PM Daily Market Commentary - 6/1/2015

davefairtex
By davefairtex on Tue, Jun 2, 2015 - 3:50am

Gold fell -1.20 to 1189.20 on heavy volume, while silver rose +0.03 to 16.74 on very heavy volume.  Both gold and silver rallied strongly after the Personal Income report was released 08:30 EDT, but the PM rally failed over the next several hours as both gold and silver sold off right back to their starting positions.

Today's actions all seemed to be about tea-leaf-reading regarding a Fed rate rise.  Increased prospects lead to a rise in the dollar, and selling in PM.  Decreased prospects lead to buying PM and selling the buck.

Failed rallies on high volume - what we saw today - are usually a sign of a decline to come.  While gold's chart looks relatively disagreeable, silver's failed rally was even larger.

Miners rallied initially on gold's rally only to sell off as gold retreated.  GDX closed down -0.46% on light volume, while GDXJ lost -0.36% on very light volume.  Senior miners remain below their 50 MA, which to me means they are still in a danger zone.  Moving averages tend to act as resistance in cases like this; shorts use moving averages as entry points for selling.  You can see in the chart below how GDX has been unable to close above the 50 MA for 3 days in a row.  I half-expect to see a big sell off in GDX in the next few days.

The buck climbed +0.49 to 97.47 - first selling off on the poor Personal Income data, and then rocketing higher on the mildly positive ISM Manufacturing Index report.  Its all about the Fed and the possibly upcoming rate raise.

The dollar was not able to make a new high, but it is consolidating above its 50 MA, which looks bullish to me.

SPX (US equities) ended up +4.34 to 2111.73, attempting a late-day rally only to sell off near the close.  VIX rose +0.13 to 13.97.  SPX looks to be slowly moving lower off its highs, but it needs a close below 2100 to  start the ball rolling downhill more seriously.

Bond ETF TLT sold off, dropping -1.07% on the day.  Bonds are still trying to recover from their late-April correction, but it has been a choppy rebound.

The CRB (commodity index) rose +0.13%, just managing to creep back above its 50 MA.  It was a decent performance for commodities on a dollar rally day.

WTIC (west texas crude) was largely unchanged, rising +0.01 to 60.24 - also a reasonably strong performance given the dollar rally today.  Buyers appear willing to buy dips right now in oil.

Gold and silver appear not quite ready for prime time at the moment.  When a strong rally ends up failing, its a bad sign, and it usually leads to lower prices.  Unless a catalyst appears, the unfortunate-looking charts combined with a potentially strengthening dollar (based on perceived prospects of a Fed rate increase) will probably cause further selling to occur in PM.

Of course once the rate raise appears, it might end up being a "sell the news" event, but the anticipation leading up to the affair will most likely be good for dollar bulls, and a relatively less happy time for PM owners.

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3 Comments

cmartenson's picture
cmartenson
Status: Diamond Member (Offline)
Joined: Jun 7 2007
Posts: 5971
Dollar getting monkey-hammered

I have no earthly idea why it is happening, but the consolidation above the 50 dma for the dollar just gave way in a pretty convincing manner and it's being driven lower.

Its 50 dma is at 96.77 and the dollar is currently down (-1.34) at 96.06

Gold not (yet) responding proportionally as it is up an anemic +0.4% on the dollar's -1.3% decline.  Ditto for silver (+0.5%)

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5687
dollar falls - euro celebrates

From what I could see, buck just started sinking early in Asia, and it just kind of didn't stop until - well right around an hour ago.  The only major economic report today was the Factory Orders at 10:00 EDT, which although depressing (and thus probably dollar-negative) it didn't align with any major currency movements.

I think its related to Greece.  The Euro is up 2.2% on the day; there is news about both Greece and "the Institutions" presenting their own respective detailed plans.  Presumably this suggests things are getting more serious and moving towards a denoument.

http://www.bloomberg.com/news/articles/2015-06-02/creditors-said-to-be-wrapping-up-greece-proposal-today

The impasse over Greece’s future lingered as both sides worked on rival proposals for the conditions of a financial lifeline with debt payments looming.

Greek Prime Minister Alexis Tsipras said his government submitted a new plan, while officials from the country’s creditors were said to have agreed on what would be a final offer to avoid the country defaulting. While the euro rallied on optimism over a deal, Dutch Finance Minister Jeroen Dijsselbloem, who leads the euro-area finance ministers’ group, said institutions are still far from any agreement.

Gold is plummeting in Euro terms (down -1.77%) - a resolution to the Greek issue would seem to be gold-negative.

agitating prop's picture
agitating prop
Status: Platinum Member (Offline)
Joined: May 28 2009
Posts: 864
I don't get it

The move down in the dollar makes zero sense. Are currency traders betting that Greece's deadline will be extended forever...like Brussels will throw up it's hands and do a big, "whatever!" and THAT won't have worse consequences for the euro? Very short term thinking...attention of a gnat speculative play. Won't last. Is it Friday that the loan payment is due?

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