Federal Reserve statement and fiscal stimulus negotiations guide market action | The Gold Forecast

Federal Reserve statement and fiscal stimulus negotiations guide market action

December 16, 2020 - 7:05pm

 by Gary Wagner

 

“There's something happening here. But what it is ain't exactly clear… There's battle lines being drawn. Nobody's right if everybody's wrong.”   Steven Stills

Today the primary focus of market participants and investors was the release of the Federal Reserve statement, and the current negotiations to finalize the wording on the bipartisan proposal announced yesterday. This revision is a revamp of the original bipartisan proposal which was presented last week.

Although negotiations continue to finalize the draft to be voted upon, by splitting the original proposal into two parts and separating the two primary issues which caused the negotiations to deadlock in a stalemate, it is now highly likely that this revision will allow the Senate and House to easily pass this proposal.

According to a report by Microsoft News, “Lawmakers are closing in on a roughly $900 billion COVID-19 stimulus deal Wednesday morning that may include another round of stimulus checks and other much-needed benefits, according to a source familiar with negotiations not authorized to speak on the record.”

The optimism of passing this legislation is extremely high. Senate Minority Leader Chuck Schumer today said they were on the “precipice” of an agreement. Senate Majority Leader Mitch McConnell said on the Senate floor that they had made “major headway” on closing a deal that could pass both the House and Senate.

The report said that “Schumer acknowledged the emerging deal did not include everything Democrats would have wanted, but said it was necessary in the "short term," and vowed to "work in the future to provide additional relief.".”

The first proposal will allocate $748 billion having support on both sides include an allocation to boost the federal unemployment benefits, as well as capital to fund the second round of the paycheck protection program. The cost of these two components will be approximately $330 billion. It will also include capital so that stimulus checks to all taxpaying Americans of $600 or $700.

This additional aid will add to our current budget deficit and government debt. As such it will pressure the dollar lower, and could very well be extremely bullish for gold pricing.

Today’s release of the statement which followed the conclusion of this month’s FOMC meeting did little to move gold pricing. However, the press conference that followed with Chairman Powell first making a prepared statement and the Q&A session that followed resulted in gold trading back to the intra-day highs.

Chairman Powell maintained that the Federal Reserve will continue to be extremely accommodative, and will continue to purchase assets to add to their balance sheet to the tune of $120 billion each month. He also vowed to keep interest rates near zero likely for as long as needed.

To that end Chairman Powell said, “the enhanced guidance provided today should ensure that policy remains highly accommodative as the economic recovery progresses.”

The net result was solidly bullish for gold pricing. As of 4:30 PM EST gold futures basis, the most active February contract is currently fixed at $1868.10 which is a net gain of $12.80. Concurrently the US dollar which had been fractionally higher before the release of the statement and press conference has moved from positive fractional gains to close lower on the day. Currently, the dollar index has declined by approximately 2/10 of a percent and is fixed at 90.245.

The initial price spike witnessing gold yesterday was highly attributable to optimism that fiscal stimulus would be forthcoming by the end of the year. Statements by the Federal Reserve as well as the comments from the House and Senate have continued to be highly supportive of higher gold pricing.

On a technical basis, there is no real resistance until $1875, $1915, with major resistance at $1941 per ounce. Based on the fundamentals that have been the catalyst for the recent price spikes in both gold and silver we would expect the uptrend to continue and the rally to run through the remainder of 2020.

Wishing you as always, good trading and good health,

 

Gary S. Wagner - Executive Producer

This report is now free and publicly available to everyone

Gold Forecast: Proper Action

On December 15th we sent out a trade alert to buy gold and silver. Overseas traders got in at around $1866. Mainland traders who bought at the NY open got in at $1860

  • long February Gold Futures at $1860-$1866 and place stop at $1816
  • long XAUUSD at $1856-$1862 and place stop at $1816
  • long March Silver Futures at $25.16 - $25.25 and place stop at $23.50
  • long GLD @ $147.12 and place stop at $170.60
  • long SLV @ $23.23 and place stop at $21.80

long February Gold Futures at $1830 -$1843 and out at $1850 for a profit of $700 to $2000.00 per contract
long XAUUSD at $1841 and out at $1850 for a profit of $90.00 per mini 10 oz contract
long March Silver Futures at $24.29 and out @ $24.40 for a profit of $550.00 per comex contract
long GLD @ 1$71.50 and out @ $173.00 for a profit of $1.50 per share
long SLV @ $22.30 and out @ $22.50 for a profit of $0.20 per share
Long December gold at $1899. Stop hit at $1918, for a $1900 profit
Long forex gold at $1896.00. Stop hit at $1912, for a $1600 profit
Long December silver at $24.21. Stop hit at $25.07 for a $4300 profit
Long GLD at $180.46 and stop hit at $176.42 for a loss of $4.04 per share
Long SLV at $23.23 and stop at $22.78 for a loss of $0.40 per share
Long December Gold Futures at $1926 and stop hit at $1907.30 for a loss of $18.70 per ounce
Long Forex Gold at $1922 and stop hit at $1903 for a loss of $19.00 per ounce
Long December Silver Futures at $25.13 and stop hit at $24.73 for a loss of $0.40 per ounce
Long December gold at $1890, out at $1909.30 for a profit of $1,930.00
Long December silver at $23.95, out at $24.50 for a profit of $2,750.00
Long Forex gold at $1883.68, out $1907 for a profit of $23.32 per ounce
Long GLD ETF at $178.03, out at $179.80 for a profit of $1.77 per share
Long SLV ETF at $22.66, out at $22.03 for a loss of $0.63 per share
Long December Silver (SI Z20) @ $27.07 - Stop hit @ 25.56 for a loss of $1.51 per ounce
Long GLD @ $183.91- stop hit @ $178.50 for a loss of $5.41 per share
Long SLV @ $ 26.33 - stop hit @ $23.53 for a loss of $2.80 per share
Long December gold (GC Z20) @ $1947.00 - Stop hit @ $1952 for a profit of $500.00 per contract
Long Forex gold (XAU A0-FX) @ $1939.00 - Stop hit @ $1944.80 for a profit of $5.80 per ounce
Long December gold @ $1956.50.Stop hit @ $1960 for a profit of $350.00 per contract
Long December silver @ $27.39.Stop hit @ $27.80 for a profit of $2050 per contract
Long forex gold @ $1948.55.Stop hit @ $1955 for a profit of $6.45 per ounce
Long GLD @ $183.57.Stop hit @ $184.36 for a profit of .79 per share
Long SLV @ $25.10.Stop hit @ $25.75 for a profit of .65 per share
Long September silver at $26.68. Our stop was hit @ $26.87 for a profit of $1000 per contract.
Long December Gold at $1955.50. Our stop was hit @ $1979 for a profit of $2350 per contract
Long Forex Gold at $1947. Our stop was hit @ $1967,52 for a profit of $20.52 per Ounce
Long September silver at $24.40. Our stop was hit @ $25.99 for a profit of $7950 per contract
Bought GLD @ $166.74. Our stop was hit @ $$183.00 for a profit of $16.87 per share.
Bought SLV @ $18.00 Our stop was hit @ $23.80 for a profit of $5.80 per share.
NUGT – we sold all shares and took profits of $33.19 per share
Long December gold at $1997, we covered the trade @ $2035 for a profit of $3800 per contract
Long Forex gold at $1977, we covered the trade @ $2017 for a profit of $40.00 per ounce

Gold Market Forecast

Today’s respectable price gain in gold and silver confirm a larger probability that the key reversal we identified yesterday has some steam in it and could take both precious metals substantially higher. On Thursday and Friday show we will begin to look at projections of where we believe gold and silver pricing will reach before hitting levels of resistance. Today’s video is fairly straightforward as it will cover the trade alert sent out yesterday and detail price entry and stops as we look at our technical studies.

Market Overview

Economic Calendar