PM Daily Market Commentary – 7/30/2015
Gold fell -8.50 to 1087.30 +1.50 to 1095.80 on moderate volume, and silver dropped -0.08 to 14.70 on moderate volume. Gold dropped in late trading in Asia, concurrent with a move higher in the buck. Gold tried recovering during the NY session but sold off through end of day. Clearly, no swing low for gold today.
The strong dollar is taking its toll on gold. So far, the 9 EMA has acted as resistance for the past month. For the past four days, gold has simply refused to mark a swing low. That's not a great sign. If the dollar keeps rising, we'll test the 1072 lows soon enough, and I'm not sure they will hold.
Silver sold off along with gold as the dollar started to rise. It recovered and managed to keep more of its gains going into the close in NY. Silver moved back below its 9 EMA, but still remains in position to break out. Likely, silver's future will depend on how the rest of the commodity complex performs.
Miners did quite poorly, with GDX losing -3.54% on heavy volume, while GDXJ fell -3.41% on heavy volume too. You can see that the 9 EMA has acted as resistance for the senior miners as well – a decent trading discipline would be to ignore the miners until they manage to close above that pesky 9 EMA. That would have kept you out of the worst of the recent downtrend – with only one headfake at 19. Clearly, we have no swing low in the miners.
The dollar rose +0.62 to 97.69, a continuation from yesterday's post FOMC dollar rally. From the market's reaction, it appears that the FOMC was viewed as more hawkish than the market expected them to be, and so the dollar reacted higher as a result. As always, a stronger dollar generally results in lower commodity prices, which will hurt gold and silver.
SPX was virtually flat on the day, closing up +0.06 to 2108.63. Equities sold off during the morning, but recovered by mid-day and managed to close slightly in the green. 2Q GDP was released today at 08:30 EDT, and came in at the lower end of estimates at 2.3%. For reference, the Atlanta Fed's GDP Now's prediction was 2.4%.
Bond ETF TLT rose +0.77% after finding support on the 9 EMA yesterday. Bonds look to be strengthening – money flowing into the buck looks to be going there.
JNK rallied for a third day, up +0.29%.
The CRB (commodity index) fell -0.37% on the day, succumbing to the stronger dollar. CRB in Euros was mildly positive on the day.
WTIC (oil) dropped -0.45 to 48.44, with the upward move seemingly capped by the 9 EMA. Much like gold and silver, WTIC has not managed to close above the 9 EMA for the past month. While oil has printed a swing low, the next step would seem to require a close above that 9 EMA.
Commodities are trying hard to reverse. It's not clear if they'll manage that now, or if they need to fall to a lower level to find buyers. Some parts of the commodity complex have marked lows, but the strengthening dollar may short-circuit any commodity rally if it continues. How long will this dollar move last is anyone's guess – my sense is it was driven by increased optimism for a Fed rate hike following the FOMC meeting that ended Wednesday.
All we can do is watch and wait. Same story: swing low for gold is 1103, held through to the close.
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An unexpectedly weak ECI (Employment Cost Index) report released at 08:30 EDT caused the dollar to drop more than a full point, which pulled gold up from 1082 all the way to a high of 1102.90.
Will this cause a breakout? So far, it hasn't. Gold's rise today was capped just below the magic 1103 level, and it has since fallen back.
Silver looks a bit stronger, and is through its 9 EMA, which is a positive sign.
In a shocking result, the employment cost index rose only 0.2 percent in the second quarter which is far below expectations and the lowest result in the 33-year history of the report…
This report, which is very closely watched by policy makers, may very well unsettle the outlook for the Fed's rate liftoff, pushing expectations to the December FOMC from the September FOMC. For the inflation outlook, wage pressures are supposed to be an offset to still weak commodity prices. The Fed's 2 percent goal for core inflation is looking elusive
Thanks so much, Dave, for that timely comment. It's so helpful to get your perspective. Best, Jan