PM Daily Market Commentary – 8/29/2016
Gold rose +1.20 to 1327.10 on moderately light volume, while silver rose +0.11 to 18.86 on moderately light volume also. Both gold and silver made new lows, but managed to rebound, with silver doing a bit better than gold. A flat dollar neither helped nor hurt.
Gold was hit early in Asia, with a momentary spike down to 1317.20, but the buyers appeared to buy the dip, pushing prices back up into the green by end of day. The low volume hammer candle is a new low, but doesn’t look particularly compelling as a reversal bar. It will be easy for gold to print a swing low tomorrow, however.
My data sources haven’t updated as of this writing, so I don’t have any candle analysis or charts to show you. I’m pulling them from stockcharts, hopefully just for today. Support for gold remains at 1310.
Silver made a new low, pulled down by gold during the spike lower in Asia, but then moved higher relatively steadily for the remainder of the day. Silver ended up printing a spinning top candle – it would not take much for silver to print a swing low tomorrow. Support for silver remains around 18.
Not a lot happened in the miners today either – GDX rose +0.22% on moderately light volume, and GDXJ was up +0.24% on moderate volume. Mostly, the miners just moved sideways. Its hard to draw any conclusions from today’s price action. Perhaps – it could have been worse?
Platinum rose +0.32%, palladium rose +0.79%, while copper tried to rally, failed, and printed a new low, down -0.26%. Copper continues to look ill.
The USD was unchanged at 95.54, printing a doji on the day. I take heart from the lack of follow-through from all the Fed jawboning last week. Interestingly, the Fedwatch Tool [http://www.cmegroup.com/trading/interest-rates/countdown-to-fomc.html%5D shows that the market has definitely cooled on the prospects for a rate hike: the probability has dropped from 33% last Friday, to just 21% today. If that trend continues, that’s definitely gold-positive – well, at least until the payrolls report is released this coming Friday.
Crude fell -0.66 [-1.39%] to 46.98. Crude did not make any new lows, and appears now to be more or less moving sideways. It closed a few cents below its 9 EMA. I suspect crude is waiting for the next petroleum status report coming this Wednesday before it picks a direction.
SPX rose +11.34 to 2180.38, in a fairly broad-based rally. There was a middle-of-the-road personal income report released today which rose an (annualized) 5%, as expected. That doesn’t look much like a recession to me. VIX fell -0.71 to 12.94.
TLT shot up +1.34%, wiping out Friday’s big drop and moving right back to the higher end of its range. That seems to suggest rate rise worries are abating.
JNK jumped +0.52% and printed a new high today, which carries it to within four cents of the all time high set back in 2014. That’s risk on.
CRB fell -0.90%, dropping cleanly below both the 9 EMA and the 50 MA. Commodities are starting to move steadily lower once again.
Based on the CME Fedwatch tool, it appears that the worries over a possible September rate rise has receded substantially from where it was last Friday. This is confirmed by the flat dollar, rising bond prices, as well as slightly higher gold and silver prices. That’s a relatively positive outcome. Had the worry not receded, I expect that gold would have broken 1310 support relatively quickly, and silver would be on its way to 18.
This could all still happen if we get a strongly positive payrolls report this Friday. Of course if payrolls are weak, I suspect we’ll see gold take off.
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Well it looks like the buck was just taking a breather yesterday – today a strong dollar rally has encouraged gold to drop, and that has sent the miners right off a cliff. Right now, buck is up +0.56, gold down -11.60, and GDX off a big -5.43%.
Gold made a new low to 1314.90, not far from 1310 support. If gold breaks 1310, things could get really ugly, especially in the miners – this is the worst correction in the miners since 2015. Call it about 20% so far.
There was no event triggering the dollar rally – its just been moving slowly higher all day long. If that buck keeps climbing…PM will probably continue to drop.
This is actually good news for anyone who felt left out of the Great Miner Rally of 2016. Once things slow down, you'll be able to buy in at a big discount. If we do a 50% retrace on the 2016 move, we're halfway there right now…
Seriously though, I'm looking forward to Thursday – I'd guess that prices will probably stabilize in advance of payrolls. Then on Friday if we get a weak payrolls number, the rebound in the miners could be huge…as in, 10% in one day. And I don't think the downside will be nearly as large, because it will have already been wrung out of the price by the current move lower.