Dissent And Debate | The Gold Forecast

Dissent And Debate

March 21, 2014 - 4:21pm

 by Gary Wagner

Sometimes the clearest thinking comes from dissenters. In the case of the Fed and the results and blowback from the latest FOMC meeting, that certainly seems the case. It may be only a matter of wording, but there seemed to be a slight policy shift.

The Fed's future policy statements will no longer cite a specific unemployment rate that might lead to its eventually raising short-term interest rates. The Fed instead says it will monitor a "range" of information before approving any rate increase.

Narayana Kocherlakota, president of the Minneapolis Fed, said the shift, which the Fed approved 8-1, will hurt the American economy.

"The new guidance fosters policy uncertainty and thereby suppresses economic activity," Kocherlakota said in a statement explaining his dissent.

Kocherlakota said that lowering the threshold for considering a rate hike from 6.5 percent unemployment to 5.5% would have enhanced the Fed's commitment to low rates until inflation nears its 2% target. Inflation is now running around 1% percent, and the unemployment rate is 6.7%.

Kocherlakota said a better approach would have been a statement saying the Fed intends to keep rates at record lows until unemployment has fallen below 5.5% - as long as expected inflation was below 2.25 percent and any "possible risks to financial stability remain well-contained."

Gold bulls know that faster growth and the threat of inflation are key ingredients for a rise in prices.

But, Kocherlakota may have something in mind deeper than a scarcely even tangential concern for gold bulls.

How can an economic/social entity as large and rich as the United States settle for anything except full employment? Even a 5.5% unemployment rate doesn't bring us to full employment. that begins when we dip under 4%, which should be the ultimate goal of policy. 

Can it be done without damaging inflation? It certainly has happened before. And why pick any number for inflation? The2% level seems a bit of magical thinking to us.

Weekend psychology is an impressive thing. It seems that equities traders became a little weak-kneed heading into Friday afternoon and stopped yesterday's rally in its tracks, although there were only a few drops of blood shed.

Gold enthusiasts behaved exactly in the opposite fashion, bidding up the yellow metal $9.00 to $9.50 at 3:30 PM in New York. So, you have to read some confidence in gold at that development.

Silver is growing more problematic fundamentally.

It fell 5.2% this week, the worst showing since 2013, the four-day slump being its longest since September. What is more troubling is that the industrial metal complex is at its lowest in nine months, as well.

This is the smell of smoke in the house of China burning. Either manufacturing is going to get further slammed, or they have overbought their supply and are now drawing down on metals in house. Or it could be some combination of those two tales. either way, the industrial metals are hurting and silver along with them.

As always, wishing you good trading,

Gary S. Wagner - Executive Producer

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Gold Forecast: Proper Action

We pulled profits on our gold trade earlier this week. Yesterday we issued an Aggressive buy signal in both gold and silver. This trade has high risks in that we are trying to get into the trade a little early. Stops therefore need to be tight to maintain low risk exposure.

Maintain long gold @ 1333 stop just below 1320

Maintain long silver @ 20.35 Stop Just below 19.75 

Closed trades:

GLD: On April 12th our stop was hit at $162. We went long at 162.82. Trade resulted in 0.82 loss per share.

Futures: Gold (GC J21) in at 1722.80. Out at at $1728 for a profit of $520.00- per Comex contract.
Forex: XAUUSD in at 1724.40. Out at at $1729 for a profit of $4.60- per ounce.
ETF's: GLD in at 161.55. Out at at $161.90 for a profit of $0.35- per share

SLV in at $24.24. Stop hit at $23.50, for a loss of $1.05 per share
May 2021 (SI K21) in at $26.26. Stop hit at $25.3 for a loss of $0.96 ounce
Forex silver in at $26.17. Stop hit at $25,30 or a loss of $0.87 per ounce

On February 18 we entered a long April Platinum trade. In at $1282. Our stop was hit today (02/26/21) @ at $1217.00
SILVER FUTURES MARCH: Entry at $27.36, and then closed the trade later @ $27.45.
XAGUSD: Entry at $27.26,, our stop was hit at $27.39

We closed our positions in SLV:
First leg SLV: @ 22.95 .out at @ $24.99
Second leg SLV @ 24.60. out at @ $24.99

On Thursday February 4 stops were hit on our long GLD ETF. We entered at 172.14. Our stop was hit at $168.29 (the open on Thursday) for a $3.85 loss per share.

GOLD FUTURES APRIL: Entry at 1845 - 1859 . Stop hit at 1813 - average loss $3900 per contract
XAUSUD: Entry at 1845 - 1857 . Stop hit at 1813 - average loss of $38 per oz
SILVER FUTURES MARCH: Entry at 25.42 - 25.46 . Stop hit at 24.11 - average loss $6650 per contract
XAGUSD: Entry at 25.33 - 25.40 - Stop hit at 24.11 - average loss $1.3 per oz
long February gold @ $1890.00 and stop hit @ $1902.20, for a profit of $1202.00 per contract
long Forex gold @ $1886.00 and stop hit @ $1898 for a profit of $12.00 per OZ
long March silver @ $26.31 and stop hit @ $26.41 for a profit of $500.00 per contract
long GLD @ $177.26 and stop hit @ $178.00 for a profit of $0.71 per share
long SLV @ $24.67 and stop hit @ 25.00 for a profit of $0.33 per share
long February Gold Futures at $1860-$1866 and stop hit at at $1869. Average profit $600 per contract
long XAUUSD at $1856-$1862 and stop hit at $1866. Average profit $6
long March Silver Futures at $25.16 - $25.25 and stop hit at $25.30. Average profit $450 per contract
long GLD @ $174.12 and stop hit at $175.78 for a profit of $1.66 per share
long GLD @ $174.12 and stop hit at $175.78 for a profit of $1.66 per share
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

Gold Market Forecast

Although we have seen dramatically lower pricing in gold and silver throughout the week, yesterday we received our first technical clues that the bearish faction might be running out of steam. Considering that gold was trading at an intraday high of 1390 at the beginning of this week, we have in fact seen a strong round of profit taking occur. As I said in yesterday’s market forecast, it is been my opinion that it wasn’t so much if a round of profit taking would occur, but when and at what price point would occur. Since beginning of 2014 we have witnessed gold prices move roughly $200 higher. With that in mind this $60 retracement this week was not only expected, but I believe healthy.

However we are still getting mixed signals as to the status of this current retracement. Of course the long-term charts are still showing a bearish tendency, but the short-term studies are showing a potential pivot point or bottom in this market. Today’s show will detail three components. First we will look at our trade which we concluded midweek. Secondly we will look at our most recent signal that was issued yesterday along with the technical studies that prompted the call. Lastly we will look at our forecast for next week.

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