Multiple Factors Rekindle Equities Rally and Mixed Precious Metals Pricing

November 29, 2016 - 5:13pm

 by Gary Wagner

Today traders witnessed a return of the dynamic rally in US equities which began just following the presidential election on November 8. Although today’s advance did not take the Dow Jones industrial average or the Standard & Poor’s 500 to new all-time highs, they did signal a strong potential for a continuation of their current rally.

Strong housing as well as a upward revision of the third quarter GDP were cited as key contributors to today’s equities rally. The Third-quarter GDP was upwardly revised due to higher consumer spending.

Higher consumer spending also led to a dramatic rise in the share price of Tiffany. The luxury brand had been under the umbrella of a major sales slump which is now showing signs of easing.

Precious metals closed mixed today with gold trading fractionally lower losing about a third of a percent and silver gaining about a third of a percent on the day. Gold’s losses today were partially based upon an increased probability of a December interest rate hike.

This according to Powell – a Federal Reserve Governor: “A case for a December rate hike has clearly strengthened”. Inasmuch as the majority of traders and investors believe that a December interest rate hike is pretty much in the cards, this statement simply strengthens that resolve.

As we had been talking about over the last two weeks, traders and investors alike have been under the dome of short-term optimism resulting from the belief that Pres. elect Trump will ramp up the US economy through fiscal policies, major infrastructure program, and personal and business tax cuts.

However, until the President-elect becomes the President and begins to govern and layout his plan for economic revitalization, we will not have a decisive roadmap as to how Trump plans to achieve his goals.

This is led to varied opinions as to what effect President-elect Trumps policies will yield. The overwhelming consensus by many professional investors has been that his policies will result in a much stronger US economy vis-à-vis a growing GDP.

Hedge fund manager Stanley Druckenmiller believes Trump’s policies will ignite the US economy resulting in stronger bonds and a stronger US dollar. It is his believe that the euro dollar will continue to decline in value against a strong dollar moving far below pair to € .82 per US dollar.

Chief economist for Gam, Larry Hathaway agrees that the US economy will greatly benefit from President-elect Donald Trump’s policies; nevertheless he believes this will result in a lower US dollar.

This illustrates not only the complexities which lie ahead in initiating these massive undertakings but the uncertainty of how these new policies will play out.

As we enter the final month of 2016, optimism about a fresh start in Washington is creating the confidence and momentum needed to fuel the massive equities rally witnessed over the last two weeks.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

Gold Forecast: Proper Action
Maintain your current long gold position at 1199 (basis Comex February contract).
Maintain your current stop below recent lows at 1170.
Gold Market Forecast

Even recent US dollar weakness could not prop up gold prices which closed roughly 4 dollars lower on the day.

To add to this mixed message we had silver futures trading nominally higher on the day.

Although the lack of follow-through buying in the precious metals markets immediately following Sunday's (Monday in Australia) open, we still maintain that the precious metals markets could easily be forming a base and finding support at the intraday lows roughly at 1170 seen last week.

It is for that reason we are recommending that we maintain our current long gold position as well as stop placement, but more so taking a serious look at adding silver to our trading portfolio.

Trending Markets Forecast

After a one day consolidation, US equities today returned quietly into rally mode. Still under the umbrella and short-term optimism initiated immediately upon the presidential election this month, both the Dow Jones industrial average and S&P 500 traded moderately higher inching closer to the current all-time record high.

The US dollar continues to show signs of weakness. Finding resistance at 102 on the dollar index, we have seen lower pricing over the last four days.

Crude oil sold off briskly today as OPEC member nations failed to reach an overall agreement even with a daily production limit reached.