PM Daily Market Commentary - 6/2/2016

davefairtex
By davefairtex on Fri, Jun 3, 2016 - 3:45am

Gold fell -2.30 to 1212.90 on light volume, while silver rose +0.03 to 16.01 on light volume too.  Both metals traded in a narrow range.  My sense is that traders are awaiting the Nonfarm Payrolls release tomorrow - its at 08:30 Eastern, if you want to follow along.

Gold continued to drop today - still no confirmation of Tuesday's potential reversal, but no new low either.  The light volume plus the narrow trading range said nothing happened of note today.  Trend remains down.

The usual reaction at COMEX to payrolls is for gold to run the stops both above and below, so my guess is, gold will break below 1200 at least briefly.  Where will it close?  That probably depends on if the payrolls number is unexpectedly strong.  Gun to my head, I'd have to guess that it will be a good number, and so risk to gold remains to the downside.  We've had steadily bad manufacturing numbers, but manufacturing employment is a small part of the total employment picture.  Thank Mr Global and his employees on both sides of the aisle for that one.

As with gold pretty much nothing happened with silver today either.  Volume was quite light and the trading range was narrow.  Again, market seems to be waiting for the NFP report tomorrow.

Not much change in the miners either; GDX rose +0.22% on very light volume, and GDXJ was up +0.15% on light volume.  I'd show you a chart - but do you really want to see "nothing happened" for the miners too?  GDX remains above its 50 but below its 9 EMA.  NFP will probably see GDX break either up, or down out of its wedge pattern.  The move could be substantial.  Trend is down, so that's the more probable direction in my opinion.

Platinum fell -1.32% making a new low, palladium dropped -2.32%, copper went down -0.29%.  Platinum looks especially bad right now; the platinum/gold ratio had recovered in recent months, but is now apparently headed back for its lows.

The buck rose +0.11 to 95.47, dropping below its 9 EMA intraday but the buyers showed up and pushed prices back up into the green.  Euro tried to break out but failed.  Is this a "tell" for Nonfarm Payrolls?  Likely, a strong NFP report would be dollar-bullish since it would (theoretically) be more likely to encourage the Fed to raise rates in the upcoming meeting.  What are the rate-raise odds right now?  Futures markets are placing it currently at 79%.  At least that's what I think it says.

http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html

WTIC rose +0.15 to 49.06.  Oil had sold off overnight due to the API report showing an inventory build, but the 11:00 Petroleum Status report showed a (bullish) surprise inventory draw of 1.4 million barrels, which led to a brisk $1 rally in the hour following the release.  The teflon-coated oil market continues to hover within a dollar of round number 50.  It seems as though as long as Ft MacMurray is offline along with Nigeria, we'll be seeing inventory draws.  Here's a chart that compares oil prices vs inventory.  You can see in the upper-right corner how inventories have just started (ever so slowly) to fall.  US oil inventories appear inversely correlated to price; I suppose its not surprising that people want to stockpile cheap oil.

SPX rose +5.93 to 2105.28.  It sold off early, but then bottomed out around 10 and then just continued to slowly climb into the close.  Energy was not a leader today (XLE:-0.13%), it was sickcare (XLV:-1.28%).  Yay.   VIX fell -0.57 to 13.63.  Quiet day for equities too, although they did manage to print a new high.  Level to watch for SPX is 2111, which is the previous high dating back to mid-April.

TLT followed on from yesterday's breakout, up +0.72%.  TLT is moving to the upper end of its recent trading range.  This would normally be a risk-off signal.

JNK rose +0.03%, more or less unchanged on the day.  It remains in a strong uptrend, signaling risk on for equities.

CRB jumped higher today, up +0.64% making a new high.  Commodities are up 21% off the lows set back in early February.  They continue to improve.  A golden cross is not far away.  If you are tempted to think "impending global doom and gloom", CRB is suggesting otherwise.  Its a slow improvement, to be sure, but it is steadily moving higher.  I have to think that China's money printing earlier this year is making itself felt in the commodity markets six months later.

Gold, silver, and the miners appear to be on hold for Nonfarm Payrolls coming tomorrow.  PM is in a downtrend.  Its possible that a shockingly bad payrolls report could print a reversal bar for gold, but I don't think that's the likely outcome.  I'd be happy to be wrong.

For you data fans out there (and I imagine there is probably one of you), I managed to find a list of the dates of every FOMC meeting since 1936.  Some master screen-scraper wrote an "R" script to do this.  Here's a link to his page:  http://www.r-bloggers.com/fomc-dates-full-history-web-scrape/.  What a hero!

In answer to your very next question Chris: no.  Tragically, FOMC meetings are not an automatic sell-day for gold.  I wish they were - it would be easy money, which I'm a big fan of.  My math shows the average move on the 155 Fed days since 2000 for gold is $+0.62 , while the average daily move during the same timeframe is $+0.26.   Here's a breakdown by year.  You can download the csv file and spot check my math to make sure I didn't make a mistake.

Someday, I'm going to find a profitable "manipulation" smoking gun.  I'll open up a service and charge you all tons of money to be let in on the secret.  Sadly, that day is not yet here.

 

2000 10.19
2001 -3.12
2002 1.92
2003 -10.13
2004 9.92
2005 -18.42
2006 18.3
2007 11.24
2008 -11.14
2009 11.35
2010 -9.47
2011 47.72
2012 53.04
2013 0.6
2014 -23.13
2015 7.72
Total 96.59

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1 Comment

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5072
Nonfarm Payrolls

Eh so about that strong payrolls report...

Gold up $30 silver up $0.40 and GDX up +8%.

And buck off -1.33.

Wow.  Market is NOT AMUSED.

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