give way as well, having dropped 4 days in a row.

For gold, the majority of the drop came immediately after the release of the FOMC minutes at 1400 EDT, with gold probing as low as 1288.70 before rallying modestly into the close.  It wasn't a massive move, but all moves in gold in the past week seem to be to the downside.  [In early trading in asia, gold has broken down further, touching 1285.20 - it appears that a test of 1280 support is more likely than not.]

The USD screamed higher at the moment of the FOMC minutes release and climbed for the remainder of the day, ending up +0.36 to 82.29 - a big move for the buck.  Money flowed into the dollar possibly because of the increased talk of the Fed raising rates.  When the dollar rises, gold (priced in dollars) tends to fall, all else being equal.

GDX closed mostly flat, down -0.11% on light volume.  GDX is sitting right at its 20 EMA, still looking relatively bullish.  GDXJ was down -0.69% also on light volume, closing below its 50 day MA for the first time since early June.  The junior miners are slowly weakening, and today's move below the 50 MA was not a good sign for PM overall.  Although one day doesn't a trend make especially with volume this light, moving average crossings are a signpost for disciplined traders that should not be ignored.

SPX continued rising, up +5 to 1287 inching up ever closer towards a new all time high.  The Nasdaq has already made new highs, and while the "double top" scenario is still in play for SPX, my guess is we will see a breakout in the days ahead, just based on the strength of the dollar.  Money continues to flow into the US, but this is not a "safe haven" flow - it appears to be based more on expectations of superior economic performance.   After all, the Fed wouldn't be talking about raising rates if US economic performance was terrible, would they?  By comparison, Europe and Japan look pretty weak...and that's why money keeps coming to the US.

Long term treasuries (TLT) dropped -0.16%, performing pretty well all things considered.  Normally rising rates would not be happy news for bond traders, but US long bonds continue to perform well, even when faced with what should be bad news for bonds.  Its probably an interest rate differential story too - the US 10 year yields 2.43% while the German 10 year yields 0.99%.

Crude rallied, with Brent up +0.72 to 102.28 while WTIC was up a much larger +1.82 to 96.40.  We may be seeing a bottom form in crude, although the downtrend lines in crude not been broken so it is still quite early.

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