PM Daily Market Commentary - 9/8/2014

davefairtex
By davefairtex on Tue, Sep 9, 2014 - 1:09am

Gold closed down -13.00 on moderate volume, while silver was off -0.17 on light volume.  Once again PM tried to rally but dollar strength proved too much.  Both metals made new cycle lows, gold looking weaker than silver.  Silver did manage to find some support at 19.

Today the reason for the dollar strength wasn't about the euro, it was all about the pound.  GBP/USD was off -1.36%, a huge move, because of the prospects of Scottish Independence continue to improve - which is seen as pound negative.  Every day brings a new reason for the buck to rally; today USD was up +0.60%, another large move.

My hope on Friday that the dollar would soon be topping based on euro capitulation have not been borne out.  As Gilda Radner once said, "if its not one thing, its another."  Based on the current interactions between instruments, I believe gold and especially the mining shares will continue to drop until the buck stops rising.  As to when that happens, I have no idea.  Bank stress tests, the UK turning into Britain, what could be next?

Mining shares sold off hard today, with GDX down -3.51% on heavy volume; GDXJ was down -5.19% on very heavy volume.  The market completely ignored the nice GDX hammer candle from Friday, it made new cycle lows, closed at the low for the day - the whole bearish bit.  Right now there is serious distribution in the miners, and it will probably continue until the dollar shows some signs of slowing down.  Which so far, it hasn't.  Miners really did look quite good right up until they broke support last week.  Support breaks can be pretty unpleasant, as we have seen.

SPX was off -6 on to 2001.54; a modest drop.  So far US equities have just chopped sideways within a range for the past two weeks after hitting 2000.  That's probably bullish.  VIX was up to 12.66, slightly elevated.

Long term treasuries (TLT) were largely flat, closing up +0.04%, still above their 50 MA and still in a bullish trend.

Commodities were down again today, off -0.39%; WTIC dropped below 92 making a new low but then rebounded, printing a hammer candle.  The commodity complex overall continues to look bearish.

With the large rise in the buck and no move higher in US assets, along with dropping commodity prices, its all about risk off right now.  And gold futures contracts, like it or not, are viewed right along with other commodities as risk assets, especially by Managed Money who are the traders who tend to move the market.  So COMEX gold sees more short interest, and longs also liquidate when banks deleverage and/or traders look to pay down dollar debt.

Next support for gold is at 1240; next support for silver is 18.75.  A drop below 1240 for gold would be quite bearish for PM overall.

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1 Comment

Cornelius999's picture
Cornelius999
Status: Gold Member (Offline)
Joined: Oct 17 2008
Posts: 379
Martin Wolf, Ass. Editor and

Martin Wolf, Ass. Editor and Chief Economics correspondent of FT hasn't done gold any favours in his new book, the name of which I already have forgotten.  He says the reinstigation of a gold backed is an impossible fantasy and undesirable.  There's no mention of oil, peak or otherwise, energy, or resources in the index. That might upset the City and make his paper pale !

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