Gold Staggered By Stronger Dollar and Risk On Sentiment In Equities

June 21, 2016 - 5:02pm

 by Gary Wagner

You can assign any reason (or blame, if you think that way) for gold’s falling star act today.

Yes, Janet Yellen did reinforce the conclusions communicated after the FOMC meeting last week. So identical to the FOMC statement were her opening remarks that preceded her Congressional testimony in the next few days that there is no purpose in repeating them.

“Caution,” “uncertainty,” and “risks,” were the bywords. We consider her identical statements last week and this as a response to those few who believe the Fed has muddied the water. Well, it’s crystal clear as of right now.

Next we have the lifting a bit more of the Brexit fear. The 23rd and the referendum in Britain can’t come soon enough so we can get on with even more fundamental fundamentals. But, the inclination in the markets is to believe it won’t happen.

Gold is off about $22.00 per ounce in mid-afternoon trading with the resurgent U.S. dollar accounting for about 25% of the loss. The rest of the loss is attributable to regular trading. Investors are seeing opportunities in stocks.

Silver is off about 21 cents, with a similar dollar drag on its price. Platinum is off not quite 1.00% but fickle palladium is up about $2.00 per ounce.

Just for the record, the dollar is up not quite 0.50% against the euro, higher by 0.80% against the yen and up, surprisingly enough, against the British pound, though by just a quarter of a percent. The yen, of course, functions as a haven play and today is not a risk-off day. The greenback is off almost imperceptibly against the Swiss franc, another important currency haven.

U.S. benchmark oil closed off 1.00% at settlement, although it continues to trade into the afternoon, after hours. But the West Texas Intermediate crude quote is well off its opening lows of $48.19 per barrel.

As you know, we are real Fed watchers here at the Gold Forecast. We are in wonderment when a Senator (in this case Shelby of Alabama) begins grilling Yellen to show how tough he is.

Not that he doesn’t have the right or even duty. But the Congress has scarcely involved itself in the economy since 2009 and honestly, while monetary policy can be an important rudder and perhaps a sail, it is fiscal policy – and other kinds of legislative policies – that make the economy go.

If you live in an interventionist world, you can’t hum a laissez-faire tune. The world nowadays is far too interconnected.

Additionally, the Congress needs to understand that there are limits to monetary policy, especially in the face of powerful secular factors.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

Gold Forecast: Proper Action
Yesterday we suggested taking profits at current market price (1290)  
Long gold @ 1245 out @ 1290 for a $45.00 dollar gain ($4500 per contract)
 
If you took stop to market and pulled profits last week, (our secondary strategy):
Long @ 1245 Out @ 1294 for a $49.00 gain (4900 per contract)
 
All Traders should stay sidelined
Gold Market Forecast

Even with dovish comments made by Janet Yellen today, the current belief that Britain will not leave the European Union plunged gold prices to their lowest point in the last few weeks.

Any premium that was baked into the current price of gold based upon the UK leaving the European Union has been taken out of current pricing models. From here until the vote on Thursday in Britain we could see prices drift lower.

However, just as gold prices have over-compensated for an exit by Britain from the European Union, we might be witnessing overcompensation for just the opposite. Although anything can happen between now and the vote, we will remain sidelined with no active trades until the dust settles and the results of the vote are in.

Trending Markets Forecast

Traders continue to define their trading activity based upon whether the UK will exit the European Union. As of this writing, analysts are putting the probability of an exit at about 25%.

The real facts are that until the vote comes in there is no certainty as to the outcome of the resolution being voted upon. With that in mind, our belief is that the most prudent action is no action at all and to remain sidelined with no active trades.