Fresh News Eludes

We are indeed entering the season of "No Fresh News." The holidays are notorious for it. Of course, we will have labor reports, and we will face the fed music in December regarding tapering.

In general, people around the globe slow down at this time of year. Yet there are tidbits we can pop into our brains and consider.

Janet Yellen is all but confirmed as the new Fed head unless there is a right-wing Kamikaze strike in the Senate. Her presence not only signals a continuation of Ben Bernanke's policies but may very well signal an enhancement of his policies. Or, we may see something that is not as balance-sheet oriented. Yellen is an original thinker in a much truer sense than Bernanke. 

If there is a new kind of program, look for it to be unrelated to the Fed balance sheet and more concerned with regulations. The big financial institutions have been the beneficiaries of the Fed's largesse. It's now time to put the money they have been able to accumulate to work for the whole country. That is more up Yellen's alley.

And another thought on Yellen: will Bernanke allow things to "go dark" during his last meeting as Fed chair? Our thought is yes. It is a matter of etiquette and order to not saddle an incoming head of an organization with the strategy of the outgoing. 

"It's unlikely that Bernanke will do anything at his last meeting if he perceives that his successor would prefer to leave policy unchanged," said Nic Brown, head of commodities research at London's Natixis SA. He added, "The dollar may drop back, too. This is all potentially positive for gold prices in the very short term."

Anyway, what would the fresh news be that would inspire seven members of the FOMC to vote to taper? The last vote was 11 to 1. If there is a trajectory for the American economy, it is rather a flat one. 

On another front - hardly new news - the continued dumping of gold-backed Exchange-Traded Products is one of the major forces in the lowering of gold prices in the last year. We don't believe that this dumping is truly connected to the real value of gold or its value as an instrument for investment. We feel as if the concept of ETPs as they interact with gold is the problem. Commodities are, by their nature volatile in price. Blending them in with an equity-oriented product can only mean that the stock will be volatile. Why buy an ETP when you can buy a regular business growth stock? 

The ETPs overloaded on buying gold with the hope of pushing a new marketing idea. (Does the term "Mortgage-Backed Securities" mean anything to you?

Once the pig in the ETP python moves through the beast, gold will see a bullish effect. 

Watch your technical signals!

Wishing you as always good trading,   

 Gary S. Wagner - Executive Producer

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