Shelter From The Welter

February 7, 2014 - 4:36pm

 by Gary Wagner

Shelter From The Welter

The jobs report was terrible. The jobs report was OK, and the unemployment rate went down closer to where the Fed wants it. (A lousy 6.5%. Unacceptable.) 
 
The emerging markets are collapsing. No, they're "recalibrating." 
 
Equities are overbought. No, scratch that. They're oversold. 
 
We have a welter of conflicting news, sentiment and analysis flying in tight formation with what? A thousand different opinions about gold and silver price direction.  
 
The result is that gold and silver, which indeed have been oversold for at least 6 months, are now getting the love they deserve. Part of it is due to the fact that the conflicting viewpoints are pushing money slowly but surely toward the precious metals. 
 
Even the very group we look to for "forward guidance" seems to be waffling now that their notion of acceptable unemployment rates are within grasp. There is more and more Fed talk about soft inflation or price stagnation.
 
Memo to the Fed: with so many people still out of work, Baby Boomers beginning to retire in response to the shabby jobs market, wages flat and productivity gaining, why on Earth would there be much inflation? 
 
We can't even get much of a spark from the infamous energy markets. Yes oil and gas go up, but, a quick survey around the nation shows that gasoline is holding pretty steady over numerous 6-month cycles. Home heating oil is up, naturally, because of the hideous weather this winter in the U.S. But those prices will plummet once spring comes. Natural gas, in fact, was down again today. 
 
China today came back from its New Year holiday break and so they fattened up the trading-slip piles as gold and silver saw more action in Asia. Most of it was bullish.
 
Next week, Chinese data is due out. Their inflation gauges should detail more nuances in the economy in China, although inflation is projected to be tame. 
 
The second half of February is traditionally a down time for physical purchases of precious metals.
 
Chinese New Year is over, of course. And in the U.S. and the rest of the Western World, Valentine's Day will be done by the 14th. As it is, gold jewelry purchases in the developed counties are declining among the young. Word is that among romantics, diamonds are the new gold. Silver buying for such purchases seems to be holding steady.
 
Finally, although this is the fundamentals portion of this email, we have to keep looking at 1270 as our resistance point. As we've said many times, a long-lasting and hard-to-breach resistance level becomes a sort of shadow fundamental factor.

 

 

As always, wishing you good trading,

 

Gary S. Wagner - Executive Producer

Sentiment Indicator:

Gold Forecast: Proper Action

Yesterday we issued an aggressive buy signal for gold. Today following the release of the most recent jobs report we issued a conservative buy signal for gold. At this point all traders who desired to take this trade should be positioned on the long side.

Aggressive traders bought gold at 1258

Conservative traders bought gold at 1266

A protective stop should be placed which sells gold below 1245.

Gold Market Forecast

As much as we were able to identify an absolute double bottom at 1181, we also looked at the real possibility that gold prices had broken above their long-standing resistance line. This week’s trading activity in some ways clarified our current model, but we certainly did not witness any breakout and sustained dynamic rally in gold. Rather what we have been witnessing has been a slow and methodical move to the upside as gold prices genuinely breakthrough various resistance levels. It is my current belief that we are building a base just above this resistance area and should see prices move higher. Of course next week we will have our new Fed chairperson give their first testimony to the Senate. With today’s softer than expected jobs report we wouldn’t expect any major changes in the Feds current tapering policy.