METALS: Portion of a Hike has Probably Been Factored with Sep Slide

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OUTSIDE MARKET DEVELOPMENTS: Global equity markets were higher overnight as they prepared for today’s FOMC meeting. The Asian session started out with August Japanese trade balance data that showed a net deficit that was a sharp contrast from July’s surplus, as both exports and imports showed sizable year-over-year declines. The highlight of the Asian session was the results of the Bank of Japan’s monetary policy meeting which yielded a change in policy objectives to focus on bond yields. Apparently the BOJ was backing away from printing money and in turn increasing its focus of meeting inflation targets. The European economic calendar brought an August reading on UK public sector net borrowing (PSNB) which dropped relative to July’s net total. The North American schedule has no major economic data points from the US or Canada, but will have the major event for global markets with the results of the latest Federal Market Open Committee (FOMC) meeting during early afternoon US trading hours.

silver-595GOLD / SILVER: The gold and silver markets continued to coil for most of the trading session yesterday but overnight they showed some strength in the wake of changes in BOJ policy. Strength in the Dollar would seem to suggest that the currency markets are to a degree expecting a US rate hike later today, while gains in Treasuries and stocks recently might suggest that other parts of the financial trade are expecting the Fed to remain on hold. The metals seem to have benefited from a BOJ meeting as it appears that Japan altered its yield curve targeting in an effort to stimulate its economy. On one hand, the gold market has seen a high to low September slide in prices of $48 an ounce already, but on the other hand the last COT positioning report still showed the net spec and fund long in gold to be 329,000 contracts and that would suggest more downside is possible in the event of a hawkish result from the US Fed later today. The world’s largest gold ETF saw their holdings decline by 3.86 tonnes on again Tuesday and they reached their lowest level since September 2nd. Declines in GLD might be a short term reaction to September weakness in gold prices but it might also be the result of fears ahead of this afternoon’s Fed decision.

Platinum BarsPLATINUM: News that talks between unions and miners (in South Africa) appear to have hit a deadlock probably supported PGM prices as that in turn increases the prospect of strikes at platinum mining facilities. Apparently the NUM rejected a wage increase off of 6.75% compared to their wage increase demand of 14.5% and that in turn led to the NUM filing a wage dispute with the mining company. In short both the NUM and the AMCU have filed wage disputes and that focus could become the primary focal point of the PGM trade once the FOMC result is put in the rearview mirror. Another issue that might serve to support PGM prices is a (KITCO) news report that China remains behind the curve on recycling platinum in vehicle with less than 1% of potential recycling units undertaken in roughly 2 million junked vehicles. That figure is significantly below China’s net annual car registrations of 172 million units.

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