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James Hyerczyk
Gold & Silver
Gold & Silver

Gold futures settled higher on Friday after hitting a fresh six-week low early in the session. The market was helped when the Euro rebounded from its low and the U.S. Dollar Index gave back some of its gains. However, the biggest influence on gold was likely the recent solid performance in the silver market.

December Comex Gold settled at $1196.20, up $8.80 or +0.74%. Its low for the session was $1184.30.

The rally in gold produced a potentially bullish daily closing price reversal chart pattern. Additionally, it was very similar to the reversal on August 16, following a trade to $1167.10. That chart pattern was fueled by aggressive short-covering by hedge funds and money managers, who currently sit in net short positions.

Daily December Comex Silver

Silver

Silver futures surged to their highest level since August 30 on Friday. Its divergence from gold is making the metal an attractive asset. Gold, for example, hit its lowest level since August 17, while buyers were moving silver sharply higher. At this time, gold is being led higher by silver, which means the “tail is wagging the dog.”

December Comex Silver settled at $14.690, up $0.400 or +2.80%.

Silver is being supported because it is relatively cheap. Additionally, it could be attracting buyers due to inflationary expectations and industrial demand during the current economic expansion. As of Friday’s close, the gold-silver ratio is about 85:1. This makes it a more attractive asset relative to gold. This may be just enough to bring in the buyers. Now that the news is out there, look for heightened volatility.

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U.S. Economic Data

The Personal Consumption Expenditures (PCE) index excluding the volatile food and energy components was unchanged in August after rising 0.2 percent in July.

The Commerce Department said on Friday consumer spending, which accounts for more than two-thirds of U.S. economic activity, rose 0.3 percent last month after an unrevised 0.4 percent gain in July. August’s increase in consumer spending was in line with economists’ expectations.

In August, personal income rose 0.3 percent after increasing by the same margin in July. Wages jumped 0.5 percent. The saving rate was unchanged at 6.6 percent last month.

Chicago PMI came in lower than expected at 60.4. The market had priced in a reading of 62.3

U.S. Consumer Confidence

U.S. consumer sentiment came in just under expectations in the final reading of September. Nonetheless, the index remained near all-time high levels.

The University of Michigan’s monthly survey of consumers hit 100.1 in the final reading of September, below the 100.8 expected from economists. Sentiment among consumers rose from August’s final reading, when sentiment hit 96.2.

“Consumer sentiment remained at very favorable levels in September, with the Index topping 100.0 for only the third time since January 2004,” Richard Curtin, chief economist for The University of Michigan’s survey, said in a statement.

“All households held very optimistic expectations for improved personal finances in the year ahead, the most favorable financial prospects since 2004,” Curtin added.

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