And This Time We Mean It (Really)

June 19, 2014 - 5:45pm

 by Gary Wagner

As many parents are fond of saying: "How many times do I have to tell you?"

It seems the Fed's moderating tone, which was missed by many analysts on the first pass, promised longer-term low interest rates, which makes sense on many levels.

First, the European Central Bank is keeping rates as low as possible - zero or below - because that body does not have the same flexibility when it comes to quantitative easing as does the Fed, given its federative nature. So, the U.S can't let its interest rates come too far out of alignment with Europe's.

Second, as the Fed unwinds QE3 - the bond and mortgage buyback - it has to have a hedge against a potential torpedo hit from that action. The defense against the torpedo is low interest rates.

Until today, though, low interest rates seemed only to serve the equities markets, but, because low interest rates are seen as an inflation accelerant, gold and silver are holding new attractions for investment.

Rumor has it that there was one very large single-investor buy-in today, but we haven''t confirmed it. That makes some sense, though, given the way the price of gold screamed higher early this afternoon.

Apparently 85 tons of gold changed hands in three big trades. And trading volume was up across all forms of gold trading: physical, spot and futures.

There is continued concern about the situation in Iraq, although its effect is already baked into the price. The situation in Ukraine is still on a simmer, inarguably present but not an enormous factor.

We think that after many false starts and misapprehensions, precious traders finally believed the Fed's comments on interest rate stability.

Janet Yellen might as well stand up and shout, "I told you so!"

As always, wishing you good trading,

Gary S. Wagner - Executive Producer

Sentiment Indicator:

Gold Forecast: Proper Action

Early this morning in Hawaii we sent out a special trade alert in which we noted that we had a defined breakout in both gold and silver. Our comments then were: if we see gold prices stabilize at and above 1300 we will quickly issue a buy recommendation.

We got just that and roughly 15 minutes after, we sent out a trade alert with a specific buy recommendation for both gold and silver.

Maintain your current long gold position at 1303
Maintain your current long silver position at 20.61

Stops: (we will look to tighten stops on Friday, or Monday at the latest)
Gold stop just below 1285
Silver stop just below $20 

Gold Market Forecast

Over this last week we have spoken about the multiple factors which are currently influencing the precious metals markets, possibly coalescing into a perfect storm scenario.

Geopolitical uncertainty in Iraq, an upwardly revised consumer price index, and the Federal Reserve announcement that interest rates may begin to move higher - but not for some time, all intertwined as we witnessed gold climb over $40 today.

The key number we were looking at was 1288, which on a technical basis would be the first point in which we could assume that the current rally in gold was more than a counter trend, and that the bulls had finally gotten the football and were running downfield. The question of how far they can run this football will be our primary topic on today's video report. We will not only explore current support and resistance levels but more importantly take a look at our current strategy and target for this trade.