Video-June-05-2013-Archives-Daily-Show
Video section is only available for
PREMIUM MEMBERS
|
Is A Slowdown Good For Gold?
In afternoon trading, gold has kept its nose above the 1400 mark, a key support level. Silver is essentially unchanged.
The action today was quasi-governed by mixed economic news out of the nationwide Beige Book, which summed up economic growth in the U.S. as "modest to moderate." Most regions and sectors showed growth. The Dallas region showed the best balanced growth.
However, the private survey of the employment picture, issued monthly by ADP always immediately ahead of the U.S. Labor Department's statistics (due out Friday), showed fewer than expected jobs were created in May. Economists were expecting 165K; we got 135K. This is not enough to put much of a dent in the 7.5% unemployment rate unless droves of people left the workforce. Most likely that will not come true since May is the big month for college graduations. So, we can add those newcomers to the long list of job seekers.
One of the more interesting details to emerge in the Beige Book is that in some regions and sectors, employers were having difficulty finding qualified workers. This is another indication that the recovery will be very rocky for those without an education or useful skills, but better-than-average for those with those qualifications.
A strong spot in the U.S. economy continues to be the service sector, which accounted for nearly all of the job growth reported by ADP. Manufacturing, which has been contracting, accounted for all the jobs lost.
The soft economic data pressured the U.S. dollar. Almost all of the small rise in gold today was due to that weakness. In fact, it was a quiet day in trading all around the markets - equities, commodities and bonds, although the face price of bonds went up. Summer doldrums are setting in, perhaps.
The equities markets should be watched closely by gold traders as issues of valuation, current performance and second half outlooks stream into the news. Overvaluation has indeed become an issue, pressuring stocks down.
Jack Ablin, chief investment officer at BMO Private Bank, said "The market is trying to come to grips with valuation. Where are the fundamental supports? The market became somewhat un-tethered from fundamental supports."
"The market has gone quite a long way without having much of a pullback," believes Kevin Caron, market strategist at Stifel. "The conditions are ripe for a pullback."
We will add a concrete prediction regarding when the Fed will initiate a significant pullback from QE3 efforts and when it might raise interest rates: 2014. We feel we are safe for the rest of the year, despite what others might say, although loose lips will continue to roil the waters for gold.
Throughout the world, stock indexes were on the decline and in the U.S. the yield of Treasury bonds continued their gradual shrinkage from earlier this month and in April.
If the equities pullback does occur - a decent bet as summer vacations approach and Wall Streeters and City of Londoners begin taking their holidays - gold may well be a major beneficiary. Do not look for a silver boom, however. Demand is slow for the gray metal because - no surprise - of the industrial slowdown. Common industrial metals are taking a severe beating overall. Alcoa is doing so poorly that it probably will be booted from the Dow Jones Industrial Average the next time a realignment occurs.
Wishing you as always good trading,
Gary S. Wagner - Executive ProducerMarket Forecast:As you will see in today’s video $1400 per ounce in gold is slowly becoming a support level. On a technical basis it is this support level that is so critical if we are to see a base form in gold prices and a end to this long dramatic correction we have been facing throughout 2013. We have mentioned many times in our current show that as long as the equities markets remain strong our sentiment is that liquidity will be pulled out of precious metals and into the equities markets. There can be no doubt but that is exactly what we have witnessed over the last three weeks of trading. However this week we begun to see small cracks emerge in the equities markets and a tentative top for the S&P 500. Today’s video will also explore possible levels that the S&P could correct to using basic Fibonacci retracement. It is our recommendation to maintain your current long position in gold, and stop placement. We are currently sidelined in silver trades and today’s video will explain why we are taking that position.
Video archives:http://thegoldforecast.com/video/april-2013-archives-daily-shows http://thegoldforecast.com/video/may-2013-archives-daily-shows
Market Sentiment:
Long gold @ 1400 stop below 1380
From the week of 05.31. 2013 COT LINK See previous weeks in Historical Commitments of Traders Reports. |
|
|
Gary S. Wagner - Executive Producer