Fed Comments Support Dow, NASDAQ Composite and Gold

June 4, 2019 - 6:08pm

 by Gary Wagner

As of 4:00 PM EDT U.S. equities surged today with the Dow Jones industrial average up over 500 points, a 2.06% gain. The NASDAQ composite had a stellar performance today up 2.38%, which was the largest percentage gain when compared to the S&P 500 and the Dow. Gold also closed up slightly on the day gaining approximately three dollars, with August futures currently fixed at $1330.80.

U.S. equities as well as gold moved in tandem to the upside based largely upon comments made by Fed Chairman Jerome Powell.

According to Reuters “The Federal Reserve will respond “as appropriate” to the risks posed by a global trade war and other recent developments, Fed Chairman Jerome Powell said on Tuesday in remarks that seemed to open the door to the possibility of a rate cut. In a brief statement included as part of a speech on broader monetary policy issues, Powell said the Fed was “closely monitoring the implications” of a trade dispute that has, since the Fed’s last meeting, disrupted global bond and equity markets and posed risks to U.S. and world economic growth.”

Powell’s statements seem to be in alignment with statements made yesterday by St. Louis Federal Reserve Bank Chairman James Bullard who said  “[the]central bank might have to cut interest rates soon,”.

Collectively Chairman Powell and James Bullard’s statements suggests a willingness by the Federal Reserve to implement rate cuts to stimulate economic growth which is now much slower, than expected prior to the onset of the trade war between the United States and China taking such a huge effect on commerce.

Typically, gold which acts as a safe haven asset, and U.S. equities do not move in tandem. However, in the case of a possible rate cut by the Federal Reserve both closed in positive territory. The scale of the moves were not equal though U.S. equities performed ten times stronger than gold which only grew by about 0.2%, while all three indices had gains above 2% on the day.

However, gold could be consolidating, or even entering a correction. After exhibiting such strong gains recently, one would expect a period of consolidation to occur before the next major move begins, whether that is a continuation of the rally or a small pullback after such a parabolic rise is yet to be seen.

Yesterday we spoke about gold surpassing palladium prices making it the most expensive precious metal of the complex. However, based on today’s solid performance in palladium in which it gained just under 2%, has resulted in gold’s price superiority extremely short-lived. The key will be whether or not U.S. equities continue to rally, because a strong equities market will be highly supportive of the industrial components of palladium as well as platinum and silver to some extent.

Wishing you, as always, good trading,

Gary S. Wagner - Executive Producer

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Gold Forecast: Proper Action
Today we raised our stop from $1310.13 to $1321.13
Maintain Long August gold@ $1293.10
Maintain stop @ $1321.13
 
Thursday morning, May 30, we sent out this message -Trade Alert: buy August 2019 gold @ the market. Respectable move today in gold which is currently trading up $6.80 to $7.00, basis the August 2019 contract and fixed at $1293.10.
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Gold Market Forecast

Although we remain bullish for gold on a long-term basis, trade activity over the last couple of days has signaled the potential for gold to either consolidate or slightly correct. Today gold traded with a higher low and day higher high than yesterday, however it only closed fractionally higher on the day.

Support for gold was largely attributed to statements by Federal Reserve Chairman Jerome Powell who alluded to the potential for rate reductions this year to continue the economic expansion. This coupled with yesterday statement by the president of the St. Louis Federal Reserve bank, James Bullard is significant in that it illustrates real support for rate cuts if needed. Today’s tepid upside move in gold following a significant parabolic rally has prompted us to tighten our stop, which we recommended with a trade alert sent out earlier today.

Sentiment Indicator:
Gold -> Neutral
Silver -> Neutral
S&P 500 -> Bullish
Bitcoin -> Bearish
Bitcoin fundamentals by Joseph M. Wagner II:

Correction in Crypto-currencies?

As I had predicted late last week as well as yesterday, the cryptocurrency markets are in the midst of an overdue but healthy correction today. We predicted on Monday that BTC futures were setting themselves up for a retracement, my price point for support is the .23% Fibonacci retracement at $6981. Currently BTC futures on the Chicago Mercantile exchange are trading down by approximately $950 stripping nearly 11% of value at the time this was written at approximately 1:15 PM Eastern daylight Time. The steady decline began about six hours ago when in a span of 15 minutes lost close to $500 in value. Over the next 30 minutes BTC futures traded sharply to the downside and by 8:00 PM on the East Coast pricing dipped to roughly $7700 per unit.

The market traded extremely flat over the next 12 hours not budging in either direction until the New York markets opened for the day which brought pricing even lower to $7600 and may be headed slightly lower before it finds any bottom and bounces. Although this could be the bounce that takes it above $9500 I find that scenario unlikely and forecast that it will likely revisit the crucial level of $6981. It may in fact dip lower than this price point but I believe the correction we are now experiencing crypto currencies will be short-lived and not bring in and to the current Bull Run.

If you are heavily invested in crypto currencies in digital dollars then you may want to move crypto-based coins into one of the many stable coins such as USD-Coin, True USD and the 800-pound gorilla in the digital asset jungle. But with these coins pegged to another currency usually the US dollar and to somewhat the euro, investors may ask the obvious question, how can I profit from a stable coin? According to   Flagshipcyrpto, “Investors of Stable-coins make money by receiving dividends from the newly issued coins being given to them for holding the Stable coin’s shares. Investors are hoping to buy a “money machine”, which will give them newly created coins that they can then sell.” Sure they may be stable and solve the problem of volatility but as a trader, there surely doesn’t seem to be much meet on the bone and there is a lot of fresh meat.