The prices of gold and silver slid today as traders and investors took profits they had accumulated last week, particularly from the mini-rally based on the poor jobs number issued by the U.S. department of labor.
It is difficult to see what beyond this profit taking - and a concomitant rise in the dollar - is weighing on gold. Those who sold today made a specific bet that the dollar would rise and felt they would ride that wave. So, many of those traders made a split trade, you can be sure, trading gold down and the dollar up.
The dollar strengthening is due to an early analysis of the Bank of Japan's monetary easing. Many are thinking that the move by the BOJ will depress the yen and push the dollar higher. It probably will to a small extent, but it will also help stimulate trade and help jump start the world economy, which is still badly winged.
Other gold-positive fundamentals remain in place, although since Monday gave us no toothsome news for the precious metals, traders fell back to worrying and wanted to wring out profits, as we said above.
Europe is in true dire straits. The U.S. is recovering, but sluggishly. China appears to be in the same boat as the U.S. And Japan we just reviewed. Those four entities account for well over half the world's GDP.
It would have been more rational for the precious markets to have zeroed in on what Eric Rosengren, President of the Boston Fed, said last Friday in an informal setting, the Boston Children's Museum.
"If spells of unemployment have a persistent impact on income, wealth and home ownership, then a more aggressive response to persistently high unemployment rates is warranted," said Rosengren, a voting member of the Federal Reserve Board this term.
He added, "More rapid economic growth is likely to not only reduce the unemployment rate, but also reduce some of the collateral damage the economy may otherwise face from the spells of long-duration unemployment. Continued accommodative policy, such as continuing our asset purchase program through this year, is an appropriate response to labor market scarring."
So, fundamentally we have scarcely changed unless it is to the better for those who favor current easing policy, or even more easing. As precious metals traders, we are in favor.
As always, wishing you good trading,
As always, wishing you good trading.
Gary S. Wagner
Executive Producer/The Gold Forecast
On Skype Gary.S. Wagner
Market Forecast: We issued a buy trigger today: Today’s lower pricing in the precious metals markets can be expected after the dynamic rise that we saw in Friday price activity. However it must be said that during a key reversal you would typically get follow-through on the next trading day. That certainly is not the case today. Therefore it is our recommendation that we trail stops up tight to lessen the risk and exposure on this current trade. The other option is to simply take profits, although they are small profits their profits nonetheless. Proper action will define where our stop recommendations are if you go that route.
See previous weeks in Historical Commitments of Traders Reports.
Maintain long in gold 1563
Maintain long in silver 27.02
Gary S. Wagner - Executive Producer