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The Tide Rolls For Gold And Silver
Gold and silver surged today for a host of reasons, some similar some slightly different.
Mixed economic news from the U.S. seems to have pushed the metals into their initial morning rise. After fighting off "good news" about a small drop in unemployment claims, traders turned to the Consumer Price Index, which was flat both in its wide-cast version and core version at +0.2%.
U.S. industrial production came in flat for July the Federal Reserve reported, missing expectations for a 0.3% increase.
A separate Federal Reserve report showed that manufacturing activity in the Philadelphia-region expanded at its slowest pace in four months in August, while manufacturing activity in New York state fell mildly but unexpectedly.
The Philly Fed Manufacturing Index fell to 9.3 in August from 19.8 in July, falling far short of market forecasts for a 15.0 reading, actually a disaster.
The Federal Reserve's Empire State (NY) Manufacturing Index fell to 8.24 in August from 9.46 in July, bursting the expectation balloon that foresaw a gain to 10.00.
All this news hit the dollar hard. Dollar weakness is accounting for more than 1/3rd of the rise in gold and about 1/4 of the rise in silver.
One would think that silver would have taken the industrial news harder, but many analysts are saying that silver has been exceptionally oversold and it appears that now the shorts have been combed out of the market, thus allowing the bull to take clear field.
The dangerously fluid situation in Egypt has added some safe haven buying to the party. That country appears to be headed for all out civil war. This could threaten oil supplies. A strike at oil facilities in Libya; an explosion at a pipeline in Iraq and the civil war in Syria are adding to the quivering and sweating. The instability will drive cash that's lying fallow all over the Middle East into safe haven instruments. Gold is the primary candidate.
A report in the Times Of India today tells us many things about gold and that country:
"Gold imports by India, the world's largest buyer, more than doubled in the second quarter of 2013 after a slump in prices in April spurred demand for bars and coins, according to the World Gold Council.
"Inbound shipments climbed to 338 metric tonnes in the three months ended June 30 from 153 tonnes a year earlier, the London- based, producer-funded group said in a report on Thursday. Total demand rose 71% to 310 tonnes, with consumption of bars and coins increasing to 122 tonnes from 56.5 tonnes and sales of jewelry gaining 51% to 188 tonnes, the council said."
The story tells us that the gold and silver duties imposed by India's central bank are not working. It tells us that smugglers are more efficient than the law enforcement agencies trying to stop them. It tells us that the status of the rupee is so dire that people are ignoring their government's silly policy and buying hard assets in the form of precious metals to protect their wealth.
Interestingly, the sentiment about the economic news is still split. Equities in New York fell more than 1%. U.S. Treasuries yields rose to their highest level in two years, with the benchmark 10-year note topping 2.8% for the first time since August 2011. Some of the money leaving equities is going to gold and silver, some to Treasuries.
"It's a set of data that will add to the September tapering conversation," Tom Porcelli, chief US economist at RBC Capital Markets in New York, said of the prospect for the Fed beginning to reduce its bond purchases. "The bottom line is that the tapering will probably happen either in September or October, but it will be a gradual one."
That is one opinion. However, we should be aware that lower unemployment claims are a far different beast than rising employment rates. We await that number eagerly. And the fall in industrial production does not bode well for anyone, especially with the dollar so weak. Inflation seems to have shown a little life in July, but that is probably mostly due to the sinking dollar.
Wishing you as always good trading - and that wish came true this week,
Gary S. Wagner Executive ProducerMarket Forecast:Today’s major upside move in the precious metals markets has given us further technical evidence that the lows in gold at 1181 were most likely the bottom of the market. Secondly today’s move above 1349 in gold is extremely significant. It has been my belief gold had to, on a closing basis move above that critical resistance level (1349), to negate any model which looked for gold moving to lower pricing. This morning we sent out a trade alert with a specific recommendation to raise stops in both gold and silver. We also suggested taking profits on part of your position if you added to that position on Tuesday. Our current Elliott wave model places us near the upside target of our current wave three. This model was based upon wave one and wave three being about equal in size. However it is very possible that wave three could extend to 138 0r 161 % of wave one. Today’s video will highlight our current strategy, and in the upcoming shows we will look at different upside targets depending on how the current market scenario unfolds.
Proper Action: We raised stops today .
Move stop in to below 1350 in gold (for those that added to position when I suggested on Tuesday could take profit on part of that position)
COT LINK See previous weeks in Historical Commitments of Traders Reports.
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Gary S. Wagner - Executive Producer