Gold, silver and oil prices plunged alongside stocks Tuesday
as weak corporate earnings reports prompted investors to flee
risk assets and buy safe-haven Treasuries. In addition, the
dollar rallied on short-covering and a sell-off in the euro,
depressing prices of dollar-denominated commodities.
Spot gold prices fell 1.36% to $1,706.90, a new six-week
SPDR Gold Shares (
), tracking a tenth of an ounce of bullion, gapped down 1.17% to
165.62. It broke below its key 50-day moving average for the
first time in nearly three months. The next level of price
support lies at its 200-day line at 161.38, down 3% from its
Market Vectors Gold Miners ETF (
) fell 2.38% to 51.18. It's holding above the 50-day line, which
is bullish. It also has a strong IBD Relative Strength and B+
Accumulation/Distribution Rating. That shows it's outperforming
76% of the market and institutions are buying more shares than
PowerShares DB US Dollar Index Bullish (
) gapped up 0.55% to 21.93. It's still trading below its 200-day
moving average, which is bearish.
SPDR S&P 500 ETF Trust (
) slipped 1.22% to 141.65. It broke below the 50-day line but
appears to be finding price support at its August lows.
iShares Barclays 20+ Year Treasury Bond (
), the most widely traded Treasury ETF, rose 1.07% to 122.25 as
benchmark 10-year bond yields fell 0.04% to 1.76%.
Traders are seeking shelter ahead of the Federal Open Market
Committee announcement Wednesday, said Timothy Evans, chief
market strategist at Long Leaf Trading Group in Chicago.
"This meeting can clearly provide the catalyst the market is
looking for," Evans said. "Additional easing in some form could
provide the market the optimism needed to reverse the
sluggishness of late. If the market finds disappointment with no
new news of easing out of the Fed, we are advising our clients to
be buyers in the market."
Evans added: "The lack of follow through following the
euphoria that came to the market in anticipation of QE3 is
bringing a lot of profit taking as traders reassess the market
and look for the next catalyst for market direction."
As traders unload their commodity and stock holdings, they get
back dollars, driving up demand for the greenback.
"Long-term investors are being forced to liquidate more of
their bullish positions in precious metals in order to free up
margin for their losing equity positions," Fawad Razaqzada, a
technical analyst at GFT, wrote on FX360.com. "But the
fundamentals remain supportive for gold and silver and once the
phase of weakness is over, the metals could stage another rally
and potentially reach unchartered territories."
Walter de Wet, an analyst at Standard Charter, is looking for
gold to find price support at $1,700 an ounce and believes lower
prices will attract bargain hunters.
"We continue to see a steady improvement in gold physical
demand out of Asia as gold moves lower," de Wet wrote in his
daily commodities report. "We expect buying strength to improve
as the gold price moves lower."
Gold remains in a multi-year uptrend and is still trading
above its 200-day average, where it's found support in the past.
It has only fallen 5% from its 52-week high, which traders
consider a normal pullback.
Silver Hits New Six-Week Low
Following the yellow metal's lead, spot silver prices dropped
2.40% to 31.77 an ounce.
iShares Silver Trust (SLV) gave back 1.94% to 30.78. It also
fell below its 50-day line to a six-week low.
Global X Silver Miners ETF (SIL) skidded 2.97%. It sports a
strong IBD RS and Acc/Dis Ratings of 89 and A-.
Crude Oil At 13-Week Low
November crude oil futures fell $2.43 to $86.22 a barrel.
United States Oil (USO), the largest ETF tracking West Texas
Intermediate (WTI) light, sweet crude oil, gapped down 2.64% to
32.03. It has been weakening more and more after falling below
its 200-day line a month ago. It has a very weak RS Rating of 19
and low Acc/Dist Rating of D-, indicating institutions are
heavily selling more than buying.
"Amid general pessimism over the prospects for the global
economy, the restart of the TransCanada Keystone pipeline weighed
further on WTI (West Texas Intermediate oil)," Marc Ground, an
analyst at Standard Charter wrote. "Another delay in the restart
of the Buzzard field in the North Sea, together with Shell
declaring force majeure on its Nigerian Bonny Light and Forcados
exports, limited the downside in Brent (crude oil traded
Weak readings in European consumer confidence could lead to
further weakness in the euro, which is bullish for the dollar and
bearish for commodity prices.
"Unsurprisingly, today's advance reading of the Eurozone
consumer confidence is expected to remain weak at -25.9 for
October (the September reading was also -25.9), weighed down by
the persistently poor current economic conditions and economic
outlook components," Ground wrote.
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