Everything was going so well yesterday, right up to THAT moment. Fed meeting minutes were released at 2 PM Eastern; very small market blip, everything seemed fine.
Then came 2 words from Fed Chair Jerome Powers.
And down we went. Sigh. Traders jumped on by the lack of confidence expressed by those 2 words. Overreaction? Probably. But isn’t the market a reaction machine, and isn’t modern news “reporting” all about overreaction?
In any case, here we are today. In basic terms, it wasn’t too bad for precious metals. International silver got knocked back to recent support at 16. International gold sits just above support at 1400.
Miners were hit harder; silver miner ETF SIL dropped 4.6% while the gold miner ETF GDX took a 4.8% hit. Leveraged miner ETFs got slammed, or popped if they were short-side.
Much of these drops can be attributed to the direct connection between the US Dollar and precious metals prices. When the value of the dollar rises, precious metals prices drop. But, historically precious metals prices rise in times of uncertainty, inflation, or falling interest rates – which is what we’re apparently in now.
So expect a bit of short-term tug-of-war as precious metals decide whether they are going to obey support or head for another leg down over the next week.
Powell’s 2 words only confirmed the long-term picture silver and gold were already painting – rising uncertainty. By dropping rates due to “possible” issues outside the US, the once almighty US Dollar is now firmly in The Race To The Bottom. And that is definitely not a sign of certainty, which should be good for gold and especially silver, which has been outperforming gold recently.
But in the very short term, it looks like it’s Dollar up & metals down in US markets.
The Gold Enthusiast
(DISCLAIMER: The author is long the silver sector via small positions in PAAS and SVBL. He has no intentions of trading these positions in the next 72 hours. The author is long the gold sector via small positions in NUGT, JNUG, a few junior miners, and covered calls on part of the NUGT position. He may roll some of the NUGT options forward and up if a profitable roll scenario emerges in the next 48 hours, but as no plans to trade the other positions in that timeframe.)
The iShares Silver Trust (SLV) was trading at $15.05 per share on Thursday morning, down $0.16 (-1.05%). Year-to-date, SLV has declined -5.88%, versus a 12.77% rise in the benchmark S&P 500 index during the same period.
This article is brought to you courtesy of ETF Daily News.
About the Author: Mike Hammer
For 30-plus years, Mike Hammer has been an ardent follower, and often-times trader, of gold and silver. With his own money, he began trading in ‘86 and has seen the market at its highest highs and lowest lows, which includes the Black Monday Crash in ‘87, the Crash of ‘08, and the Flash Crash of 2010. Throughout all of this, he’s been on the great side of winning, and sometimes, the hard side of losing. For the past eight years, he’s mentored others about the fine art of trading stocks and ETFs at the Adam Mesh Trading Group.