Video-September-03-2013-Archives-Daily-Show
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Immediate and Underlying Causes
There is a proximate cause for the rise of gold and silver today: Syria. Even more specifically, the joint missile exercise that the U.S. and Israel conducted seems to have rattled the eastern Mediterranean. Further, Speaker of the House John Boehner and House Majority leader Eric Cantor said that they would support President Obama's request to authorize military action in Syria. While the deal isn't done, and won't be done until deep into the second week of September, the blessing of the two chief House leaders is crucial.
An interesting sidebar to the move to go to Congress is that no American President in history has
ever been refused by the two houses when requesting a stamp of approval on military action.
"The market is very vulnerable to news, to rumors, to anything that's going to come out from the Middle East," Bernard Sin, head of currency and metal trading MKS in Geneva, said today. "People looking for a safe haven will pump money into gold. The market will be very choppy."
Underlying fundamentals are also giving life to precious metals trading today.
Gold demand in India is still very strong, although officially importation is down. On the black and gray markets, though, more gold than ever is pouring into India, the world's largest buyer of the yellow metal. And demand in China, which slowed a bit as the price waltzed across the $1400 threshold, is still brisk if moderated.
India took another drastic step to prop up the rupee. The government significantly raised the margin requirement on buying gold futures after prices rallied to an all-time high.
The next FOMC meeting is scheduled to begin September 18th. Some analysts have read the tea leaves and are absolutely convinced tapering will begin ending shortly after the meeting. Mostly they are basing this feeling on the revision of GDP statistics upward for Q2.
However, GDP growth is only a small part of the Fed mandate. Other mandate components are keeping down unemployment and tamping down inflation. The job market is decidedly tepid and inflation appears to be non-existent (when its not ready to go negative). So, we say no tapering of any significance till after the December meeting.
But, when the Fed does begin tapering, will it mean much for gold? We don't believe so. If the Fed in essence says the economy is ready to taxi down the runway and take off, then inflation will be a factor. If more people go back to work, all workers will make more money so more will be spent and that drives gold up.
Investors scrutinize economic data to try to predict when the United States is likely to start curbing its economic stimulus. Nevertheless today they shrugged off stronger-than-predicted figures on U.S. manufacturing that showed the pace of growth last month was the fastest in more than two years.
"The biggest story is certainly the non-farm payrolls data at the end of the week, where a strong number will certainly weigh on gold, as this will give more clues about the timing of tapering," Mitsubishi analyst Jonathan Butler said.
It might be noted that, since 1990, September has been the best month for rising gold prices, going up an average of 2.7%.
Wishing you as always good trading,
Gary S. Wagner - Executive ProducerMarket Forecast:On a technical basis today’s upside rally fits in boldly to our current model which has our Elliott wave sub count currently in a “B” wave. Today’s ago I sent out my most current chart highlighting the fact that gold had moved to an intraday low of 1371, which was a 38% retracement of wave three. We are currently in wave four, just completing the B wave which is a sub count of wave four. If our current model holds I would look for a final terminating C wave to complete this minor fourth wave. However it must be noted that we have a wildcard, and that wildcard is Syria. As I speak about today’s video as a technician we watch the wake at the back of the boat attempting to determine current direction. However it is only the captain that knows when he will change course or direction. That being said any military action by the United States into Syria could change my current Outlook and forecast. Although we are currently sidelined we are looking to see if we get any kind of a pullback and signal to reenter the market from the long side.
Proper Action :
We are currently sidelined we are looking to see if we get any kind of a pullback and signal to reenter the market from the long side.
From the week of 05.17.2013 COT LINK See previous weeks in Historical Commitments of Traders Reports. |
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Gary S. Wagner - Executive Producer