Gold and U.S. Equities Continue Their Weeklong Rally

June 7, 2019 - 5:39pm

 by Gary Wagner

There has been an extended rally in both US equities and gold pricing this week. Both asset classes have moved to higher ground. Gold and equities running in tandem with price advances for a sustained time period is a rare occurrence. Typically, these asset classes have an inverse correlation. Liquidity will usually move from equities to gold on signs of weakness in the risk-on asset class, and move from gold to equities when investors favor stocks over safe-haven investments.

Beginning on Thursday of last week (May 30th), traders have moved gold prices higher each consecutive day. Although today’s gains in gold futures are nominal, bullish market forces resulted in the highest high gold has achieved this year.

As of 3:30 PM EDT gold futures, basis the most active August 2019 contract is up $2.20, and fixed at $1344.90. However, it was the intraday high that warranted the most attention as gold traded to a new yearly high of $1352.70.

Today’s gains fall solidly on the shoulders of dollar weakness. With gold up +0.17% and the US dollar index down -0.50%, clearly today’s price advances in the precious yellow metal are entirely due to a falling US dollar.

Dollar weakness this week is a direct result of possible Federal Reserve action beginning next month with the first rate cut since the Fed began to raise rates as they moved to a monetary policy of quantitative normalization, rather than quantitative easing. Statements made by both James Bullard, President of the St. Louis Federal Reserve Bank on Monday, and Federal Reserve Chairman Jerome Powell on Tuesday has opened the door for a series of rate cuts to be completed in 2019.

Beginning on Wednesday with the release of the ADP jobs report we saw in increased probability that the Fed would begin a series of rate cuts. Although 175,000 new jobs added in May were forecasted, the actual ADP numbers came in at 27,000. Today U.S. Labor Department released its jobs report which also increased the probability of a Fed rate cut. It was forecasted that non-farm payroll jobs in May would increase by 177,000. However, when the report was unveiled this morning, it showed that only 75,000 non-farm payroll jobs were added in May.

Wishing you, as always, good trading,

Gary S. Wagner - Executive Producer

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Gold Forecast: Proper Action
Yesterday,June 6, we raised our stop from $1321.13 to $1328.13
Maintain Long August gold@ $1293.10
Maintain stop @ $1328.13
 
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.
Gold Market Forecast
We remain bullish for gold on a long-term basis, however, at any moment we could see a short term pause in this rally.  On Wednesday gold traded with a higher low and day higher high than on Tuesday,  it was the extended high of $1349 that caught the attention of traders. Yesterdy,  gold traded to a higher low, but not a higher high. Today gold reach a NEW high price for 2019
 
Support for gold continues to be  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 Monday's 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 Labor deptment Jobs report came in well under expections. 175,000 new jobs were forecast and the actual number was only 75,000.
Sentiment Indicator:
Gold -> Bullish
Silver -> Bullish
S&P 500 -> Bullish
Bitcoin -> Neutral
Bitcoin fundamentals by Joseph M. Wagner II:

Bitcoin’s predicted speedy recovery is confirmed today on a daily candlestick chart. Viewing the markets from this format reveals a variant of a two day bullish reversal pattern simply called a ‘bullish kicking’. Although to truly fit the definition today's candle would not dip into the upper wick of the prior candle (Thursday). None the less as we had spoken to the point prior to this retracement’s occurrence, is that the back stepping would be rather shallow and short lived. Also noteworthy is the CME’s futures contracts are trading lower than anticipated with the recent succession of the CBOE’s single coin contract. However, looking at the bigger picture Daily volume and liquidity are up and have been steadily for months.

Thursday’s new positions were roughly equal to the old record daily Volume hit on November 20th, 2018 at approximately 12,500 contracts being bought and sold. Which was seemingly doomed from the start. In fact, both funds offered Bitcoin divertive contracts at seemingly the worst possible time (at the all-time apex at approx. $20,000).