Powell and Yellen begin their two- day congressional testimony | The Gold Forecast

Powell and Yellen begin their two- day congressional testimony

March 23, 2021 - 6:32pm

 by Gary Wagner

Today both Chairman of the Federal Reserve Jerome Powell and the secretary of the United States Treasury Department Janet Yellin began a two-day congressional testimony. In short, their testimony resulted in dollar strength which was the primary factor taking gold prices lower. As of 5 PM EST gold futures basis, the most active April 2021 contract is currently fixed at $1725.50, after factoring in today’s decline of $12.50 (-0.72%). Simple math determines that only 0.10% was attributable to market participants selling the precious yellow metal, with the remaining decline directly attributable to a strong dollar. The U.S. dollar closed higher as the dollar index gained 62 points, or 0.68%, and is currently fixed at 92.365.

Silver pricing was hit much harder today, with the most active May 2021 contract currently fixed at $25.095, which is a decline of 2.63%. This means that the vast majority of today’s decline in silver can be directly attributed to market participants actively selling the precious white metal.

This also can be clearly illustrated when we view the KGX (Kitco Gold Index). In the case of spot gold, the KGX is currently fixing the price at $1727.20, which is a net decline of $12.10 on the day. Of the $12.10 decline, dollar strength contributed $10.40, with the remaining decline of $1.70 attributable to selling pressure. Silver’s loss, however, was mainly due to selling pressure which resulted in today’s 2.60 % decline. The KGX is currently fixing spot silver at $25.01, which is a net decline of $0.73 per ounce. Selling pressure accounted for 2.24% or $0.58, with the remaining $0.15 decline directly attributable to dollar strength.

One of the primary topics that were discussed during the first day of testimony was the health of the U.S. economy, which has seen a tremendous contraction due to the Covid-19 global pandemic.

The disparity between current market sentiment by market participants, the Fed, and Treasury is the optimism regarding how quickly the United States will recover from the pandemic as well as the real possibility of rising inflation which has led to skepticism regarding the Federal Reserve’s current monetary policy of keeping interest rates (Fed funds) between zero and 25 basis points (1/4%). This optimism has led to rising yields in U.S. treasury 10-year notes, which are currently fixed at 1.627%

According to MarketWatch, Michael Armbruster, managing partner at Altavest, told the publication, “Even though we have seen a reprieve in Treasury yields over the last few days, we remain in a rising interest rate environment, and that is negative for gold and silver. We probably need to see the equity markets break before we get a policy change from the Fed…that could change the price trajectory for precious metals.”

He also added that “For gold bugs, it is likely to remain a tough market for the next three to six months.”

On a bullish note, he spoke about the long-term prospects of gold pricing, citing that he is “still bullish on gold rebound over the longer term if a mega $3 trillion bill gets through Congress but in immediate term, gold is being influenced by 10-year bond yields.” He believes that this could cause a rise in interest rates sooner than most people expected.

We have seen gold and silver both being subjected to selling pressure created by a number of factors. These include dollar strength, rising yields in Treasury notes, as well as recent rebalancing to favor U.S equities over safe-haven assets.

The real question becomes as to whether or not market participants are correct in their more optimistic view of a recovery than the Federal Reserve.

If, in fact, they have correctly predicted a much faster recovery than the Federal Reserve believes, then we could see both gold and silver continue to trade under pressure. However, if the market sentiment is ahead of itself and overly optimistic, we would see a return to a bullish demeanor in both gold and silver

Wishing you, as always, good trading and good health,

Gary S. Wagner - Executive Producer

This report is now free and publicly available to everyone

Gold Forecast: Proper Action

On March 10th we issued trade alert to buy gold and silver.

On March 16 we raised stops to. On March 23 stop on our silver trades were hit. However we remain long gold futures, forex and GLD

Futures: GC 1690., XAUUSD 1690., ETF's: GLD 159.35.

Futures contracts:
Buy April 2021 gold (GC J21) @ the market current $1722.80. Place stop at $1690
Buy Forex gold @ the market current $1724.40. Place stop at $1690

Electronically Traded Funds:
Buy GLD at the market current $161.55. Stop at $159.35

Stops hit: SLV in at $24.24. Stop hit at $23.50, for a loss of $1.05 per share

May 2021 (SI K21) in at $26.26. Stop hit at $25.3 for a loss of $0.96ounce
Forex silver in at $26.17. Stop hit at $25,30 or a loss of $0.87 per ounce

On February 18 we entered a long April Platinum trade. In at $1282. Our stop was hit today (02/26/21) @ at $1217.00
SILVER FUTURES MARCH: Entry at $27.36, and then closed the trade later @ $27.45.
XAGUSD: Entry at $27.26,, our stop was hit at $27.39

We closed our positions in SLV:
First leg SLV: @ 22.95 .out at @ $24.99
Second leg SLV @ 24.60. out at @ $24.99

On Thursday February 4 stops were hit on our long GLD ETF. We entered at 172.14. Our stop was hit at $168.29 (the open on Thursday) for a $3.85 loss per share.

GOLD FUTURES APRIL: Entry at 1845 - 1859 . Stop hit at 1813 - average loss $3900 per contract
XAUSUD: Entry at 1845 - 1857 . Stop hit at 1813 - average loss of $38 per oz
SILVER FUTURES MARCH: Entry at 25.42 - 25.46 . Stop hit at 24.11 - average loss $6650 per contract
XAGUSD: Entry at 25.33 - 25.40 - Stop hit at 24.11 - average loss $1.3 per oz
long February gold @ $1890.00 and stop hit @ $1902.20, for a profit of $1202.00 per contract
long Forex gold @ $1886.00 and stop hit @ $1898 for a profit of $12.00 per OZ
long March silver @ $26.31 and stop hit @ $26.41 for a profit of $500.00 per contract
long GLD @ $177.26 and stop hit @ $178.00 for a profit of $0.71 per share
long SLV @ $24.67 and stop hit @ 25.00 for a profit of $0.33 per share
long February Gold Futures at $1860-$1866 and stop hit at at $1869. Average profit $600 per contract
long XAUUSD at $1856-$1862 and stop hit at $1866. Average profit $6
long March Silver Futures at $25.16 - $25.25 and stop hit at $25.30. Average profit $450 per contract
long GLD @ $174.12 and stop hit at $175.78 for a profit of $1.66 per share
long GLD @ $174.12 and stop hit at $175.78 for a profit of $1.66 per share
long February Gold Futures at $1830 -$1843 and out at $1850 for a profit of $700 to $2000.00 per contract
long XAUUSD at $1841 and out at $1850 for a profit of $90.00 per mini 10 oz contract
long March Silver Futures at $24.29 and out @ $24.40 for a profit of $550.00 per comex contract
long GLD @ 1$71.50 and out @ $173.00 for a profit of $1.50 per share
long SLV @ $22.30 and out @ $22.50 for a profit of $0.20 per share
Long December gold at $1899. Stop hit at $1918, for a $1900 profit
Long forex gold at $1896.00. Stop hit at $1912, for a $1600 profit
Long December silver at $24.21. Stop hit at $25.07 for a $4300 profit
Long GLD at $180.46 and stop hit at $176.42 for a loss of $4.04 per share
Long SLV at $23.23 and stop at $22.78 for a loss of $0.40 per share
Long December Gold Futures at $1926 and stop hit at $1907.30 for a loss of $18.70 per ounce
Long Forex Gold at $1922 and stop hit at $1903 for a loss of $19.00 per ounce
Long December Silver Futures at $25.13 and stop hit at $24.73 for a loss of $0.40 per ounce
Long December gold at $1890, out at $1909.30 for a profit of $1,930.00
Long December silver at $23.95, out at $24.50 for a profit of $2,750.00
Long Forex gold at $1883.68, out $1907 for a profit of $23.32 per ounce
Long GLD ETF at $178.03, out at $179.80 for a profit of $1.77 per share
Long SLV ETF at $22.66, out at $22.03 for a loss of $0.63 per share

Gold Market Forecast

There is a widening chasm between market sentiment from traders and market participants versus the market consensus from the Federal Reserve. Currently the Federal Reserve believes that there will be a much longer timeline for a full economic recovery in the United States than market participants. It is this discrepancy that has led the Fed to emphasize that they will not raise rates during this year, 2022 and as far as 2023. At the same time market participants have been moving yields higher in the 10 year treasury notes due to their more optimistic take on the timeline for a full economic recovery.

Depending on which camp has a more accurate assessment of the timeline for an economic recovery United States is a huge determining factor in where interest rates go and whether or not the Fed moves up their timeline, or whether or not market participants are overly optimistic and need to reevaluate the timeline for recovery and their optimistic stance. The answer to this question will most definitely determine the future direction of gold and silver pricing.

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