Gold Rises On Extended Dollar Weakness While Oil Slides

August 10, 2016 - 5:15pm

 by Gary Wagner

Sentiment that an interest rate increase is moving farther and farther out on the time horizon continues to throttle back dollar strength. This, in turn, helped gold rise today.

Provocatively, regular trading showed a loss, small as it was.

Crude oil gained no beneficial bump from the lower dollar, tumbling again on a build in inventories. Those inventories as reported by the U.S. Energy Information Administration were up 1.1 million barrels. West Texas Intermediate was off around 2.50%.

Data also showed that Saudi Arabia was pumping at new record-high levels, piling worry upon worry about the global glut.

Countering the crude build was a larger-than-expected gasoline draw, which is normal for this time of year as huge numbers of motorists in the U.S. take their final fling before school goes back in session, for students and for workers.

In spite of the seasonal drawdown, gasoline (RBOB) fell over 3.50%. Natural gas was down 1.75%.

We’re reminded of the big-spending farmer in town trying to impress the ladies. “There’s more where that came from,” the big spender says bold as brass. That’s how it is with oil, gas and gasoline. Plenty more where that came from.

Naturally, energy prices weighed on stock indexes. But there were a few other factors at work in markets across the globe.

Earnings season is over so any euphoric buying will be absent for a while. Investors and traders are also concerned about machine-gun bursts of data that can upset a fragile equilibrium in the markets. Most seem to be assuming that results in key indicators are going to remain mixed or unpredictable.

Turning back to the relaxations of August, we can pretty much count on quieter markets until after Labor Day. Bigwigs are out of town and most of their junior underlings are on strict orders not to do anything too big or too risky.

Equities in Asia and Europe were mixed to lower for reasons similar to those cited above with an added twist. There is a raft of data due out from China Friday, including industrial production, fixed asset investment and retail sales.

In the U.S., Friday will give us U.S. consumer spending, which is expected to rise but not blow the doors off of anything or anyone. Our own bet is that it stays about the same, appearing weak, as new entrants into the labor market will not make their purchasing power felt until this month or next.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

Gold Forecast: Proper Action

Yesterday afternoon (Hawaii) we issued a Trade Alert – Buy Gold @ the market with a stop below 1335 (this basis Dec Comex contract)

Maintain long gold @ 1355 (1348 spot)

Maintain stop below 1335 (Dec Comex) (1329 spot)

Gold Market Forecast

Yesterday we issued a buy recommendation in gold. Over the last few days we have noticed a pattern unfolding called a Three River Morning Star.

Extremely noteworthy is the fact that the low of this pattern group (the star) occurred at 1335, which is precisely a 61% retracement of the last rally. Yesterday morning we saw that the initial pattern was complete. However, it still lacked a confirming candle.

The confirming candle occurred in the afternoon session (overseas), in which gold began to trade dramatically higher. On today's video report we will detail the trade as well as the rationale for why we placed our stop where we did, and most importantly our upside target or exit strategy.

Trending Markets Forecast

Markets will trade to a price point and equilibrium that they realistically belong at. This is regardless of intervention whether it be by a central bank or OPEC.

Statements made earlier this week by the oil cartel sent prices nominally higher, but more importantly, higher for a very short period of time. Over the last couple of days we have seen the price of crude once again begin to drop dramatically, moving to its natural equilibrium, based upon supply and demand economics.

US equities continue to trade near record highs, yet they do this with extreme headwinds and a bias to the downside.

The US dollar continued under pressure today, losing about one half percent on the day. Our current model indicates that the US dollar could continue to trade under pressure.