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Deflationary Pressures Are Everywhere This Morning

|Includes: CLF, SCCO, iShares Silver Trust ETF (SLV), VALE
When the precious metals decline, there is a very good chance that deflation is taking hold. This morning, both gold and silver are declining sharply lower. The SPDR Gold Shares (NYSEARCA:GLD) are trading lower by $4.49 to $161.96 a share. This is a decline of 2.60 percent for the GLD and this signals deflation in the stock market. The iShares Silver Trust (NYSEARCA:SLV) is trading lower by $1.00 to $30.33 a share. The SLV is declining lower by 3.25 percent and this is also signaling deflation in the market today. Traders can watch for short term intra-day support on the GLD around the $160.40 area. The SLV will have some short term intra-day support around the $29.80 area.

It is not just the precious metals that are coming under selling pressure today, all of the leading industrial metal stocks are declining this morning. Leading industrial metal stocks such as Cliffs Natural Resources Inc (NYSE:CLF), Vale SA (NYSE:VALE), and Southern Copper Corp (NYSE:SCCO) are trading sharply lower. These stocks will likely see intra-day bounces when the U.S. Dollar Index pulls back or declines. This morning, the U.S. Dollar Index futures (DX Z1) are trading higher by 0.68 cents to $79.36 per contract.

Traders and investors should continue to follow gold and silver as a leading indicator for the stock market. Often, gold and silver will lead the stock markets higher and lower. Gold is certainly pointing to deflationary pressures today. Therefore, until gold can catch a bid it is prudent to expect the major stock market indexes to remain under pressure. 

Nicholas Santiago