A Tiny Dose Of Risk Friendliness Douses Fire Under Gold For Now

March 9, 2016 - 4:56pm

 by Gary Wagner

We experienced a classic, if small-scale, risk-on day in U.S. and European markets today. Crude oil also rebounded robustly today as well, abetting the lukewarm strength in stocks.

Asia did not share in the equities and oil optimism, falling across the three major indexes. Hong Kong was just barely down while the Nikkei and Shanghai had their bell rung loud and clear. China’s economy is still suffering from the highly negative export/import data released this week.

It is also suffering from credibility problems as more international investors are doing a gut check on the world’s second largest powerhouse. Now that there is wavering in the growth pattern, transparency is drawing closer scrutiny. No one less a personage than Ben Bernanke called for enhanced openness in China. We shall see.

Strong, strong demand for gasoline in the U.S. fueled today’s rise in prices of energy. (No pun intended.) The inventory draw on gasoline was triple what the experts had predicted: 4.5 million barrels versus the forecast 1.4 million.

The obverse of that coin is that crude stockpiles rose 3.9 million barrels, an unexpectedly high figure. We are also slipping into the crease in the year when gasoline is reformulated for and refineries close briefly to refit and retool. Additionally, gas is cheap as cheap can be, even with the recent uptick. We are also in the midst of the heavy spring driving season instigated by schools’ spring breaks. Upcoming soon, too, are various religious holidays and holy days. Thus, the draw down will continue.

Even though hope springs eternal that OPEC will pull it together with its partners outside the cartel to limit production, the move is still over the horizon. Production remains unchanged, so there is a more general downward pressure on price.

Gold touched 1242.10 this morning, obviously affecting our trade. The details can be found in today’s video and in Market Forecast and Proper Action.

But, as we said, it was a risk-on day. The moves in stocks were fairly meager, but nevertheless, a fresh appetite for risk entered the markets.

The U.S. dollar rose against the yen and Swiss franc today, demonstrating the lack of enthusiasm for currency haven plays.

Yields on 10-year bonds across the globe rose enough to signal that demand was a little slack for the paper. The yield of the U.S. 10 was up most of all the major bonds.

Lest we forget, we are headed toward a Fed meeting on the 15th, a mere three business days away.

Depending on whether you are a cup half full or half empty, you might be leaning hawkish on an interest rate hike or dovish. We think it would be prudent for the Fed to stand pat, and if they must raise rates, wait until the following meeting.

Truth be told, we would like to see more inflation and a 4.5% unemployment rate before the Fed starts the slashing and burning again.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

Gold Forecast: Proper Action

We are currently flat with no active trades.

Today we pulled profits on our long gold position. We initiated a buy in gold at 1217.

Over the last week and a half we have been raising our stops.

Yesterday we sent out a special trade alert recommending that all traders move their stops to below 1255. Our stop was hit during today's trading session.

We went long at 1217. We then sold our positions at 1254 for a gain of $37, or $3700.00 profit per contract

 

 

Gold Market Forecast

On yesterday's video report we spoke about the fact that we were seeing some real resistance in gold at roughly 1280 per ounce.

Our most recent forecast model has been looking for gold prices to trade to highs of 1292. However, with well identified resistance at 1280, we tightened our protective stop on our current trade.

That stop was hit today and we took profits.

As to whether we covered our position prematurely, that is certainly arguable.

But, in the words of Herbert Hoyle, one of the most successful stock traders in the 1950s, when asked why he was able to pull consistent profits out of the markets when the majority of traders were taking substantial losses, he replied, "Because I always sell too soon."

Trending Markets: Proper Action

Maintain your current long position in the Standard & Poor's 500 E-mini @ 1979 (current 1989)

Maintain your current stop below 1965

Trending Markets Forecast

As we spoke about in our opening letter, today was certainly a risk on day with equities staging a modest rally in which we saw the Dow Jones industrial average once again flirt with 17,000.

Supportive of the US equities markets was crude oil. It gained almost 5% on the day.

We still see strong resistance in the Standard & Poor's 500 e-mini at 2003.