PM Daily Market Commentary - 8/25/2014

davefairtex
By davefairtex on Tue, Aug 26, 2014 - 5:04am

Gold closed down -4.80 to 1277.00 on light volume, while silver was off -0.08 to 19.32  on moderately light volume.  While both metals managed to avoid making new cycle lows, it was only by a relatively slim margin.  The metals continue their slow downhill slide on mostly light volume with so far no support in sight. 

Trading today was relatively subdued in gold - it just sort of slid slowly downhill all day long.  Silver tried a modest rally but failed.

I think I will blame the dollar for all the trouble right now in PM.  Today, it was up +0.19 to a new cycle high of 82.58.  Since the FOMC minutes release, the buck is up almost a full point, which I believe has really caused gold and silver a lot of trouble.  If we look at gold priced in euros, we can see gold tracking sideways within a range - right now, gold-in-euros is right at its 50 MA, clearly above its 200 MA and looking undecided about direction, but still relatively positive.  Our gold-in-dollars chart looks significantly more bearish.

If and when we get our long-awaited "dollar collapse" we can expect gold to perform similarly.  Right now, gold is remaining steady while the euro is losing value.  It is "preserving wealth" for the europeans whose currency is dropping.  The flip side is, of course, gold is dropping for us.  But if and when the dollar starts to plummet, gold should rise in price.

Bottom line: currencies matter with gold.  All else being equal, if you expect the dollar to keep rallying, it will probably hurt your gold portfolio - and vice versa.  For all those who think "gold is money" (or the way I think of it: "gold is like a foreign currency") this makes sense.

GDX had troubles today, closing down -1.84% on moderate volume, while GDXJ was off -1.69% on light volume.  About 20% of the GDX loss (10 cents) came in the last 3 minutes of trading, when it sold off really hard into the close.  After market close, however, it erased those losses completely and rose another 10 cents, which I interpret as bullish.  It was an odd finish to the day, leaving me scratching my head a bit over what it means.  How much should I count the bullish after-market action?  I don't know.  I leave you with the daily chart, knowing it is probably less ugly than it looks:

SPX - another new all time closing high today, up +10 to 1998.  SPX moved above the magical 2000 number early in the session, but could not hold those gains into the close.  VIX was actually up on the day, closing at 11.70.  VIX rising on a day when SPX is up 10 points tells me that put buyers are still out there, perhaps imagining that the 2000 level may be the time and place where the long multi-year rally will finally end.  Perhaps it is the romantic in me, but at this point I expect a close above 2000: Financial Entertainment TV needs a magic number to celebrate.

Long term treasuries (TLT) - up again, closing +0.38% also edging closer to a cycle high.  Bonds up, SPX up - dollar assets are your friend right now.

Crude rallied, with Brent up +0.36 to 102.65 - Brent crude is chopping sideways-to-up, trying to form a bottom.  A close above 103 would mark step 1 in a reversal for oil; step 2 is a close above its 20 EMA and/or its downtrend line.  But we are getting ahead of ourselves - right now oil remains weak.

Commodities look quite a bit like oil - trying to make a bottom.  My guess: if they manage to do so, it will probably help silver - and by transference, gold too.  It will all work together: a dropping dollar and SPX, commodities rising, silver rising, pulling gold back up again.

But that still has yet to happen.

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