A Pre-Fourth Of July Parade Of Factors in Gold, Currencies, Stocks And Oil

July 2, 2015 - 4:18pm

 by Gary Wagner

Early today gold slipped into the mid 1150s, a testing ground for lower prices. However, in afternoon trading, gold has come off those lows and is trading in the mid-1160s, off $4 to $5.

A U.S. dollar made weaker by a soft labor report has helped gold modestly, offsetting downward pressure in regular trading. The yellow precious metal has been essentially flat since mid morning in New York.

The dollar slipped not because currency traders don’t like the numbers in the U.S. Department of Labor report but because they are sniffing the air and smelling an interest-rate hike later than sooner. That promises little pressure on real-world interest rates and helps to form the assumption that the dollar will remain stable or go lower in relation to the euro.

Nonfarm payrolls increased by only 223,000 in June the Labor Department said. Adding to the report's squishiness, April and May data was revised downward to show 60,000 fewer jobs were created than previously reported. The unemployment rate fell 0.2% to 5.3%, but labor force participation fell to its weakest since October 1977.

This has some observers speculating that an interest-rate hike could be pushed into the farther horizon of early 2016. For now we are sticking with a call for it in December. We believe that by then ideology within the FOMC will trump pragmatism.

The Greek crisis seems to be on hold until at least Sunday/Monday as the financial world awaits a cock-eyed referendum. Campaigning for support of the Greek administration’s point of view sounds like a mix between a disaster movie and a child’s Saturday morning cartoon show.

Regardless, when the country wakes up, it will still face the same problems whether its citizens like it or not. Not only is Greece in actuality non-creditworthy, with all the bluster and off-the-wall commentary it is acting as if it is not worth lending ten cents to.

U.S. equities markets are either off slightly, up slightly or unchanged in late afternoon trading. At first glance one would think the labor report is impacting it. In reality, the long Independence Day weekend is more to blame. Investors like to keep their exposure down for the 72-hour-plus hiatus in the U.S. while Europe and Asia continue to trade.

Shanghai continues its steep descent, the composite now trading below 4000 for the first time since the end of March. China is now a drag on the rest of the world’s economy. Shanghai is down almost 25% since its closing high was hit in mid June.

Crude oil is down 0.5%, due to dollar weakness and a higher rig count in the U.S. fields, a bad sign for oil bulls. Brent North Sea down marginally on the day.

Another issue we are going to be faced with as we enter the depths of summer is the doldrums. Traders, investors and analysts will be taking their big salaries and spending it on vacations, or on ever-longer long weekends.

The doldrums mean volatility for smaller volume means jumpier moves. These are the months when smaller players can move markets and often do so eccentrically.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

Gold Forecast: Proper Action

We entered long @ 1178.50, on Monday. Our stop @ 1161 was hit (-$17.50 on the trade)

We also issued a buy signal this morning (Thursday) after the previous stop was hit (today's video will detail the rational behind this call)

Maintain long gold @ 1164, Maintain stop below 1155 (today's low)

Gold Market Forecast

Although we saw gold trade under dramatic pressure today (trading to an intraday low of 1155.80), that low was to be short-lived as traders propped gold prices back up well off of these lows to effectively close in New York at almost an unchanged level on the day. Whether it was short covering or a buy-the-dip mentality the daily candlestick we identified was a “hammer." The significance of this candle type is that it demonstrated how quickly and severely the market recoups from these lows closing near the opening range of that trading session.

Based upon candlestick identification, our Elliott wave count, and channel analysis we determined that the intraday low at 1155 significantly formed a bottom in the market and that we should see prices move higher from there. With the referendum vote occurring on Sunday in Greece we could certainly see some safe haven buying return to the precious metals markets. All in all I do expect to see fireworks this weekend.

Trending Markets: Proper Action

Last week (Tuesday) we sent out a special trade alert recommending initiating short positions in the euro. The euro was trading approximately at 111.75 at the time of the sell.

Maintain current short euro @111.65. Maintain Stop @ 112.20

For those that are long U.S. dollars we recommend maintaining current long position and maintain stop @ approximately 95.11

Trending Markets Forecast

We have seen significant pressure and lower pricing in the euro, and the reciprocal upside moves in the US dollar for the better part of this week. Today we saw that current and strong trend soften just a bit with a firmer euro and slightly weaker dollar.  Today’s modest downside move in the dollar can be directly attributable to a mixed but lower than expected jobs report, which could signal a postponement by the Federal Reserve to initiate rate hikes in September or December of this year.

The corresponding moderate upside move in the euro could be attributed to the belief that a resolution to the current Greek debt crisis is at hand, as a referendum vote on Sunday could clearly signal whether Greece remains part of the euro monetary system. However, as I’ve spoken about on many occasions, austerity measures without a real detailed plan to boost the Greek economy can only put off the inevitable, which is the total collapse of the economic system in Greece.

This is the real issue at hand. Whatever the outcome of Sunday’s vote, it is the economic contraction in Greece that needs to be mitigated in tandem with solving their debt problem.