Just When You Thought It Was Safe

September 10, 2014 - 5:12pm

 by Gary Wagner

Let the hair pulling commence.

Gold seemed to rise and fall as if on big rolling seas today. After regular-hours trading, it appeared that gold would end more or less unchanged.

That was not to be. As the late afternoon session wore on, gold took a significant, though not catastrophic drive that was partially, though not wholly, exacerbated by dollar strength.

What suddenly sprang into the picture is paranoia over next week's FOMC meeting (the 16th and 17th). Why all of a sudden?

The San Francisco Fed released an in-depth study articulating how investors underestimated the speed at which the Fed might raise rates. Whether this is accurate seemed to not occur to anyone. Each federal Reserve branch is "independent," and has its own team that assesses conditions regionally and nationally.

Although the study was issued yesterday, it seems not to have been fully digested until after noontime EDT. This is just what the precious market needed to start chasing its tail over possible Fed rate rises.

Apparently the same analysts and investors ignored the fact that mortgage applications hit a fourteen-year low in August. Yes - that's one-four fourteen. XIV if you remember your Roman numerals.

And, while the situation in Ukraine has cooled off considerably, tonight President Obama is going on air to tell of the impending war with the desert barbarians. Nevertheless, gold and silver did not bat an eyelash at the news of another Middle East adventure.

The price of energy plummeted again today, although natural gas held firmer than crude and Brent. The latter two were down around 1.00%. Our sense is that this is more than a glut. It's a sign that consumption is down worldwide.

None of this stopped American equities markets, which continued their juggernaut ways. The NASDAQ was up 0.75% while the S&P and Dow were up about a third of a percentage point each.

Gold and silver have been looking for direction. It seems that direction is upon us.

As always, wishing you good trading,

Gary S. Wagner - Executive Producer

Sentiment Indicator:

Gold Forecast: Proper Action

This morning we sent out a formal trade alert recommending that traders initiate short positions (sell gold), if they have not already done so. The trade alert read as follows:

Although I have been speaking of lower prices ahead in gold, I have not put out a formal SELL signal in gold. This is it. If you are not already short gold you should sell it at market (1249.54 current price)

Buy stop above 1261.

Gold Market Forecast

We saw a continuation of the dramatic selloff in the precious metals continue today.

Even with the US dollar and equities below recent highs in their respective markets, both managed to close higher on the day. We believe that this is a trend that could continue. Although we're not looking for stocks or the dollar to move straight up, we see no reason to believe that their trends have eroded.

Thus, we believe that we will see continued pressure in gold as long as the equities markets and US dollar remain firm. Once gold broke below support at 1261 our current real target became 1230. That number is based upon a 76% retracement from the $200 rally which began at the end of 2013 beginning of 2014.

We did not issue a sell recommendation for silver - today's video will explain our rationale behind that decision.