Market Updates

If you think it’s been a tough week for equity markets and commodity bulls, spare a thought for those with their money in cryptocurrencies.

Last trading just above USD $14oz and below AUD $20oz, it’s been a tough few weeks for silver, which is now down almost USD $1oz, or 5% since the start of November. The decline in silver has helped bring the gold to silver ratio (GSR) to 85:1, more than double what it was back in 2011. As per the chart below, silver is now at its cheapest point relative to gold in 25 years.

Whilst Japanese economic output has grown over the last five or six years, it’s been very slow going, unlike the assets on the BOJ balance sheet, which have exploded since 2011, as the nation’s central bank has bought up a huge stockpile of Japanese government bonds, as well as stocks and ETFs.

President Trump’s tax cuts and fiscal stimulus were always going to provide a sugar hit for the economy, with higher levels of growth than would otherwise have been seen.
The downside to that stimulus was always going to be seen in rising deficits, and this week we saw a stark illustration of that, with the US Federal government posting a USD $100 billion shortfall for the month of October.

Whilst the government is making noises about encouraging the banks to lend more freely, and surveys of Australians suggest they think it's the best time in three years to buy a house, the market itself is still deteriorating, with prices and transaction activity continuing to fall.

It’s been a savage few months for oil bulls, with the price of West Texas Crude (WTI) falling from approximately USD $76 per barrel to USD $56 per barrel in barely a month. That's a fall of over 25% – an extraordinary move which can be seen clearly in the chart below, which plots the price of WTI crude over the last year.

Precious metal prices for local investors have eased this week, as a bounce in the value of the Australian dollar helped pushed gold down toward AUD $1,686oz, whilst silver is at AUD $20.04oz. Prices in USD have also corrected – gold was last trading at USD $1,224oz, with silver at USD $14.55oz, as the metals remain within their recent trading ranges.

Precious metal prices have recovered from their correction earlier in the week, with gold currently sitting at USD $1,234oz, whilst silver last traded at USD $14.84oz. The moves cap what has been a great month for gold in particular, with the yellow metal up by over 2.3% in USD terms for October. Silver was essentially flat, with the Gold to Silver Ratio (GSR) increasing from 83:1 to 85:1 during this timeframe.

Precious metal prices have held their ground this week as global stock markets continued to crater. Gold is currently sitting at USD $1,233oz whilst silver is at USD $14.74oz, both largely uncharged on the week. In local currency terms, gold is sitting just below AUD $1,750oz whilst silver is just below AUD $21oz, with the Australian dollar last trading at USD $0.7078.

Precious metal prices have consolidated last week’s strong gains, with gold currently trading at USD $1,225oz, whilst silver is sitting at USD $14.55oz. In Australian dollar terms, gold and silver are sitting at $1,728oz and $20.60oz respectively, with the AUD again falling below USD $0.71. Overnight, we saw more volatility creep into equity markets, with the S&P 500 down nearly 1.50%, whilst the NASDAQ fell over 2%. European stocks were also in the red, with the DAX down 1%, whilst losses were also seen in Asia.

Gold prices soared overnight, with the price of the yellow metal last trading at USD $1224oz, whilst silver is now sitting at USD $14.66oz, with the yellow metal now on track to close up for the week, after a sharp decline saw the price pull back below UDS $1185oz just three days ago. In Australian dollar terms, gold has well and truly reclaimed the AUD $1700oz level, and last traded at AUD $1722oz, whilst silver is back above AUD $20.50oz, with the local currency fetching USD $0.71.

Gold continues to battle the USD $1,200 level this week and we saw Silver catch a bid and hold the US$14.00 level comfortably. Eyes are on the Australian Dollar as it fell through key support this week and continues it’s bearish trend lower.

Until last nights price action, gold and silver had remained largely stuck within its recent trading range, and on track to a record a flat monthly return for September. However, after a sharp fall overnight (seen on the chart below in green), the yellow metal is currently trading at USD $1184oz, whilst silver is at USD $14.40oz, with the yellow metal now down close to 1% for the week.

Gold is currently trading at USD $1203oz, whilst silver is at USD $14.30oz, with the precious metal market continuing its recent consolidation. In Australian dollar terms, gold is trading at $1673oz, whilst silver is sitting just below $20oz, with the local currency sitting at USD $0.719, boosted of late by stronger than expected GDP and employment figures. 
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With the recent dramatic sell-off in the silver spot price, we no doubt have many investors scratching their heads as to what is happening in the silver market, and questioning whether the sell-off will continue. Gold has finished the week higher and at the time of writing sits at AUD$1,674.00 per ounce. Silver, though, has continued to go counter-trend and finished the week lower at AUD$19.89 per ounce – $14 per ounce in US dollar terms.

The gold price in USD fell by 3% in the first half of August, declining below critical support at USD $1200oz, though it has since bounced back above this level. The savage sell off represented the culmination of a four month drawdown for the yellow metal, with the gold price declining from near USD $1350oz over this period.

Depending on how you look at it, given what’s happened to precious metal prices in the past five weeks, as a gold market commentator, I either picked the very best or very worst of times to take several weeks away from work.

Precious metals have had a volatile week with the gold price in USD breaking south of 1,200 per ounce and absolute chaos in Forex markets saw the AUD/USD plummet to around US 72.00c. Gold in USD is currently in capitulation mode and dropped as low as $1,165 during the week.

Gold remained heavily oversold this week with a favourite long-term indicator well and truly in the buy zone with gold in the $1630 range.
 
The longer-term chart in AUD is above, and there are only a few times each calendar year where the Williams% oscillator will hit an oversold level -80 or less, on a weekly chart (circled at very bottom of above chart). About as simple as technical analysis gets, but if you look back on previous years where this oscillator was in the oversold zone, it is quite reliable for providing good price points to buy, or top up ones portfolio.
 
Not a crystal ball for predicting the future in any way, but what it does highlight are times of excessive price weakness, which usually provide short to medium term lows for the calendar year and the best price points to average in.  Signals occur only when the price rapidly deviates from a recent trading range, and the last time we were in this zone was back in July 2017 at $1,550AUD per ounce, and the best buying spot of the year.

Despite the Federal Reserve keeping interest rates on hold, Gold prices continued to ease this week, with further falls in our currency providing somewhat of a floor for AUD prices. The Federal Reserve indicated that the US would see two more rate hikes this year, with the most probable months being September and December. We saw some USD strength on the back of the announcement, which has the AUD/USD back at 0.7363.

In news this week the International Monetary Fund (IMF) has warned that the inflation rate in Venezuela could top 1,000,000% by the end of the year, as the country is in the midst of a hyperinflationary episode that trumps the Weimar republic episode post WW1.

Gold prices have fallen by over 1% this week, re-testing the USD $1240oz level, whilst silver has also declined, trading closer to USD $16oz, as renewed selling pressure hit the entire commodities complex this week.

Gold prices have rallied this week, with the precious metal complex possibly having completed its multi-month corrective period. The yellow metal, which had fallen by approximately USD $130oz since early 2018 (see chart below), found important support after trading as low as USD $1,238oz on the 3rd of July, and is now sitting closer to USD $1,260oz.

It’s been a difficult two weeks for precious metal bulls, with gold failing to hold support at the all important USD $1,300oz level late last week, before plunging to USD $1,275oz on June 15th, which you can see on the chart below.

The plunge, which took place about a day and a half after the Federal Reserve had gone ahead with a fully anticipated rate hike, erased any 2018 gains precious metal investors had been sitting on for the year, with both gold and silver now down in USD terms year to date.

David Stockman, director of the Office of Management of Budget under President Reagan and mas­ter of mazy budgetary arithmetic, joins Jim Grant for a scintillating discussion of fiscal and monetary matters, and a look at Central bank tightening in years to come.