Gold recovered $20 of yesterdays' big loss in wary Friday trading. Analysts are still sifting and traders are still shaking in their boots. But, as we said yesterday, the best time to make money is when there is blood in the streets.
It is very difficult right now to form a fundamental fix on things in the precious markets, although silver appears ready to swoon itself into oblivion. Gold is a metal of another color.
Gold will react in reciprocation to T-bond yields and we shall have to wait to see how Asian physical buying affects gold contracts in London, New York and Hong Kong. India, of course, took some steam out of its citizens' gold sails by ratcheting up import taxes. And China's entrepreneurial class will probably be liquidating their gold hoards until the Chinese banking crisis is over. Even with all the turmoil in the gold market, a scant majority of participants in KITCO's weekly price survey see prices going lower. We believe that so much depends on how well sanguine analysts can make their voices heard.
Here are some thoughts to ponder:
* The Fed saw economic growth accelerating to 3.0 to 3.5 per cent next year. But that was only a bit higher than its March projection of 2.9 to 3.4 per cent.
* The Fed might have been much more worried about enhanced risk-taking in equities and derivatives - a point we have been making for months. Once that exuberance is thrashed out of the stock markets, gold may be more favored.
* From The New Yorker: "Nobody said that managing the U.S. economy is easy, especially when the mechanism for setting fiscal policy is as dysfunctional as it is these days. The mystery is why Bernanke and his colleagues didn't wait to see a pickup in growth before announcing their intention to change course, rather than doing it now, when the economic outlook is still pretty uncertain."
That indeed is the mystery. No one is happy unless you were an addictive bond buyer 6 months ago.
No one won this round. And describing the fiscal policy setting (by Congress and the President) as dysfunctional is like describing "Silence of the Lambs" as a bedtime story.
As always, wishing you good trading,
Gary S. Wagner
It is been said many times that one of the most powerful men in the world is the President of the United States. However, if we look at this week's activity, a case can be made for Ben Bernanke, the head of the United States Federal Reserve. Comments made by him sent precious metals markets, the commodities complex and the equities markets into a literal tailspin. In the case of gold we saw price points reach 33 month lows.
The last time we saw gold drop in this manner was September 2011. Whether today's moderately strong upside move is attributed to short covering or buying the dip mentality (bargain-hunting), we truly saw gold quickly come off of yesterday's lows to trade $20 higher and close significantly near $1300 per ounce. Today's video will detail our rationale behind our trade signal this morning in which we recommended long positions in both gold and silver. There can be no doubt that this trade is a high risk trade. Whether we have seen a bottom begin to form in gold or whether we will simply play this as a bounce in an extremely oversold market, I believe we have a high probability of seeing gold and silver move higher next week.
Long gold @ 1293 stop below 1269
Long silver at 20.02 stop below 19.29
From the week of 06.07. 2013
COT LINK See previous weeks in Historical Commitments of Traders Reports.
Gary S. Wagner - Executive Producer