Possible Fed Action and Geopolitical Events Reignite Interest in Gold

June 13, 2019 - 6:53pm

 by Gary Wagner

Gold has once again found its footing and now for a second consecutive day has closed higher when compared to the previous close, and gains have included both a higher low as well as a higher high. As of 5:00 PM EDT gold futures basis the most active August contract are currently fixed at $1336 per ounce which is a net gain of $9.20 on the day.

Today’s gains have been attributed to multiple factors. First there is the continuing belief of a high probability that the federal reserve will implement interest rate cuts later on this year. Possibly as early as July when the next FOMC meeting begins.

 Secondly, the continued concerns regarding the current trade war between the United States and China are still at the forefront shaping the current economic environment. However there has been a new flareup geopolitically speaking. It was reported that two oil tankers were attacked in the Gulf of Oman, resulting in one tanker sustaining damage and the other one set adrift and on fire.

According to Reuters, “Two oil tankers were attacked on Thursday and left adrift in the Gulf of Oman, driving up oil prices and stoking fears of a new confrontation between Iran and the United States, which blamed Tehran for the incident.”

“It is the assessment of the United States government that the Islamic Republic of Iran is responsible for the attacks that occurred in the Gulf of Oman today,” U.S. Secretary of State Mike Pompeo told reporters in a brief appearance without providing hard evidence to back up the U.S. stance.

This is precisely the reason that Iran has been on the radar of the United States with the general in charge of the region recently stating that the threat from Iran is imminent. His words came to fruition today. The U.S. dollar was slightly supportive of higher precious metals prices although any gains due to dollar weakness were fractional. Currently the dollar index is fixed at 96.90 putting it down 0.070 (-0.07%) on the day.

The net result of recent geopolitical events as well as a defined pivot for the federal reserve in regards to their monetary policy from one of quantitative tightening, to the return to accommodative measures resulting in a return to quantative easing. As such the recent rally seems as though it is back in full swing, with the correction being nothing more than a pause before continuing to higher ground.

Wishing you, as always, good trading,

Gary S. Wagner - Executive Producer

P.S.
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Gold Forecast: Proper Action
Yesterday we sent out a  special trade alert recommending the initiation of a long position in August gold. Traders taking that call went long at $1339.10. We also recommended placing a stop at $1333. Today geopolitical events were highly supportive of gold which closed at $1346 per ounce, roughly 7 dollars above our entry price. On today's video report we will discuss in detail the rationale behind entering the trade along with are exit strategy should the trade move higher and the rationale behind where we put our protective stop.
 
 
Gold Market Forecast
We remain bullish for gold on a long-term basis, however On Sunday we saw the market open two dollars lower and begin to selloff. When gold prices had declined by eight dollars we took our protective stop which was sitting at $1328 and took it to the market so that we could exit the trade at $1338 per ounce adding an additional $10 profit to the trade which resulted in a 45% gain
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All week we have spoken about the proper point to reenter from the long side as you know it was my belief that the retracement we would witness would be shallow and brief and that is exactly what we saw when geopolitical events today rekindled safe haven allure of gold and moved it nine dollars higher on the day. My senses that we have now entered a new leg of the rally and my current target will be fully explained on today's video report.
Support for gold continues to be  attributed to statements by Federal Reserve Chairman Jerome Powell who alluded to the potential for rate reductions this year to continue the economic expansion. This coupled with last  Monday's statement by the president of the St. Louis Federal Reserve Bank, James Bullard is significant in that it illustrates real support for rate cuts if needed. Last weeks Labor department Jobs report came in well under exceptions. 175,000 new jobs were forecast and the actual number was only 75,000, are supportive of rate cuts.
Sentiment Indicator:
Gold -> Bullish
Silver -> Bullish
S&P 500 -> Neutral
Bitcoin -> Bullish
Bitcoin fundamentals by Joseph M. Wagner II:

For the second day in a row BTC futures are poised to close well above the $8000 price point, more importantly futures on the CME seemed destined to close above $8200, which was previously an area of strong technical resistance. At the time of writing this article BTC #F is bid at $8295 up $100 on the day or 1.2%. This area has historically been a key level of support, resistance and consolidation. Looking at a two day candlestick chart one can identify a pattern known as tweezer bottoms and the current 48-hour candle providing confirmation to this bullish reversal pattern. Also the 20 day volume weighted moving average that BTC futures had been trading at or above for the entirety of the recent rally (that brought pricing from $3300 to the intraday yearly high at approximately $9200) up until last Tuesday, June 4 when the technical indicator crossed above the closing price until the most recent 48-hour candle.

Although daily volume is down from a peak of over 31,000 contracts being bought or sold on May 13, today coming in just below 4000 which is similar to volume during the first five months of the CME’s BTC futures contract being offered, looking at the open interest we are still very close to the all-time high of open contracts in this market. More technical analysis shows how this key reversal pattern holds weight is the 100 and 200 day moving average golden cross we spoke about occurring today as well as the relative momentum index at an all-time high of 67.

We spoke about the fundamental reasons for my belief as to why Bitcoin’s price will continue higher throughout this month and I believe in the coming weeks Bitcoin will not only make a new high for the year but also reach the coveted $10,000 mark.