PM Daily Market Commentary - 4/26/2016

By davefairtex on Wed, Apr 27, 2016 - 3:47am

Gold rose +5.40 to 1244.80 on moderate volume, while silver climbed +0.16 to 17.21 on moderately light volume.  Both metals caught a bid today ahead of the FOMC announcement tomorrow; perhaps the falling dollar helped.

After selling off in Asia, gold jumped up $10 just before the US market opened and managed to retain all its gains through end of day.  Gold is back above its 9 EMA, and that's good news, however some amount of gold's move can be attributed to a currency effect from the dropping dollar.

What does it mean for gold to be looking a bit stronger going into the FOMC announcement tomorrow?  I don't know.  I certainly don't feel comfortable taking a big position - I have no idea which way things will jump.  I might as well go to Vegas and drop my money on "red" and hope for the best.  Still, better up than down, right?

Silver has continued to move up - those COMEX buyers just keep pushing the price higher.  That's a bullish sign.  Silver is dreadfully overbought at this point, but the uptrend remains intact.  Until it crosses that 9 EMA, momentum remains bullish.  How many current COMEX silver longs will resist the urge to bail out if silver has a big down day?  That's the key question.  Commercial short assaults only work if managed money bails out.

Miners rallied nicely today, with GDX up +2.36% on moderate volume, and GDXJ up +3.84% on heavy volume.  Yesterday's modest drop was yet another buying opportunity in the miners.  The current pattern is, a two day drop, follow by a rally to new highs.

Platinum fell -0.32%, palladium was up +0.06%, and copper was virtually unchanged at +0.02%.

The buck sold off hard, at one point down more than -0.60, but rallied back to close down -0.26 to 94.54 printing a bullish hammer candle.  To me, the future of the buck is more or less in the hands of the FOMC.  Will they use the recent rally in oil prices as an excuse to sound more hawkish?  If so, we could see the buck take off.  I really don't know, but prices in many things are quite extended in one direction - the FOMC announcement could be the perfect catalyst for a reversal.  Certainly a higher equity market and higher oil prices give the FOMC more flexibility to talk about a rate rise.

WTIC staged a strong rally today, jumping +1.67 [+3.88%] to 44.66 making a new high for this cycle.  At least half of the move came after hours, when the API inventory report revealed a draw of 1 million barrels for the week.  This surprising (and bullish) result caused oil to pop more than 80 cents almost immediately.   Oil equities continued climbing too, up +1.60% on the day.

SPX rose +3.91 to 2091.70.  That's a very tepid move in the overall market considering the strong move in oil equities.  It is earnings season, which adds another variable into the mix.  Even so, SPX looks to be in a holding pattern prior to the FOMC announcement.  VIX fell -0.12 to 13.96.

TLT can't catch a break; it dropped again today, losing -0.45%.  There seems to be some steady selling pressure on the long bond right now; after breaking below the 50 MA, TLT has done nothing but drop.

JNK rallied +0.40%, wiping out yesterday's losses and then some.  JNK is more or less chopping sideways right now; higher oil prices do not seem to be helping JNK all that much, at least in recent days, however JNK remains in a clear uptrend.

CRB rallied +1.46%, a nice move that brings it quite close to its 200 MA.  A close above the 200 would be a very bullish signal for CRB.  CRB remains in a medium term uptrend.

As I said yesterday, market is probably waiting for the FOMC announcement before it picks a direction - for the buck, for PM, and possibly also for equities.   Announcement happens at 14:00 Eastern tomorrow.  Oil is doing its own thing, more or less; traders are probably looking to the Petroleum Status report tomorrow (10:30 Eastern) to confirm the API inventory report released today.  Higher oil prices = support for junk debt = relief for the financial sector = higher equity prices in general.

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1 Comment

davefairtex's picture
Status: Diamond Member (Online)
Joined: Sep 3 2008
Posts: 5685
dollar drop in Asia = strong gold rebound

Buck is off about 0.50 hovering around the 94 level after BOJ announced at 23:00 Eastern that they would be leaving their rates unchanged.  USD/JPY moved by -2.31%, which is a fairly substantial move.

Gold had sold off fairly substantially prior to the BOJ announcement, but the big drop in the buck caused it to rally here in Asia back up to 1255.

That buck really does seem to be key.


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