Gold fell again today, dropping -3.40 to 1089.40 on very heavy volume, while silver fell -0.15 to 1461 on moderate volume. Both gold and silver broke above yesterday’s high in London trading, but then the sellers emerged and pushed prices slowly back into the red by the time the market closed in NY.
Why did gold and silver have a hard time today? My sense was, the overall commodity complex sold off, and just dragged PM down with it.
Unless commodities in general can start to recover, gold looks headed inexorably for a new low. Again, the rebound will be astonishing when it happens, but in the meantime, we get to endure seemingly unending selling. Gold has been down 8 of the last 9 days – no fun if you are long gold.
Silver had a strong rally today in the London session, breaking above the 9 EMA – but it didn’t last. Silver looks destined to test the 14.49 lows possibly tomorrow…and if commodities keep falling, my guess is silver will drop through 14.49.
Miners opened up, and then sold off all day long. GDX dropped -3.27% on moderate volume making a new low for the cycle. GDXJ fell -3.08% on heavy volume, and it made a new low as well. In any recovery I’d expect the miners to be leading…currently GDX:$GOLD is still bouncing along the lows. Ratio says: no recovery yet.
Platinum was off slightly, down -0.25%. Palladium fell -1.48%, while copper dropped -2.10% to 2.38, breaking below its previous low, making a new six-year low that dates back to 2009.
The dollar fell today, dropping -0.51 to 97.23, falling through its 9 EMA. It remains in an uptrend, but the fall below the 9 EMA is the first step towards a dollar correction. However the large drop in the buck did not help the commodity complex at all. This tell us that the commodity complex is seeing a large amount of selling.
SPX continued falling, dropping -12.00 to 2102.50, knifing through its 9 EMA but finding support on the 50 MA. SPX is still only a few percentage points from an all time high. VIX rose +0.52 to 12.64.
Bond ETF TLT broke out today, climbing +1.25% and breaking above its recent consolidation area. Bonds are finally starting to shake off the weakness of the last few months.
The CRB (commodity index) fell -1.11%, another large drop especially given the decent-sized fall in the buck, with the CRB making a new low and stopping right at the previous low set back in March. Commodities are really looking terrible. This is not helpful for gold at all.
WTIC fell -0.37 [-0.73%] to 48.85, a relatively small drop but nevertheless making a new cycle low. Oil continues to fall after breaking the round number 50. All the news for oil is bearish – rig counts remain high, shale production is stable, Iran nuclear deal is done – we officially have an oil oversupply with no relief in sight. And there are still 925 wells in the fracklog up in the Bakken…with 110 wells completed again this month. Are those wells profitable? I don’t think they are. But as long as those companies can continue to borrow money, they will keep drilling.
It feels like the entire commodity complex is headed lower, and gold and silver are caught in the downdraft. If it were just gold that was suffering, I’d be more sanguine about a recovery and a great snap-back rally. However since the whole commodity group is falling, it may be tough for gold to rally on its own, regardless of the Commerical short position. How long will commodities continue to drop? That I can’t say. All we can do is watch the charts, and wait for the buyers to appear to mark that elusive swing low.
I suspect once commodities find support, that’s when we’ll see the PM rally happen.
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