Investing in precious metals 101

PM Daily Market Commentary – 9/26/2018

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  • Wed, Sep 26, 2018 - 10:12pm



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    PM Daily Market Commentary – 9/26/2018

Gold fell -6.76 [-0.56%] to 1201.62 on very heavy volume, while silver dropped -0.13 [-0.93%] to 14.36 on heavy volume. While the FOMC meeting announcement and the subsequent press conference caused a fair amount of volatility, it did not appear that metals prices moved materially as a result of the meeting.

So did the Fed tell us anything new? To start things off, the Fed removed the word “accommodative” from their statement released at 2pm.  Then, in his opening statement, Powell explained: “This does not signal any change in the likely path of policy. Instead, it is a sign that policy is proceeding in line with our expectations,” he said, saying that the Fed still expects gradual rate increases going forward. Removing accommodative?  Nothing to see here.  Powell said the economy is strong, all is well, risks remain balanced; at least for now, its all unicorns and rainbows.

Gold sold off going into the FOMC meeting announcement, rallied briefly after 2 pm, then lost those gains once Powell’s press conference started, and then moved sideways into the close. Candle print was a confirmed bearish NR7 – bearish – and forecaster dropped -0.21 to -0.25. Today’s drop pulled both the weekly and monthly forecasters back into a downtrend. Gold is now back into a downtrend in all 3 timeframes.

COMEX GC open interest fell -5,718 contracts. It looks as though some short-covering happened today.

Rate rise chances (December 2018) is at 83%.

Silver fell along with gold into the FOMC announcement, bounced around for a time, and then moved lower into the close. Candle print was a dark cloud cover (33% bearish reversal), and silver forecaster plunged -0.48 to +0.08, which tells us that silver is still clinging to an uptrend by a slim margin. Silver remains in an uptrend in both daily and weekly timeframes.

COMEX SI open interest fell -165 contracts.

The gold/silver ratio rose +0.34 to 83.56. That’s bearish – and the current level for the ratio suggests PM could be at or near a long term low.

Miners mostly chopped sideways into FOMC, bounced around for an hour or so, and then sold off into the close. GDX fell -2.28% on extremely heavy volume, while GDXJ dropped -1.71% on extremely heavy volume also. XAU plunged -2.53%, worse than either ETF, driving below the 9 MA, making a new low, and pulling the forecaster down -0.32 to -0.20, which is a sell signal for the miners. XAU is now in a downtrend in all 3 timeframes.

The GDX:$GOLD ratio fell -1.73%, and the GDXJ:GDX ratio moved up +0.58%. That’s bearish.

Platinum rose +0.34%, palladium moved up +0.43%, and copper climbed +0.25%. The other metals seemed more or less unaffected by FOMC.

The buck moved up +0.05 [+0.05%] to 93.73. Initially falling on the FOMC statement at 2 pm, the buck bounced back once Powell clarified that “removing accommodative” meant nothing and that rates would continue to rise. The long legged doji was unrated, and forecaster was unchanged at -0.18. The buck remains in a downtrend in both the daily and weekly timeframes.

Crude fell -0.03 [-0.04%] to 71.87. Today’s EIA report was somewhat bearish (crude:+1.9m, gasoline: +1.5m, distillates: -2.2m) and the report did seem to pull prices down a few cents. Today’s doji candle was unrated, and and crude forecaster fell -0.25 to +0.24. That’s still an uptrend; crude remains in an uptrend in all 3 timeframes. Goldman told us today that no, oil won’t hit $100/bbl. That makes me want to buy.

SPX fell -9.59 [-0.33%] to 2905.97. Equities rallied immediately at 2 pm (presumably happy to see the removal of “accommodative”), but then proceeded to fall once Powell explained that rates would continue to rise. SPX forecaster dropped below its 9 MA, and issued a sell signal on the daily. Sector map shows financials (XLF:-1.20%) leading the market lower, while cyclicals did best (XLY:+0.23%). This was a bearish sector map.

VIX rose +0.47 to 12.89.

TLT rose +0.70%, printing a strong-looking swing low (60% bullish reversal). TY agreed, rising +0.30% and printing an even stronger swing low (64% bullish), pulling TY back above its 9 MA, with the forecaster issuing a buy signal. The rally all came about during the press conference, after it was clear rates would continue to rise. The 10-year yield plunged -4.1 bp to 3.06%. This might mark the top for long rates for a while.

JNK rose +0.03%, rallying briefly at the announcement, but then retreating afterwards. The shooting star candle was neutral; forecaster remains in limbo, at -0.07, unsure of direction.

CRB fell -0.59%, with 4 of 5 sectors falling, led by energy (-0.79%). CRB printed a swing high today right at the 200 MA.

The FOMC meeting caused prices to bounce around – head-faking higher on the removal of “accommodative” and then reversing once Powell explained that it essentially meant nothing. We can call it a tea-leaf-reading failure.

The largest and potentially most meaningful change occurred to the equity market; the sell-off after “the removal of accommodative meant nothing” was fairly brisk, and the end of day bounce almost nonexistent. This could actually lead somewhere. TLT & TY also confirmed the risk off sentiment – bonds sold off for weeks leading up to this FOMC announcement, and reversed just today. The prospect of a continuing series of rate increases from the Fed will in time bring the expansion to a stop. That’s just what rate hikes do.

The punch bowl is being removed, one glass at a time.

Gold and silver? So far, gold is not a beneficiary of the rate increase campaign. Gold seems to be tracking the buck like usual; events that cause the buck to rally (such as the prospect of more US rate increases) causes gold to drop, as it has done for quite a while now.  That’s more or less what happened today.

The miners are back to looking ill. Today’s swing high looked fairly strong, and it may be time to watch from the sidelines for a while until things settle down.  I’m less sure about silver. It remains in an uptrend, although not by much.

Crude seems headed for a re-test of its highs.

And that’s it.

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