It's Hard To Fight Chart Consolidation 5/07/2013
There was more conflicting information fundamentally overnight and today that affected gold and silver, but no force was more powerful than consolidation of charts.
For the moment, gold - pulling little sister silver behind it somewhat reluctantly - succumbed to renewed interest in the equities markets as the Dow crossed the magic 15,000 barrier while the S&P closed above 1620 yesterday, another record. This gives investors pause to wonder if the rally will continue as the indexes try to grasp at 16,000 and 550, respectively. There are good reasons to hope they won't if you're a gold trader unless it happens with blinding speed, which would throw the log of inflation onto the precious metals fire. The German DAX index has also hit record highs.
Companies reported that in March they had fewer job openings, indicating that perhaps there is a renewed reluctance to hire into new positions. However, March is by now old news. That stat might be marginally improved when Apri's numbers are assessed.
"Job growth is proceeding at a pretty moderate pace," said Robert Mellman, a senior economist at JPMorgan Chase & Co. in New York. "The tax hikes went up early in the year, we got this slowdown in retail sales, this slowdown in manufacturing output, and that raised the question about whether businesses would get very defensive or not. It looks like they slowed payroll growth in March and April."
The ratio between hiring, firing and quitting is fairly stable, not giving the Fed much impetus to slow the $85 billion per month in bond-buying QE3 action. The target most economists see for U.S. GDP growth in the 2nd quarter is around 1.5%, scarcely cause for celebration.
Australia, granted a small player, has implemented monetary easing and other stimulus tactics. The move yesterday and today down under did nothing for precious metals trading.
German manufacturing output unexpectedly surged in March, giving cheer to those who had been writing off Europe's largest economy. However, Germany isn't the whole of Europe - it is is actually fairly non-representative of the zone.
Meanwhile, ETF holdings continue to drop , having at least a psychological effect on gold prices. However, around 1450 per ounce, physical buyers might step in to counter the negative force of the paper gold traders. Can this retail/consumer buying continue?
A comment found in Bloomberg is telling: "Retail consumers are very price-sensitive, so you don't expect physical buying to go on and on, especially since we've come up more than $100 from the low," said Feng Liang, an analyst at GF Futures Co. in Guangzhou, a unit of China's third-biggest listed brokerage. "Those who missed the first opportunity are probably hoping for another round of declines."
We think that gold is still looking for a "meaning" in the financial world. "Who am I?" is its refrain. It has been swinging between a safe haven play and an inflation hedge. As we have said many times, the equities are inviting risk taking and inflation, which is tame, can't remain so forever.
As always, wishing you good trading,
Gary S. Wagner - Executive Producer
Market Forecast: Today’s downside move in the precious metals markets confirmed our belief yesterday that gold had become overbought and found extreme resistance between 1470 and 1480 per ounce. Over the last week or so we have been speaking about the fact that we need to see gold trade above 1470 on a closing basis. As you will see in today’s video although we had price point in gold at and above 1470 we never saw gold close above that price point. A recommendation is to maintain a neutral position as we pulled profits in both gold and silver yesterday.
long gold @ 1452 out @ 1460 + $ 8.00
silver @ 23.60 out @ 23.75 + .15
From the week of 05.03.2013
COT LINK See previous weeks in Historical Commitments of Traders Reports.
Gary S. Wagner - Executive Producer