Gold And Silver: Things Are Ugly
Doug Eberhardt | Nov 02, 2014 01:08AM ET
The mining stocks took it on the chin big time today. But the start of the day was Direxion Daily Jr Gld Mnrs Bear 3X (NYSE:JDST) again up a whopping 26%. JDST is up about $10 a share from when I first mentioned it. Being that it is down 72% of the year, it is no wonder that it had room to move higher as the mining stocks break down.
VelocityShares 3X Long Natural Gas (NYSE:UGAZ) had another decent day up 3.14% to close at $11.84 and is trading at $12.02 after hours. I had said the risk vs reward was there with today’s supply data coming in. The data was good for Natural Gas and thus good for UGAZ. It may have some more room to run, but keep moving stops up if trading it.
Gold and Silver Outlook
Things are still ugly with Gold and Silver as gold tested the $1,200 mark and broke below it while silver broke through $17 and kept on falling. If I am right about gold breaking below $1,000 an ounce, it will take silver and the miners with it. As much as I don’t want to be right, I remind those who read what I write that I have a pretty good track record and just call it like I see it.
From the Trading Desk
Yesterday’s Federal Open Market Committee did not do many favors for the precious metals. The hawkish commentary by the Federal Reserve included the declaration that asset purchases and quantitative easing will cease at the end of October. While this wasn’t a surprise, it was strong enough wording to rattle the markets and open the doorway for new policy moving forward. The Fed upgraded its assessment of the job market’s performance while indicating that short-term interest rates will remain near zero for a “considerable time”. The end of QE and the prospect of a shorter timeline for the first interest rate rise since the financial crisis sent gold and silver plunging lower in yesterday’s afternoon session. Gold will struggle to make new highs in an environment where it has to compete with yield-bearing financial instruments.
Data this morning showed that the US economy grew by 3.5% in the third quarter, beating the estimates of 3.0%. The USD and stocks rallied while gold and silver succumbed to further liquidation. Evidence of the US economy improving tarnishes the safe haven appeal of gold.
Gold has now traded lower in six of the last seven trading sessions. It closed below $1,200 today and looks poised to test the next major support of $1,180, a triple bottom and the low from the last four plus years. Silver collapsed nearly 5% today and had its lowest close in over four and a half years. The momentum is clearly down right now and there is really no major support until the psychological figure of $15.
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