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PM Daily Market Commentary – 8/1/2018

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  • Wed, Aug 01, 2018 - 10:26pm

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    davefairtex

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    PM Daily Market Commentary – 8/1/2018

Gold fell -8.40 [-0.68%] to 12240.50 on moderately light volume, while silver dropped -0.14 [-0.90%] to 15.44 on moderate volume. Yesterday’s metals rally was unwound today after Trump asked the US trade rep to explore the option of hitting $200 billion in Chinese imports with a 25% tariff, rather than 10% as previously requested. Copper (-2.84%), platinum (-2.66%), palladium (-1.68%) were all hit as a result. The buck rose +0.15% – it was not a factor in today’s metals action.

The Fed ended up doing nothing, as expected; in the announcement, there were some word tweaks that added up to “the economy is stronger than it was at our last meeting.” The market impact was minor.

Gold spent the day moving south, along with the rest of the metals. The long black candle was a bearish continuation; forecaster dropped -0.63 to -0.44, dropping gold back into a downtrend. Today’s close was a new closing low for gold, and it dropped gold back below its 9 MA. I expect that if the metals complex as a whole breaks down further, it will drag gold right down with it.

COMEX GC open interest rose 2,536 contracts.

Rate rise chances (September 2018) rose to 91%.

Silver fell all day long. The closing black marubozu was a bearish continuation; forecaster fell -0.54 to -0.28, which was a sell signal for silver. Silver managed to avoid a new closing low, unlike gold, but it too dropped below its 9 MA today. If copper makes new lows, so will silver. It all pretty much depends on tariffs.

COMEX SI open interest fell -1,908 contracts today. That’s a new one; short covering?

The gold/silver ratio rose +0.17 to 79.31. That’s somewhat bearish.

Miners fell, with GDX off -0.80% on moderate volume, while GDXJ dropped -0.57% on moderate volume also. Both miner ETFs made new lows, printing a variety of bearish-looking candles. XAU fell -1.85%, substantially worse than the ETFs,. It hasn’t quite broken down below the previous low set back in December, 2017, but it is very close to doing so. Miners remain weak.

The GDXJ:GDX ratio fell -0.21%, and the GDX:$GOLD ratio dropped -0.81%. That’s bearish.

As mentioned, platinum fell -2.66%, palladium dropped -1.68%, and copper lost -2.84%. This was all driven by tariff news. Copper and platinum both issued sell signals, while palladium is just barely hanging on. The metals could be preparing to take another leg down; they look pretty weak right now.

The buck rose +0.14 [+0.15%] to 94.25. The modest move pulled the buck back up above both the 9 and 50 MA lines, which flipped the forecaster back into an uptrend – for the 5th time in two weeks. Pulling back to the weekly, we see that the upside momentum for the buck continues to slow. The buck really could go either way at this point; if it starts rising again – say it breaks through 95 – that would of course be bad for PM.

Crude fell -0.58 [-0.85%] to 67.84. The EIA report was not quite as bearish as the API report (crude: +3.8m, gasoline -2.5m, distillates: +3.0m), and it did manage to pull oil up off its lows, but the short black candle was a bearish continuation, and forecaster fell -0.06 to -0.22; the EIA report did not rescue oil prices this week. Crude remains in a downtrend in both daily and weekly timeframes.

SPX moved down -2.93 [-0.10%] to 2813.36. The long black candle was bearish, and forecaster dipped -0.15 to -0.20. SPX remains in a downtrend in both daily and weekly timeframes. Sector map has energy leading down (XLE:-1.39%) along with industrials (XLI:-1.35%) while tech did best (XLK:+0.90%).

VIX rose +0.32 to 13.15.

TLT was hit hard today, dropping -1.04%, making a new low. TY’s plunge was a bit more sedate, losing just -0.25%, also making a new low. TY printed a variety of bearish-looking candle patterns. Bonds continue to head downhill. The 10-year yield rose +3.9 bp to 3.00%.

JNK plunged -0.36%, printing a swing high (59% bearish reversal). Forecaster fell, but has not issued a sell signal just yet. I’m not quite sure what made JNK unhappy today; it didn’t look particularly risk-off to me.

CRB fell -1.49%, with 4 of 5 sectors moving lower, led by industrial metals (-1.96%) with energy (-1.93%) close behind. CRB is now below all 3 moving averages. Tariffs are taking a toll on the commodity complex, although it remains well above the lows set back in early 2016.

Well the FOMC meeting announcement was a big nothing-burger, but the ramping up of the tariff threat to 25%, up from 10%, definitely did wang prices around, especially in the metals space. Copper was the biggest loser; it is threatening to re-test the 2.67 low set a few weeks back. My guess is that the Chinese didn’t offer any more concessions in the hinted-at negotiations, so Trump decided to ratchet up the pressure.

This is what they call a “news-driven market”, which means that any sort of technical analysis takes a back seat to what the guys in the back rooms decide to do on any given day.

http://www.atimes.com/article/white-house-ups-ante-looks-at-25-tax-on-chinese-goods/

“Certainly, we would like to see the playing field leveled,” White House Press Secretary Sarah Sanders said in a briefing on Wednesday. “But until that happens, the president is going to hold their feet to the fire. He’s going to continue to put the pressure on China.”

A longer article at Asia Times puts a framework around the situation that won’t be found in the Trump-bashing media circus:

http://www.atimes.com/article/china-caught-off-guard-as-us-trade-war-highlights-beijings-dilemma/

Gold’s near term future – as is the case with the rest of the metals – seems tied to what happens with China and tariffs.

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