Gold And Silver Trading Sentiment Says Wait For The Next Fed Meeting

Call it sentiment. Call it mood, or a sixth sense. Sometimes traders and investors act out in strange and wondrous ways.

Let’s try to make sense as to why the entire precious metals complex fell hard today led by silver, which was off not quite 1.00%. Gold was also off – by 0.60%. A gyrating dollar is having some impact on the precious metals but that was scarcely the bigger problem.

Certainly there was a bit more profit-taking, extending yesterday’s trend, but we feel as if gold and silver are coming in for a landing that will leave them temporarily grounded until traders can be absolutely, positively, one hundred percent sure rates will not rise in September. That means that by early afternoon thirteen days from now, we’ll have all the confirmation we need.

That’s when we start worrying about December’s meeting.

The CME FedWatch rate rise probability index took a hefty bounce up, moving from 15% yesterday to 21% today. Yet, so as not to get our thinking tangled up, we had better learn to look at that as a 79% chance that the Fed will not raise rates

The yield on the 10-year bond rose over 1.60% today, moving to the top of the range it has been oscillating within since mid-June. It feels like momentary enthusiasm gripped traders, however. (Just our sentiment!)

Of course, as you might imagine from bond yield movement, that the dollar would be strengthening, although we are seeing a lot of choppy trading in currencies. The surprise today is the weakness of the yen and to a lesser degree the softness of the British pound.

The euro is up on strictly European news. The European Central Bank said it will keep interest rates where they are and will not add further stimulus to the roughly $90 billion-per-month bad paper buyback “stimulus program” they have been operating for the last couple of months.

Finally, we come to hyperactive oil prices. They soared on news of a bigger draw than experts were predicting. West Texas Intermediate settled 4.65% higher while Brent North Sea rose about 4.15%. Both oils have since fallen back.

While the interplay of demand and stored stockpiles is interesting, in the long run, production is king and consumption is queen.

Energy consumption has been holding steady to lower for a variety of reasons. Production and available in-ground reserves, however, are overflowing the needs of the world economy.

Today the Apache Corporation said it discovered a new field in West Texas that holds more than 3 billion barrels of oil – about the equivalent of an entire year of U.S. crude production – and 75 trillion cubic feet of natural gas, making it the company's biggest U.S. discovery ever and one of its most important worldwide.

While this discovery will not be reflected in pricing soon, it is another looming giant that will help to clamp a lid on prices – possibly for the remainder of the lives of anyone reading this.

Wishing you as always, good trading,