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Damage on the Gold Charts Enhanced by Talk of Ending EU QE

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OUTSIDE MARKET DEVELOPMENTS: Overnight equity markets were mostly weaker in what appeared to be mixed European data and a minimally better than expected UK September Services PMI reading. Chicago Fed President Evans gave a speech in Auckland and suggested that he favors a slow and gradual rate hike pattern and he also suggested that he favors a December hike as long as data remains on an upward path. The European session presented a flurry of PMI services and composite PMI numbers from around the region, with Euro zone readings posting a 1 tick rise while French services were down slightly less than 1 point. UK services PMI posted a modest bounce and the BOE’s Broadbent suggested that the slowdown hasn’t been as bad as was feared off the BREXIT. The North American session will start out with the September ADP employment survey which is expected to see a modest decline from the 177,000 reading seen for August. The August international trade balance is forecast to see a slightly smaller deficit while the September ISM non-manufacturing survey is expected to see a moderate increase from August’s 51.4 reading. August factory orders are forecast to see a sizable decline from July’s +1.9% reading and fall into negative territory. Minneapolis Fed President Kashkari will speak during mid-morning US trading hours while Richmond Fed President Lacker will speak during the US afternoon hours.

gold-bars-595GOLD / SILVER: The gold market was pummeled yesterday in a washout that we think was a long time in coming. As we have suggested last week, seeing gold fail to react positively to the Deutsche Bank situation was probably an early warning sign of sagging bullish sentiment. Furthermore with the gold and silver markets consistently holding a moderately long spec and fund position over the prior 3 months, some of the aggressive selling on yesterday was probably margin and stop loss selling. It almost goes without saying that adverse Dollar action added into the gold and silver beating yesterday but it is possible that fresh fears of an end to QE asset purchases in the Euro zone gave metals prices an added push down. Unfortunately for the bull camp, hawkish Fed and ECB dialogue pressures gold from the Dollar perspective but it also pressures gold and physical commodities from the rising rates angle. While gold and silver might be getting closer to support levels off the middle of 1st and 2nd quarter consolidation pattern on their charts, a continuation of Dollar strength isn’t difficult to imagine into the end of the week when US payrolls are likely to give renewed strength to the Greenback.

Platinum BarsPLATINUM: The beating in precious metals Tuesday wasn’t limited to gold and silver as selling hammered January platinum down to the lowest level since June. Like gold, PGM prices were obviously undermined by strength in the Dollar and general liquidation of commodities because of hawkish US Fed dialogue. Adding into the bearish wave in PGM prices is news that the NUM mineworkers union reached a 2 year wage settlement with Impala that was retroactive to July 1st. While the competing union the AMCU might continue to cause tensions, the AMCU might not have much standing with the mining companies when some miners have accepted 13% to 14% wage increases. In conclusion, the PGM markets have seen inside and outside market forces shift in favor of the bear camp. If there is a possible positive, it is that the declines in platinum and palladium this week have probably already reduced the net spec and fund long to nearly leveled readings.

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