Market Rundown | Silver Holds, Gold Rolls
Silver Technical Analysis, Goldman, and Bloomberg
Housekeeping: A little later than usual today, and so a little extra given the size and implications of yesterday’s CPI reaction. Cheers
Market Rundown:
Good Morning. The Dollar is down 40 bps. Bonds are mixed with short dated rates higher. Stocks are up between 40 and 70 bps. Gold is down $1.40. Silver is up 14 cents. Copper is down 1%. Crude is up $1.70. Nat Gas is up 5+%. Grains are mixed and Crypto is up small likely in sympathy with stocks.
Markets as of 11 a.m. ET…
Yesterday’s CPI came in slightly hotter that expected, which had the pronounced effect of destroying every hope of rate hike repeal that had been percolating. Essentially the CTA stock buyers got crushed, and those that sold it to them (macro hedge funds we’re told) did well.
Even though inflation came in stronger than expected, it is being argued that CPI starting to roll over lower based on the component breakdowns. But this all feels like both sides talking their books. The increases were in Rent, and Food- both of which will not go away in a month. The decreases were in Energy related factors- which could get better or worse quickly. RaboBank’s Mike Every:
Regardless, what we saw yesterday was a 0.1% m-o-m rise in headline CPI against expectations of a -0.1% print, so the y-o-y rate only declined slightly from 8.5% to 8.3%; and core CPI soared 0.6% m-o-m vs. 0.3% expectations to increase from 5.9% to 6.3% y-o-y. Despite the drop in gasoline prices, the contribution from rents soared; so did grocery prices; so did health insurance. Even the BLS’s new core core core measure, which takes out energy, food, shelter, and used cars and trucks was up further to well above 6% y-o-y.- Source
Based on Today’s PPI , which also came in hot, the inflation is just working its way through the system now and is starting to diminish in intermediate good demand. Nobody knows now however. For instance: today’s PPI showed goods lower and services higher. When we were told by Zoltan Pozsar the Fed’s rate hikes would target Service related inflation before Goods inflation.
Silver is Supposed to Underperform Gold in a Selloff right?
Today’s activity in the nutshell is a small bounce of yesterday’s trampling. Except Silver….. Silver is very strong relative to Gold in this selloff. And while that could change tomorrow we know, it is indicative for the moment that there are still too many shorts in futures. Further, there are fewer speculative longs to puke in bearish news than before, admittedly a double-edged sword.
Excerpts:
Goldman: A long Op-Ed style read that includes diametrically opposed views on the question surrounding how high unemployment will go as a result of getting inflation down. One camp says much higher. The other camp says its very possible to avoid a spike merely by a decrease in unfilled job openings.
We covered some analysis of this here and here admittedly on the “nay” side prior. This is now the mainstream economics topic and pretty interesting to read the disagreement. Some data and charts as well.
Silver Technical Analysis: “Monday’s action managed to take out two prominent prior momentum highs going back to April. Today’s [Tuesday’s] pullback and settlement in no way offset that shift. It will be interesting over the next several days to see if the action from Monday persists with an upward trend bias.”
BBG- Commodity Big Picture In Five Charts: Their analyst makes the case for commodities to come under pressure of the strong dollar and “ toward enduring deflation as the path of least resistance for commodities”.
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