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Powell Speaks and the Selling Continues

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Chairman Jerome Powell spoke at an event hosted by the Swiss Institute of International studies, in Zürich Switzerland. His outlook for the economy was positive stating that today’s U.S. Labor Department report indicated that the U.S. economy in terms of employment is healthy. He also said that his future outlook is likely to highlight his belief of continued expansion. Most importantly he said that the central bank is “not forecasting or expecting, a recession.” And that “Incoming data for the U.S. suggests that the most likely outlook for the U.S. is still moderate growth, a strong labor market, and inflation continuing to move back up.”

The FOMC meeting is set to begin on September 17th and conclude on the 18th, and based on the CME’s FedWatch tool there is a 91.2% probability that there will be a rate cut of ¼%. While the probability of a rate cut is 91.2%, the FedWatch tool is predicting there is an 8.8% probability that there will not be a rate cut. This is up from yesterday’s 5.4% probability that rates will remain unchanged.

As of 5:00 PM EDT both gold and silver are significantly lower, with silver losing 2.86% of value today a decline of $0.537, and fixing December futures at $18.27. Gold also traded lower on the day losing $10.50 and is fixed at $1515 per ounce after factoring in today’s decline of .69%. Market sentiment continues to see a disruptive exit by Britain, and the unresolved trade war between China and the United States remain forefront in the eyes of bullish gold traders. Another factor is the almost $1 trillion budget deficit for last year and the belief that the budget deficit will swell to over $1 trillion.

Considering how much both gold and silver have gained in value recently with gold’s gain of more than 18% this year, and silver gaining even a greater percentage of growth, I believe market participants have been waiting for an opportunity to take profits which indicates that the selling pressure could continue next week.

According to MarketWatch, Joni Teves said in the call of the day, “positioning in silver is lean, suggesting that there should be room for the uptrend to continue. While net longs on gold were at record levels, silver was 74% of the record. Plus, silver trading on the Shanghai Gold Exchange has picked up.” That said, Teves said silver’s higher volatility implies a “nimbler attitude” as opposed to strategic gold positions.

The gold silver ratio has moved up from recent lows this week to close unchanged on the week as it is currently at 82.83. Although it is still below the 50-day moving average. The recent movements on Thursday and today took that ratio from 79.34 to today’s ratio of 82.83.

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Wishing you as always, good trading,

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.