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Out Of The East
Gold rallied in the last few weeks on the wings of Middle East tension and a rise in oil prices, but that now is going in reverse with the possibility of a systematic agreement in place.
"At the moment this whole idea (the Russian proposal on Syria for outlawed weapons to be placed under international control) looks constructive and if the practicalities can be met this is the end of the tension, bringing back gold to react more to the idea that Fed tapering could start in a few weeks' time," said Robin Bhar, analyst for Societe General.
Lowered tensions also increased risk appetite for equities today, as has been happening in the last couple of sessions.
Indeed, global shares rose and crude futures fell 2% to around $111 a barrel as expectations of a strike on Syria ebbed.
Positive correlation between gold and oil has been restored in the past few sessions; gold is seen as a hedge against oil-led inflationary pressures. Most usually, when oil falls, gold goes with it.
Gold is likely to remain under pressure in coming sessions on uncertainty about the timing and pace of the U.S. Federal Reserve plans to scale back QE3 stimulation bond and securities buying.
We have to say that while some analysts and traders are overlooking last week's horrendous jobs report and the absence of clear inflationary pressure in the world, betting on the FOMC to quit QE3 in this coming meeting seems like a pipe dream.
Silver fell in tandem with gold, which seems contradictory since, if the world economy is doing as well as analysts seem to be saying through their bets, then the price of the gray metal ought to be rising, not falling. Silver, as we know, has many industrial uses.
On the general economic front, it was reported Tuesday that China's industrial output rose by 10.4% on an annual basis in August, easily beating market expectations of a 9.9% gain. China's retail sales measure also was higher than forecast, up 13.4% in August, year over year. One would think that would be bullish for industrial commodities. Alas.
Elsewhere, reports today claimed gold imports to India fell by more than 90% during August, year over year, due to government import taxes. We view these numbers as exaggerated by at least 50%. usually smugglers don't turn in their business books on a regular basis. And, even if they could be taken as gospel, eventually the people of India will rebel against the drastic taxation. India is doing much worse economically than we are generally aware of.
Although it says that August will look better, the NFIB Index (National Federation of Independent Business, fell slightly for July. However, more hiring and purchasing will be reflected in August's numbers the NFIB said.
We think the Fed would be taking a big risk tapering too early or too quickly once the process goes into gear.
Wishing you as always good trading,
Gary S. Wagner - Executive ProducerMarket Forecast:Friday’s dramatic rise in gold prices alluded to the possibility that our current corrective waves “C” had concluded. Yesterday in today’s trading activity confirm that nothing could be further from the truth. On yesterday show we look that a critical support level in gold at 1350 per ounce, we spoke about the possibility that we would see gold effectively trade to that pivot point. Today’s dramatic price decline move gold to an intraday low of 1357, just seven dollars off of that pivot point. The question now is whether or not 1350/1352 pivot will hold. If we receive technical confirmation that support is holding in that area it will create a buy trigger in both gold and silver. However if gold prices breakthrough that support level the next real level of major support is 1279. At this point is my current belief that 1350 should hold as a major pivot point and support level in gold. However until we receive technical confirmation my recommendation is to maintain a neutral pose, with no active positions in the market.
Proper Action :
No open trades as all indications are that correction is still in play. 1350 - 1352 key pivot point of support
COT LINK See previous weeks in Historical Commitments of Traders Reports. |
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Gary S. Wagner - Executive Producer