Video-June-19-2013-Archives-Daily-Show
Video section is only available for
PREMIUM MEMBERS
|
The Parallel Universe
Of the drop of $17 today in gold, about 1/3rd can be attributed to the rise in the dollar. As the old saying goes: You can't fight city hall.
Our take on the dollar rise and the modest "regular trading" drop in gold - and silver - is that analysts jerked their knee after Bernanke spoke at 2:30 New York time today. Boiled down to its essence, the chairman's message was this: IF the input of data warrants, the Fed MAY begin tapering bond purchases later this year.
If and may.
The bigger word of the two short conditionals is "if." There seems to be some confidence in central bank circles that the economy is on the road to moderate growth. But let's ask this question: how much can it be growing if inflation is rising only 1.2% per year? Our answer is, "not much." Why do you think the Fed inflation target is 2%? (The Fed uses their own internal inflation index, not the one we generally see; the Fed scale would translate into a 2.3 to 2.5% inflation rate target.)
Unemployment is also not on its way down but on its way up.
Gold is down today about 1.2%. The Dow is down 1.35%, the S&P down about 1.39%. The NASDAQ got off a little lighter with only a 1.1% decline.
The benchmark 10-year Treasury note was up .17% and from some corners there is talk the yield will rise to 3% later this year.
Both crude oil and Brent were up only a trace. Many farm commodities have been booming. Hog prices have reached a record.
So, is the economy growing? It is if you're in agribusiness. A weak dollar is creating a big market for grains, animals, lumber and juices abroad.
Early this year we predicted that the tapering of the $85 billion per month asset purchases that make up QE3 would not occur until at least October. We'll go out on a limb and say now that 2014 will be the first solid opportunity for a scaling back to occur. If and may.
Summer is traditionally a time when unemployment rises because suddenly there are at least 3 million new college graduates and another 8 million high school graduates on the market. They are not measured in the figures we see in Labor Department reports. We do know, though, that what the newest job seekers do is displace older job seekers (above 40) and job seekers whose skills are stale. Additionally, once again defying expectations, Baby Boomers just aren't retiring in droves. In fact, for those with upper level skills, more Boomers returned to the job market in the first quarter of this year than left. (Emphasis on high skill workers, please.) The generation in the middle is feeling the squeeze.
Additionally, factories lay off in the summer months. The only bright spot should be construction and possibly tourism.
In short, don't look for the unemployment rate to plummet to near 7% by October, which would be a threshold for tapering.
Finally, as happens so often, the immediate impact of Fed action (or inaction) is often due to misguided shotgun analysis. Regardless of fears, QE3 will continue for 4 more months. That's 4 x $85 billion, which equals $340 billion, more than a third of a TRILLION.
Atop all this, it was very clear that interest rates probably will not rise until the end of the first quarter of 2015, or later.
Final question, one that would take at least 200 pages to answer: Why is the U.S. growing so slowly? (And Europe, Japan and other highly-developed economies?)
In his first few sentences, Ben Bernanke took Congress and the President to task on a lack of a useful fiscal policy. He's got that right.
Wishing you as always good trading,
Gary S. WagnerExecutive ProducerMarket Forecast:As we witnessed the conclusion of the monthly FOMC meeting we witnessed a continuation of downside pressure across the board in the precious metals markets and drastically lower prices in the equities markets. Yesterday we spoke about the fed revealing when and how they would begin to taper our current quantitative easing program. On the surface it appears as though the tapering will begin towards the end of this year with a conclusion to our current bond purchases by the end of 2014. But that is on the surface, as more of the actual minutes are released we see a much more complex picture developing. But in essence we have seen the current fed’s plan laid out. Since the end of last week we began to talk about strategies within the precious metals markets that included the writing of call options, and simply playing shorts in the market or selling the precious metals. For those who been writing call options the premium has deteriorated to a great extent giving your current investment profits. Let’s see how the market reacts at its new current area of 1360, and as you will see in today’s video we will look at the next two levels of support with great interest. Video archives:http://thegoldforecast.com/video/april-2013-archives-daily-shows http://thegoldforecast.com/video/may-2013-archives-daily-shows
Market Sentiment: Bearish, Range bound to lower prices expected.
Support at 1360 has been tested and broken resistance now ay 1360 and 1380
From the week of 06.07. 2013 COT LINK See previous weeks in Historical Commitments of Traders Reports. |
|
|
Gary S. Wagner - Executive Producer