Lather. Rinse. Repeat.
The number of Americans filing for unemployment unexpectedly leapt to a two-month high in the week ended July 6, the Labor Department indicated today. There is more fuel to the fire for Fed members wavering about tapering QE3. We keep asking ourselves: If one of the primary goals of the mortgage and bond buyback known as QE3 has been to push unemployment down, why would anyone with a whit of sense talk about ending it now?
Anticipation of inflation? Ideology? A disbelief in bedrock Keynesian methods? It is really astounding. Maybe when the unemployment rate nears 7% tapering should be considered seriously, although in a socially conscious, modern democracy, 6, or even 5% unemployment is simply not acceptable.
As reported in Bloomberg: "Gold got a boost after Bernanke gave the impression that tapering is currently a distant dream," Carlos Perez-Santalla, a New York-based broker at Marex North America LLC, said in a telephone interview. "Today's data further cements the fact that the economy has not completely recovered."
The dollar took a serious tumble and is making up about half of gold's gain. The weakening dollar is also accounting for about 1/4th of silver's rise, which seems to have found some strength of its own apart from gold or currency fluctuation.
The recent rise in the dollar has come on the back almost exclusively of Bernanke's comments in May and June, so it should come as no surprise that, in what is perceived as a reversal of comments on QE3, the dollar would shrink back to non-steroidal size.
The dollar fell broadly against world currencies - euro, yen, Swiss franc, and the Aussie dollar.
"Bernanke was more dovish than expected. Nonetheless, he was also repeating what he has been saying all along and the market may have over-reacted," said Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo.
We have said just that for weeks now. We pore over the actual minutes and follow-up comments the FOMC makes. Clearly there is some conflict in the inner sanctum, but there is certainly no overwhelming sentiment to stop QE.
There is a subplot, however. Federal reserve Governor Elizabeth Duke, who had taken a lead role on housing issues at the U.S. central bank, submitted her resignation today, effective Aug. 31, the Fed said. Governors have a permanent vote on the Federal Open Market Committee (FOMC). They are appointed to 14-year terms. Duke, who has been a governor for 5 years, had been serving out another governor's term.
Duke's resignation is important because of her connection to the housing and community banking sectors. She has been a strong voice arguing for revisions and rescues of the home mortgage issue facing the U.S. economy.
In a statement released today, Chairman Ben Bernanke said of Duke, "She brought fresh ideas grounded in her deep knowledge of the banking industry and the real-world dynamic between borrowers and lenders. I wish her the best in her future endeavors."
She, in turn glowed when speaking of Bernanke's handling of the recession and the 2008 economic crisis.
Duke said that the Fed, under Bernanke's guidance had "met every test in a thoughtful, innovative and effective way."
Bernanke will surely miss such a staunch ally, especially in her specialty field.
In related news, China's Finance Minister, Lou Jiwei, thought that the Fed should be "highly alert" to the global impact from reducing stimulus by tapering the $85 billion in monthly bond buying known as QE3.
"We support the Fed's consideration of exiting from QE, but it should heed the impact of its policy on the global economy and financial markets," said Lou at a two-day U.S.-China Strategic and Economic Dialogue in Washington. "U.S. policy not only affects the U.S. but has a spillover effect on the global economy." He stressed this was especially true for emerging markets.
Circumspect, but transparent nevertheless. He should have added a "pretty please with sugar on top." Watch China's economy come back from its staggering performance of late as the tapering issue gets put on the back burner.
Wishing you as always good trading,
Gary S. Wagner
The beauty of technical analysis is that it can filter the conflicting forces and assumptions into a pristine mathematical map. Although we saw the market hit a new low last week when gold traded to an intraday low of 1185, it would not be until we receive technical confirmation that we had a reliable signal to base a trading strategy upon. We spoke about 1274 as that resistance area that needed to be taken out, yesterday’s sharp breakout to the upside to just that. Yesterday’s release of the FOMC minutes moved both the equities markets in the precious metals markets sharply higher.
It is understandable that we get a mixed bag of signals typically from the release of such data. As analysts dissect each statement it’s not unusual to see a tremendous increase in volatility and range. Therefore such fundamental events need to be filtered through hard-core technical modeling. This is our current scenario. As the fed conveyed that more loose monetary stimulus is ahead, they confirmed what many of us had already assumed: we may see the fed begin to taper much later than previously expected. These fundamental and technical factors were precisely what triggered are I signal today. On today’s video we will not only define our stop recommendations but are upside targets in both gold and silver.
Proper Action: Long gold @ 1285 stop below 1266
Long Silver @ 20.10 stop below 1960
COT LINK See previous weeks in Historical Commitments of Traders Reports.
Gary S. Wagner - Executive Producer