One More Time

December 12, 2016 - 5:04pm

 by Gary Wagner

For the last time in 2016, the Federal Reserve will meet for their regularly scheduled FOMC meeting. Although it is not etched in stone, it is highly anticipated that there will be an interest rate hike announcement immediately following the conclusion of their meeting on Wednesday.

There is anticipation that the Fed will announce a quarter percent interest rate hike. This would be the second interest rate hike that the Fed has implemented since it began its quantitative easing program in 2008. Last year, the Fed mentioned a minimum of two interest rate hikes this year. However, this obviously won’t come to pass.

Market analysts and technicians largely believe that an interest rate hike announcement has already been factored into the market’s pricing. As such, most do not expect volatile markets following the news, unless the outcome is different than currently perceived.

Gold and the US dollar

As of 3:30 Eastern Standard Time, gold is trading higher, currently priced at 1164, a two-dollar gain for the day. However, this price can be deceiving considering today’s weakness in the US dollar. Currently the dollar is trading off by about a half of percent at 101 (on the Dollar Index).

According to the Kitco Gold Index, normal trading in gold has moved the precious yellow’s pricing lower by about $4.40. Nevertheless, once we account for a weakening US dollar, which has added $6.40 per ounce to gold, we get a net result of gold trading two dollars higher. So much for genuine bounce in gold prices.

Trump’s New America

Of course, recent weakness in the precious metals complex, specifically gold pricing, has been under pressure and trading to lower pricing ever since our presidential election was held last month. A short-term optimism, based upon the belief that there will be a genuine shakeup in Washington, and a fresh start, based upon a new administration with extremely different policies, continues to drive a risk-on economic environment. This risk-on market sentiment has driven equities to all-time record highs, and at the same time, put dramatic pressure on precious metal pricing.

Recent nominations to President-elect Donald Trump’s staff and Cabinet have strongly indicated that America will be run more like a corporation than a political entity. As such, we can expect dramatic changes in how our government allocates funding and budgeting. Although the outcome of this new strategy is uncertain, traders and investors continue to bid up US equities in the belief of a more prosperous future, based upon lower taxes and less regulation.

We could expect these current trends to continue at least throughout the holidays and New Year, barring any unforeseen dramatic changes in current market sentiment.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

Gold Forecast: Proper Action

We are currently flat with no active trades in either gold or silver.

Gold Market Forecast

Considering today’s upside bounce, whereas on the surface it appears as though gold moved higher, upon closer inspection we see that gold’s two-dollar rise was totally do to a weaker US dollar. A weaker US dollar added over six dollars in value, therefore there was predominantly selling in gold today taking the precious yellow metal down about four dollars on the day.

Silver on the other hand was able to not only take advantage of this weaker US dollar but add to that weakness gaining over a percent on the day. As we have spoken about last week it is our belief that the industrial component of silver is what has maintained a bullish sentiment during this risk on environment.

Trending Markets Forecast

Once again, we have US equities closing at a new all-time record high. But just as in gold looks can be deceiving as we really have a mixed bag. Yes, the Dow Jones industrial average closed up, however both the Standard & Poor’s 500 as well as the NASDAQ did close lower on the day. This could be an indication that US equities have reached some sort of a short-term top, and we could see a round of profit-taking ensue at any moment.

Crude oil has broken above its former resistance at $52 per barrel, more so recent accords reached by OPEC member nations and Russia about production cuts have taken oil prices off of their recent lows, and now traded above former resistance. We could see crude oil track as high as $59 a barrel over this next month based upon this new news.