Gold Faces Dithering Of Analysts

April 6, 2015 - 3:43pm

 by Gary Wagner

The fundamental puzzler for gold this week is whether the drastic drop in jobs creation is the start of a pattern or an anomaly.

President of the New York Fed William Dudley found himself in the quandary, as do many other sensible analysts. But equities around the world shrugged off U.S. growth problems as late-to-work traders bid up prices on Wall Street. The Dow was up by as much as 160 points but has since backed off those highs.

Gold and silver have also backed off their highs for the day.

A weaker dollar contributed to the stocks’ rally, something equities investors like to see because it signals higher oil prices and more competitiveness for American goods and services abroad.

The timing of the Fed's first hike in its benchmark interest rate since 2006 will depend on "how the economic outlook evolves," Dudley said in a speech at the Newark, New Jersey, Performing Arts Center.

Should the labor market continue to improve and inflation begin to pick up, as Dudley expects, "then it would be appropriate to begin to normalize interest rates."

He added: "It will be important to monitor developments to determine whether the softness in the March labor market report… foreshadows a more substantial slowing in the labor market than I currently anticipate."

According to the most important Fed official (besides Chairwoman Yellen), recent "downside surprises" in key economic data reflect "temporary factors to a significant degree."

His researchers found that the effects of historic amounts of snow and severe winter weather in the Northeast and Midwest were 20% to 25% were much worse than the five-year average.

"Such large deviations appear to have meaningful negative impacts on a number of economic indicators," Dudley said.

He believes the Fed, once it starts raising the benchmark federal funds rate from its current near-zero level, will move very cautiously because "headwinds in the aftermath of the financial crisis are still in evidence, particularly the diminished availability and tougher terms for residential mortgage credit.”

In a number worth remembering, Dudley said he sees the Fed rate going to 3.5% at some point. One force that 3.5% would be indicative of is very strong inflation, which can only come once “full employment” and higher wages appear in the U.S. economy. Still plenty of time to make a sandwich before that comes about.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

Gold Forecast: Proper Action

Yesterday we sent out a “Trade Alert” recommending entering long positions in both gold and silver.

Maintain long gold @ 1215 with a stop @ 1199. We also recommend placing an OCO (one cancels the other) selling gold at 1251.

Maintain long silver @ 17.03 with a stop @ 15.75. We also recommend placing an OCO (one cancels the other) selling silver at 17.80

Gold Market Forecast

The fact that Friday’s jobs report occurred on Good Friday when both the equities and precious markets were closed created a real time lag between the data and traders' reaction to that report.

Also, comments made by some Fed elements today confirmed what many traders believe – that the Federal Reserve might have to wait longer begin to raise rates. The net result was an extremely bullish move in the precious metals markets today.

Gold prices reacted to this news and spiked higher in trading in Australia on Monday morning overseas. Prices remained firm in Hong Kong, London and into the open in New York. Gold traded to a high of 1224.80, which is where the first level of resistance is located. However, today’s higher pricing created a confirming candle to patterns we identified in both gold and silver last week. It was these confirming candles that triggered the buy signal we sent out yesterday.

Today’s video report will detail our current strategy and defined specific parameters of our current trade. We will outline the rationale and thought process behind where we placed our upside sell order as well as our protective stop loss.