Plunging U.S Stocks, As Trade War Concerns Returns Gold’s Safe Haven Status

December 7, 2018 - 5:57pm

 by Gary Wagner

Today’s jobs report, certainly the most significant economic data to come out this month, came in well under analyst expectations with 155,000 new jobs being added in the month of November. Analysts had projected that 200,000 new jobs were added last month.

U.S. equities reacted and continued their massive selloff with the Dow Jones Industrial Average trading down 662 points at its low today. Although stocks recovered slightly, the Dow closed off by 559 points today at 24,388. Today marks another deep decline in U.S equities value as they lost another 2.24%, adding to the third straight day of consecutive losses.

After trading to a high near 26,000 at the beginning of this week, the Dow gave up over 1,200 points in a single week of trading.

Market participants continue to focus on genuine concerns over the current trade war between the United States and China and its effect on the global economy at large.

As reported by MarketWatch, “Despite efforts by the Trump administration and its Chinese counterparts to paint an optimistic picture of ongoing negotiations aimed at reducing trade tensions, investors are demanding more evidence that the two sides will avoid the imposition of new and expanded tariffs in 2019, market participants say. Once again, a pair of administration officials gave opposing views about those negotiations in separate television appearances Friday.”

The one-two punch of genuine concern about the trade war and the jobs report which came in well under expectations added fuel to the fire that the Federal Reserve will have to take its foot off the interest rate pedal. Although it is still widely anticipated that the Fed will initiate one last rate hike this month, to be announced at the conclusion of the FOMC meeting, recent data suggests that the Federal Reserve will need to slow down its rate hikes next year.

Collectively all of this economic data has had a profound and bullish effect on gold pricing, which is now trading to the highest price level since July. Gold futures basis the most active February contract is currently trading up $10.10 and fixed at $1,253.70. Although today’s higher pricing has had tailwinds provided by a weaker U.S. dollar, the vast majority of today’s gains are based on solid bullish sentiment. Today’s strong gains add to a week of bullish sentiment resulting in gains of approximately $26 per ounce.

Wishing as always, good trading,

Gary S. Wagner - Executive Producer

Sentiment Indicator:

Gold Forecast: Proper Action
Maintain long February gold @ 1231 Maintain stop @ $1235.13
 
Mid week we sent out a Trade Alert: Trade Alert: Time to take profits and raise stop
 
We bought gold @ $ 1228.30 on Wednesday November 28. We Rolled over the December gold on December 2 to Feb gold @ $ 1231
 
Move your stop on the other gold position to $1235.13
 
In @ $1228.30 out @ $1243.90 for a profit of $1460 per contract.
Gold Market Forecast

This week was certainly a game changer in terms of the safe haven asset gold and its desirability. With a major selloff in US equities, uncertainty in terms of the trade dispute between China and the United States, and the upcoming FOMC meeting, gold gained over $26 this week alone. More importantly it broke through a major resistance level at $1247 per ounce, and now is just six dollars shy of 200 day moving average.

If in fact gold takes out and trades above the 200 day moving average next week that would signal that on a technical basis gold pricing has moved from an interim bullish trend to a long-term bullish trend. That is extremely significant.