Dow Plunges Almost 800 Points, Gold Scores Moderate Gains

December 4, 2018 - 5:51pm

 by Gary Wagner

Within the final 10 minutes of trading, as traders watched the U.S. equities markets close, the Dow Jones industrial average plunged almost 800 points as it traded to an intraday low today of 25,008. When the dust settled, the Dow had lost 799.36 points, with a net decline of over 3%, and settled at 25,027.07.

Real doubts have been present as to whether or not tangible and defined forward movement was reached in regards to the trade agreement this weekend when presidents of the United States and China met face-to-face. Uncertainty surrounding the released statements by both countries were cited as a primary factor moving U.S. equities lower.

According to Bloomberg, “The U.S. and China emphasized different results from Sunday’s high-stakes meeting between Presidents Donald Trump and Xi Jinping, with the split highlighting how much of a gap needs to be overcome over the next three months.”

Inasmuch as the administration painted a rosy picture highlighting that a 90-day truce had been agreed upon and put into play, there are genuine concerns regarding the ability to resolve the specific issues needed to end the trade dispute.

More so, there seems to be a discrepancy between statements from China and the United States regarding precisely what was agreed upon during the face-to-face meeting.

Bloomberg News did a comparison of the statements released by both countries and found huge discrepancies between the two. For example, our administration highlighted the fact that for the next 90 days tariffs will not be raised to 25% unless no deal is reached. The Chinese statement, however, did not mention a 90-day deadline.

The Chinese statement said that China would import more U.S. goods. However, the United States statements said that China would purchase “very substantial” farm, energy, industrial, and other products.

The Chinese statement also said that the U.S. has agreed to continue respecting the one-China policy. There was absolutely no mention of this in the statement issued by the United States. As Jim Wyckoff from Kitco News so appropriately commented in his article today, as far as an agreement goes “the devils are in the detail.”

The net result of the uncertainty surrounding the 90-day truce and trade agreement was a risk off day favoring the safe haven assets such as gold. Gold futures basis the most active February 2019 contract closed up $4.10 and settled at $1,243.70. Spot gold gained $7.60 on the day. These gains were entirely due to buyers bidding up the precious yellow metal, with the KGX (Kitco Gold Index) showing a $0.10 decline due to dollar strength.

Wishing as always, good trading,

Gary S. Wagner - Executive Producer

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Gold Forecast: Proper Action
On Wednesday November 28  sent out two Trade Alerts this morning. The first:  Buy December Gold ATM (At the market) 1218.80. Place Stop @ 1204.13. The second: to add a contract in the February (GC G19) contract month.
On Sunday, December 2nd we sent out a trade alert to roll over the December position to Febuary. You made a total of $600 per contract on the roll over.
You are now long 2 contract of February gold at an average price of $1229 (current $1244)
Maintain long two February gold @  $1229 (ave), and stop @ $1210.13
Gold Market Forecast
As we spoke about last week the future direction of precious metals as well as the US dollar were going to be highly influenced by the face-to-face meeting between Presidents Trump and Xi at the G 20 meeting in Argentina last weekend. We also spoke about the fact that the current dispute is much too complex to believe that it could be result in a single meeting, however if we had some real headway and positive statements coming out of their face-to-face talk, we would see weakness in the US dollar, as well as a return to rally mode in the precious metals markets, specifically gold. Now concern has been raised as to what agreements were reached.
Sentiment Indicator:
Gold -> Bullish
Silver -> Bullish
S&P 500 -> Neutral
Bitcoin -> Bearish