Master of the S&P Howard Silverblatt explains how two groups are controlling the market right now.» Read More
After putting in a $35 range shortly after midnight, gold stayed quiet through the Thursday's day session. The market tested a low of $1,276.10, just below support, but was unable to follow through before closing at $1,280.
Late in the day on Thursday, the Dollar Index gave up some of its gains, which has allowed it to show green on Friday's session by recovering those late losses. We are seeing slight pressure on commodities priced in dollars, and gold has moved back through support—trading close to $1,275 with a low of $1,272.60 so far.
(Read More: The Secret Sign That Gold Has Bottomed)
Silver has suffered a gut-wrenching year, losing a third of its value. But the CFO of one of the biggest silver miners says possible production cuts could soon provide a floor for the battered precious metal.
According to Pan American Silver's most recent quarterly report, the company experienced a total cost of $17.29 per ounce of silver mined in the first quarter of 2013. With the silver price recently dipping down to $18.18 per ounce at the end of June before recovering, the company's margin on production is starting to look awfully thin. That, in turn, could have an impact on the company's operations.
"The recent drop that we've seen in precious metal prices has definitely been challenging the industry, and in our case we have a portfolio of mines, and some are lower cost and some our higher cost. And when we look across the industry, for sure, we see that the current price is challenging those higher-cost operations," Pan American Silver CFO Rob Doyle told "Futures Now" on Thursday.
"We are seeing some supply-side response to the recent drop in precious metal prices," Doyle said. "So I think fundamentally, at some point, there will be a floor that comes into play."
In other words, a lower silver price could cause miners like Pan American Silver to shut down some of their most expensive mines. This, in turn, could provide a floor for the silver price, because supply would eventually be reduced.
But what has caused the incredible silver sell-off? Doyle blames technical factors and lemming-like selling.
"The market is certainly dominated by some large technical players, and I certainly believe that the precipitous drop we saw in precious metals have somewhat fed on itself," he said. "As the market moved lower, the moves were so vicious that it fed on itself and created more selling."
(Watch full segment: Where Silver's Going: Silver CFO)
Not all energy futures are rocketing higher along with crude.
After an eight-day consolidation pattern, August natural gas futures have broken down and appear headed for another leg lower.
The fundamental story backs up the downward move. The Energy Information Administration reported a sixth consecutive week of above-average natural gas inventories, which is obviously bearish for the commodity. U.S. output has risen for six years straight, in what seems to be an enduring trend.
Crude oil is rising to a fresh 14-month high for a fifth straight day. This after inventory data showed a bigger-than-expected decline in crude oil stockpiles. Geopolitical tensions also continue to weigh on the market, as Egyptian concerns have elevated the "risk premium" that is priced into oil.
Interestingly, the spread between U.S. crude oil and the Brent benchmark used internationally has narrowed. Brent now costs just $3 more than WTI crude per barrel, which is the lowest spread since December of 2010.
Two recent developments could spike gasoline prices in the near future.
The first is Saturday's devastating derailment of a train carrying a load of crude to an Irving Oil refinery in Canada. The St. John's refinery has the capacity to process 300,000 barrels of crude a day, making it Canada's largest. And most of that refining capacity goes toward making gasoline. The tracks that run these trains were heavily damaged, and officials say it will take weeks or longer to fix them.
The second development is the formation of the season's first tropical storm, Chantal. This in itself has had little-to-no impact on refiner operations, but it does remind traders that it is hurricane season, and you don't want to be caught short when a disruptive storm is coming.
Earnings and the future of quantitative easing: the market's two biggest concerns. But they're one and the same to Doug Kass, president of Seabreeze Partners Management.
"I see a false economic dawn in the U.S. and around the world," Kass said on CNBC's "Futures Now," adding that the markets and economic data have been boosted by the Federal Reserve's monetary policies. "The bottom line is that interest rates are a very important raw material in the U.S. economy. As they rise, it affects everything—profits, capital spending, hiring."
Rolling back QE will have serious ramifications, he said, and for him there's no question that it's coming. "I think tapering is a given, probably in September," he said.
In the meantime, the earnings picture looks negative to Kass, because easing has obscured the truth about how weak corporate profits are.
"I don't expect earnings to meet consensus expectations," he said. "The singer Robert Palmer was 'Addicted to Love.' Unfortunately, our corporations, our consumer and even are government are addicted to lower interest rates."
Looking for a fundamental reason to own gold? Keep looking.
Simply put, the fundamentals do not look good for the metal. Inflation is tame, interest rates have risen and stocks remain buoyant. Gold has lost more than 30 percent of its value over the last nine months, which has washed out many of the weaker hands.
(Read More: Gold's Jobs Nightmare)
Crude has had an incredible run over the past two weeks. But I'd think twice before hopping aboard this speeding train.
At today's highs, August crude oil futures was up more than 12 percent in two and a half weeks. It would be easy to attribute this rally to tensions in Egypt, but that would tell only part of the story. Both crude and S&P futures began their move on June 24, and although the move in stocks hasn't been as dramatic, it's reasonable to assume that part of crude's move is due to a prevailing risk-on mentality.
(Vote in our poll: Has Oil Hit its High for the Year?)
Gold bugs are doing their best to defend $1,200.
Gold retested $1,200 on Friday, trading down nearly $50 from the highs following a much-better-than-expected employment report. We are not seeing the weakness follow through in this session, as the market has stabilized and is retesting the $1,233 retracement level, which will now serve as resistance. A close above $1,233 on Monday will signal a likely consolidation back toward $1254.60 to $1,255.70 this week.
Friday's jobs report led the U.S. dollar to soar to new swing highs, putting pressure on commodities priced in dollars, which we saw clearly in the metals. On Monday morning, the dollar was slightly in the red, which was giving the metals a breather.
(Read More: Gold's Jobs Nightmare)
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