Precious Metals started Friday's session on its back foot, fueled by profit-taking and traders' unease ahead of the PPI data. Upon the release of the data, Core PPI m/m jumped to 0.4% vs 0.2% expected, while PPI m/m jumped to 0.2% vs 0.1% expected. The reaction in the Precious Metals was a sharp sell-off, with Silver trading down $1.00/oz while Gold futures briefly dipped below $2400. The response to the swaps covering interest rate expectations maintained a 90% chance the Fed would make its first interest rate cut at the September 18th meeting.
Shortly after the data release, Precious Metals paired its losses as the US Dollar index and continued to break down along with two-year treasury yields. Next week, traders will monitor Fed speakers with Jerome Powell on Monday, followed by retail sales on Tuesday, with expectations of -0.2%. We will see Industrial Production and Beige Book on Wednesday, followed by Thursday's Initial Claims data and Philly Fed Manufacturing Index.
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Daily Gold Chart
There are two questions that should be on every Gold trader's mind. How much of the interest rate cuts are priced into the market, and when will the ETF investors return to the market? I believe we could see ETF investors return on a technical breakout above the recent all-time highs.
Traders love the chase momentum, and the headlines of new record highs should bring Gold and Silver back on the minds of those looking for $2500 Gold and $40 Silver.
Gold has built a solid foundation above $2300/oz and should be used as your "line in the sand' for risk management purposes. Those actively trading in Gold may use the July 9th low at $2356 as your first warning sign that something is a miss.
For our clients, we will add exposure near the $2400, $2380, and $2365 levels as a "dollar cost averaging approach." If you would like to be up to date on the developments and strategies we are recommending to our clients, please register for a Free Guide by clicking Trade Metals, Transition your Experience Book.
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