Investing in precious metals 101

PM Daily Market Commentary – 8/6/2018

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  • Tue, Aug 07, 2018 - 02:41am



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    PM Daily Market Commentary – 8/6/2018

Gold fell -6.12 [-0.50%] to 1216.09 on moderate volume, while silver dropped -0.12 [-0.78%] on moderate volume also.  The buck moved higher, up +0.22% to 94.97, edging right up to round number 95. That said, currency played a more minor role in the movement of metals prices today. Today’s move down seemed to be mostly about tariffs.

There wasn’t any real news – just an increase in the heat content of the dispute. Over the weekend, Trump tweeted that tariffs were working big time – China’s stock market is down 27%. China responded by suggesting Trump was starring in his own “street-fighter style deceitful drama of extortion and intimidation.” I guess the stock market comment struck a nerve.  I expect the upper class people are the ones in China that own equities, and they are – understandably – annoyed at the plunge.  Much as the US upper class would be annoyed if their portfolios dropped by 27%.  That’s more pressure on Xi to settle the issue.

Interestingly, the more combative Xi gets, the more nervous the US manufacturers who have sent their machinery overseas become.  No doubt they want a settlement; they could be making contingency plans to move somewhere that isn’t under a tariff assault by Trump.  Well, assuming they aren’t able to get him impeached, of course.

Gold staged a brief rally in Asia, and then spent the rest of the day moving lower, closing near the day low. Gold did manage to avoid making a new low, but not by very much. The long black candle was a bearish continuation, and forecaster moved lower. Gold remains in a downtrend in all 3 timeframes.

COMEX GC open interest rose 1,165 contracts.

Rate rise chances (September 2018) remains at 94%.

Silver tracked the metals group, jumping briefly in Asia and then falling for the rest of the day. Silver didn’t make a new low either. The forecaster remains in a downtrend in all 3 timeframes.  That said – the daily forecaster does not look as though it expects prices to plunge through support, since its downtrend is actually fairly mild.  The chart itself looks a whole lot more alarming.

COMEX SI open interest rose 2,655 contracts today.

The gold/silver ratio rose +0.22 to 79.17. That’s somewhat bearish.

Miners fell, with GDX dropping -1.23% on moderate volume, while GDXJ fell -1.11% on moderately light volume. XAU fell also, but managed to avoid making a new low by a narrow margin. Friday’s weak swing low remains in place. XAU: downtrend in all 3 timeframes.

The GDXJ:GDX ratio rose +0.12%, and the GDX:$GOLD ratio fell -0.73%. That’s bearish.

Platinum fell -1.03%, palladium dropped -0.43%, and copper moved down -1.09%. The entire metals group moved lower, which dragged down gold and silver too. Until the tariff kerfuffle is resolved, its likely the metals will remain in a downtrend.

The buck rose +0.21 [+0.22%] to 94.97. The buck actually rose above 95 for a time, making a high of 95.13. For its part, the Euro is closing on 115 support; a break of 115 could lead to quite a move lower. The Euro is forming a rough head & shoulders pattern – and we’re at the right shoulder right now.

Crude moved up +0.29 [+0.43%] to 67.75. Crude actually rallied much more strongly intraday, but the rally ended up failing. Crude printed a mildly bearish shooting star. Still, crude remains in an uptrend in all 3 timeframes. Our friends over at Goldman suggest that oil supply is going to get a lot tighter later in the year. That always makes me nervous, when someone over there agrees with me. Its gotta be some kind of trick. Maybe they’re already heavily long.

In related oil news, there was an assassination attempt on Venezuelan president Maduro – using drones laden with explosives. The attempt failed.  I suspect this will not be the last assassination attempt using drones.  The same tech that makes self-driving cars possible also makes hunter-killer drones inevitable.  Computer vision, mapping software, GPS, and off the shelf software that links everything together.  I expect if I had $5 million bucks, 10 people, and a year, I could get a prototype out the door.  Maybe not even that much.  Of course you’d have to disguise the product as an drone crop duster or something like that.    But I digress.

SPX rose +10.05 [+0.35%] to 2850.40. SPX made a new high today, breaking above the previous high set a few weeks back. The long white candle was a bullish continuation. SPX remains in an uptrend in all 3 timeframes. Sector map shows cyclicals leading (XLY:+0.67%) while materials brought up the rear (XLB:-0.03%).

VIX fell -0.37 to 11.27. That’s the lowest close in VIX in months.

TLT moved slightly higher, up +0.06%. TY moved higher also, up +0.08%. TY remains in a daily uptrend, but – it looks more like a dead cat bounce to me. TY is in an uptrend in both the daily and monthly timeframes. The 10-year yield fell -1.5 bp to 2.94%.

JNK moved up +0.06%. It remains in a slow but relatively steady uptrend.

CRB rose +0.36%; only 2 of 5 sectors moved higher, led by agriculture (+1.11%). The PM group wins the prize for the ugliest chart of the commodity complex.

Between the dropping Euro and the steadily increasing pressure from Trump’s tariff assault, there’s just no relief in sight for the metals – although so far they have managed to avoid making any new lows. The COT report for gold remains incredibly bullish, but I don’t see the metals rising in the face of a rallying dollar and the tariff war.  I expect the commercials are continuing to cover down here at these levels, and that is probably providing a fair amount of support.  But we need more than that to cause a rally.

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