May 28, 2013 - 5:54pm
Bull Bites Back.
Gold is off modestly today on minor profit-taking and some chart consolidation. And, it is Friday so we have the "Nervous-Nellie Effect" at work, too.
The direction in which the Fed will take the slightly stale QE3 stimulus may, in a sense, already be out of the central bank's hands. Indeed, if the U.S. economy is steadily gaining force, the Fed's decision will be a no-brainer, which you can be assured will bring delight to their high, troubled foreheads.
Let's be clear that The United States Federal Reserve operates primarily for the benefit of the American economy. Like our military, though, as Voltaire said, with great power come great responsibilities. So, the Fed is quite aware that its actions will affect China, Europe, Japan and the emerging economies.
Already, Germany is lobbying against further easing in the euro zone - to be expected, but sort of like fighting over the terms of a will at a funeral. Please wait till the body is in the ground for a week before starting the fight. But, Germany's economy picked up a bit recently even if the rest of Europe is mired in quicksand. Germany's response is in their national self-interest, not in Europe's or the rest of the world. It speaks to German selfishness and provincialism. Can Germany's recent success continue to exist in a vacuum? Of course not. They need to think it over again.
China reported poor numbers this week and that country's economy ought to be viewed with a lot trepidation now. Japan's stock market had been soaring until Thursday when it took a shellacking. That tells us Asia in general is experiencing a good dose of volatility.
The U.S. economy seems to behave like a newly-forming wheel of Swiss cheese. A hole opens here, a hole closes over on the other side. (Speaking of Swiss, Switzerland and China signed a free trade agreement, the first in history between a heavily-controlled economy and a "free" economy. This should be a good marriage between two countries that believe cheating other economies is sound practice. Figure it will give the Swiss so many more opportunities to hide money for the super rich - Chinese rich now. And China can make counterfeit cuckoo clocks.)
The U.S. sector to begin watching like a hawk is housing. It is reaching a critical stage (headed for the positive zone). The recovery of housing is so crucial because, as the Great Recession begins to fade in the rearview mirror, the unemployed who are left behind are first and foremost construction workers. (Those who will continue to fare terribly will be young people with no college degree, 2 or 4 year, no trade skill, and little social skill, the last for sales.) Construction unemployment makes up almost 3% of those still jobless. The overall rate is 7.5%, so that number of construction-related workers is very significant.
It seems - again on the labor front - that this year's college graduating class is facing the best prospects since 2006. That's good news. When those Millennials are all working and getting their first apartments or houses, they will let loose a lot of pent up demand, which will help further drive the economy. (Stock up now, IKEA; they're a -comin'.) And, if anecdotal evidence is worth anything, our contacts in Boston, New York, Philly, D.C., Chicago, L.A. and San Francisco are saying the 4-year degree kids are finding jobs almost easily - provided they got their sheepskin from a well-regarded institution.
Finally, on the labor front, there has been much said about lengthy stays for Baby Boomers on the unemployment line. We did some disaggregation of that notion and found that it is indeed true, grossly speaking. However, the Boomers who are most affected are younger (born from 1959 to 1964). They are the least skilled among the greater Boomer population cadre. And they are the least likely to move to a new area of the country to take a new job. This adds up to the lowest-income Boomers, although within a large statistical group there are many variations and many outliers.
The preceding overview is germane to gold because, as precious traders we are always looking for a tectonic plate movements in the world economy for fundamental direction.
On ending QE3, the taffy pull among voting Fed presidents is actually good for gold because it creates uncertainty in the equities markets and positions gold as again as a safe haven. What will the equities traders do without an endless stream of cheap or free Fed money?
And, as precious traders we want the U.S. and world economies to rev up to their highest rpm's before the clutch is popped and the economies go screaming down the race track. You know what that would mean? Inflation, naturally.
As always, wishing you good trading,
Gary S. Wagner - Executive Producer
Market Forecast: For yet another week gold is continued its spiral downward with a intra-week low of 1340 per ounce. This week also contained historical new price highs for the equities markets in the United States, and strong global equities markets. This continued to put major pressure on the precious metals markets. On a technical basis we have major support in the market at 1320 and then again at 1340. Resistance in gold is currently at 1400 per ounce and then at 1412. Major resistance for gold is at 1450 and above 1470. Today’s video will look at in detail both minor and major, support and resistance. We have also adjusted our trading style begin to incorporate selling short in the market. All traders should be neutral going into the weekend having pulled profits from our short initiated at 1400 per ounce. Also we are at the final end of completing our video archives for our daily and weekly members. Here are the links for these two months.
Market Sentiment: Possible bottom at 1320 current resistance at 1412
your 1400 short should be covered (1370 to 1390)
From the week of 05.24. 2013