PM Daily Market Commentary - 9/17/2014

davefairtex
By davefairtex on Thu, Sep 18, 2014 - 1:21am

Gold closed down -11.50 to 1224.10 on heavy volume; silver was off -0.15 closing at 18.55 on moderate volume.  PM traded sideways up until the FOMC minutes release at 1400 EDT; after an initial spike lower it recovered somewhat, but then steadily sold off into the close.  Gold made new cycle lows on the day, while silver managed to remain above its cycle low.

The drop in gold can be blamed upon the dollar, which spiked dramatically higher immediately at 1400 EDT; following the spike, the buck retreated for a time, and then seemed to decide it really did want to rally and it ended up closing near the highs of the day, up a big +0.53 to 84.75.  The euro, Yen, and AUD were the primary currency victims, with losses ranging from -0.75% in Euro to -1.43% in AUD.

Today as the dollar rallied, gold and silver sold off.  Right now, the correlation is easy to see intraday; traders sell gold when the dollar rallies, its just as simple as that.  These correlations aren't written in stone, they come and go with the changing mood of the marketplace.  Right now however, the correlation is quite strong.

Miners did especially poorly today; GDX was off -2.37% on heavy volume, while GDXJ was down -3.89% on very heavy volume, with the losses in both mining ETFs coming in the last hour or so.  Traders definitely did not want to hang onto miners after FOMC, and that looks bearish to me.  GDX made new cycle lows, while GDXJ dropped substantially but remains above support.  Once again, GDXJ is the best-looking chart in the PM space.

SPX also rose post FOMC, hitting 2010 briefly, but then falling back into the close, ending the day up only +3 to close at 2001.57.  VIX was down slightly on the day, closing at 12.65.

Long term treasuries (TLT) dropped -0.26% today, another new cycle low.  Bonds didn't like the FOMC release, selling off along with PM on much the same intraday trading pattern.

Commodities overall were down just a bit, closing off -0.16%.  WTIC dropped -0.73 to 93.98, Brent was flat at 98.97.

My hope for a PM and commodity rally post FOMC ran aground on the rocks of yet another big dollar breakout.  The strength behind the dollar's move higher is amazing.  Scroll back and look at that chart: since the buck started its move near 80, it hasn't corrected, not once.   It just trades sideways for a time and then breaks out once again.

But we are not seeing rising US asset prices right now, so I conclude we are still in the throes of a risk-off market reaction.  When this ends - or even slows down, I don't know.  But given the current correlations, I believe that as long as the buck keeps rising, gold and silver will continue to suffer.

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