Gold and Silver Current Thoughts 6-4-2015

From the Trading Desk

The markets were a sea of red today with equities and commodities alike succumbing to liquidation pressure.  Gold is at five week lows but managed to tread water above initial support at $1,170.  Improving economic conditions in Europe combined with anxiety over US non-farm payrolls tomorrow had market participants trimming positions today.  The IMF urged the Federal Open Market Committee to hold off raising interest rates until the first half of 2016.  This should have been positive for gold but even this headline didn’t help lift gold much of the lows of the session.

Silver, per usual, had the most drastic downward move of the precious metals and finished down on the day 2.50%.  Trend-line as well as psychological support is coming in at $16 but it doesn’t seem like this level will hold in the near term.  Platinum closed under $1,100 and is a mere $10 away from the low of the year at $1,188.  Besides during March of this year, platinum hasn’t been this low since July of 2009.

Things are getting ugly in the markets. All of the negative data I have been writing about for so long seems to be finally getting the message to the markets with today’s data coming in worse than expected which has been par for the course. What’s a CNBC commentator to do?

I have said the Fed would not be raising interest rates anytime soon, but may do a token raise to keep some credibility. With today’s IMF announcement telling the U.S. not to raise interest rates, I am taking off the table the potential of a rate increase. In a sense, the IMF even called the Fed’s bluff. I’m not really sure how happy the Fed is about this.

But even with all this negative data, the markets shook it off and CNBC and the Fed were talking about the next rate hike. Just because the stock market goes higher, doesn’t mean the economy is sound. I try and separate the two as even with the negative data, one can’t ignore price action.

And one can’t ignore the price action in gold. The action has been down and I’m afraid the lower lows I have been expecting are coming possibly without a move higher first if today is any indication. Mining stocks along with the metals got hit.

While the stock market and gold may pullback a bit, I see another high at some point in the stock market to coincide with a low in gold, most likely by September/October. By then at least I’ll have my Illusions of Wealth book finished to, as Paul Harvey used to day, tell investors “the rest of the story.”