PM Daily Market Commentary - 7/1/2015

davefairtex
By davefairtex on Thu, Jul 2, 2015 - 1:45am

Gold fell -4.30 to 1167.80 on moderately light volume, and silver dropped -0.14 to 15.52 on moderately light volume also.  Both metals sold off slowly for most of the day; the strong move in the dollar was probably to blame.

Although gold avoided making a new low today, if the dollar continues to rally, gold will almost certainly retest the lows at 1140.

Silver looks quite similar to gold; a retest of 15.25 seems probable.

Mining shares were sold quite hard today, with GDX losing -2.70% on moderate volume, and GDXJ dropping -3.93% on heavy volume.  It looks like the "dribbling lower" phase is over, and the heavy selling phase has begun.  Senior miners have broken below the March low, and are now on track to retest the December 2014 low.  At this point, no matter what chart I look at, the miners look quite bearish.  Capitulation is in the air, and if gold continues lower/the buck continues to rise, I expect several more days of selling before it ends.

The dollar climbed steadily today, up +0.85 [+0.89%] to 96.51.  The Euro fell -0.84, dropping to 110.54.  The buck now looks bullish, which of course is bad for PM and commodities.

SPX (US equities) rallied today, up +14.31 to 2077.42.  Will this rally lead to new highs?  My guess: probably not.  With the lower high in place, traders are now in the "sell the rallies" mode, and once this rally peters out, the selling pressure should resume.  The VIX dropped -2.14 to 16.09.

Bond ETF TLT fell -1.36%, dropping below its 9 EMA once again.  It doesn't appear that the money coming into the USD is ending up in bonds; they continue to look weak.

The CRB (commodity index) lost -1.37% today, retracing most of its gains from yesterday.  Ag is quite volatile right now, and along with oil, that's driving commodities.

WTIC (west texas crude) fell a big -2.22 [-3.76%] to 56.87, helped by a bearish Petroleum Status Report which showed a build in inventories for the first time in weeks.  Oil services equities were crushed.  For the first time in 9 weeks, oil has closed below its 58-62 trading range and it is now in dangerous territory.  It has taken 9 weeks but my long expected oil sell-off is finally starting to happen.

PM remains under pressure, the miners look awful, the dollar is strong, and so all signs continue to point lower for PM.   I believe gold will most probably drop to test 1140 in the near future.  Whether 1140 holds and what happens after that is anyone's guess.

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5 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5064
nonfarm payrolls

Due to the market closure tomorrow, the Nonfarm Payrolls report was released this morning at 0830 EDT.  The release caused an immediate rally in PM and a corresponding drop in the buck.  The report was seen as somewhat soft, possibly pushing back the chances of a rate rise.

Or so econoday says anyway.

http://mam.econoday.com/byshoweventfull.asp?fid=466998&cust=mam&year=2015&lid=0&prev=/byweek.asp#top

Gold was selling off and made a new low right before 0830, and the gold rebound has gold moving back towards even.  Silver is now green.  Of course, what matters is how the day ends.  Is this gold's catalyst?  I'm not so sure.  Maybe.

 

Luke Moffat's picture
Luke Moffat
Status: Gold Member (Offline)
Joined: Jan 25 2014
Posts: 364
Definitely a matter of patience

Still looks like silver rallies are being sold to me. Almost back at the magic $15.50

Time2help's picture
Time2help
Status: Diamond Member (Offline)
Joined: Jun 9 2011
Posts: 2766
A primer
Luke Moffat wrote:

Still looks like silver rallies are being sold to me. Almost back at the magic $15.50

KugsCheese's picture
KugsCheese
Status: Diamond Member (Offline)
Joined: Jan 2 2010
Posts: 1428
davefairtex wrote: Due to the
davefairtex wrote:

Due to the market closure tomorrow, the Nonfarm Payrolls report was released this morning at 0830 EDT.  The release caused an immediate rally in PM and a corresponding drop in the buck.  The report was seen as somewhat soft, possibly pushing back the chances of a rate rise.

Or so econoday says anyway.

http://mam.econoday.com/byshoweventfull.asp?fid=466998&cust=mam&year=2015&lid=0&prev=/byweek.asp#top

Gold was selling off and made a new low right before 0830, and the gold rebound has gold moving back towards even.  Silver is now green.  Of course, what matters is how the day ends.  Is this gold's catalyst?  I'm not so sure.  Maybe.

 

 

Soft?  ~500K left the workforce! 

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5064
labor force numbers

So after looking at the civilian labor force, I note that it is very choppy.  Specifically, the unadjusted CLF16OV numbers bounce all around, and the -400k this month more or less means nothing on its own.

It appears that they have a tough time seasonally averaging this series.  When I run it through a 12 point moving average, the drop turns into a gain.

CLF16OV (Civilian Labor Force, 16 years & over) is the denominator for our headline unemployment number: U3 = 1 - CE16OV / CLF16OV.  All the numbers in that equation are more or less fiction, so I don't follow them much.

I think looking at the total number of full time jobs is probably a better indicator.

Here are the full time jobs numbers - black line is the raw FTE numbers, and red line is that same timeseries run through a 12 point moving average (i.e. a rough seasonal adjustment).  Either way you want to slice it, jobs numbers in terms of FTEs looks pretty reasonable.  Total pop grew by 175k, and CNP grew by 208k over the same period.

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