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Probing And Waiting

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PREMIUM MEMBERS

Today gold probed the 1360s range and fell back. Some might attribute this to technical factors, which in retrospect tomorrow we may see is so. But the fundamental reason is that there is still the tiny fraction of people who are thinking that the imminent FOMC meeting could yield surprises that could be bad for gold.

Like taste, it is hard to dispute silly investment notions. But, really... unless the Fed is perverse, we'll see a luke-warm to very warm endorsement of their policies with, naturally, a couple of dissenters. So be it. Earlier, gold had climbed to near a 10-week high before falling back to being essentially unchanged. 

The dollar's rise has taken a good boiler-room-full of steam from gold prices, although silver has managed to stumble. 

Only the future will tell us, but it seems as if the knee-jerk reaction that tells investors and traders to dump gold is becoming more subdued almost daily.  This is a sentiment that appears to be operating quite discreetly from technicals. A lot of traders are warming up to precious metals after having a torrid love affair with equities. 

If the FOMC is too robust in endorsing its current policy, though, that sentiment could swing and equities can go even higher.

On the other side - the not so good side - of news, according to Bloomberg:

"Russia reduced gold reserves for the first time in a year in September as Mexico cut holdings for a 17th straight month, according to the International Monetary Fund. Kazakhstan expanded assets for a 12th month."

Countries with weak currencies often dump gold as a means to stabilize their declining currencies. Neither Russia, nor Kazakhstan, nor Mexico is in good economic shape and there is plenty of outflow (for very different reasons) of hard currencies from the two countries, which helps depress the local, national currency. India is another such country as are a handful of countries in South America and Africa.

Back to the American economy... we are dealing with a problem that will probably last another two weeks. The slow release of data caused by the federal shutdown is giving us news and numbers that are no longer relevant. But some numbers are better than none. How well those delayed data are reflecting a true state of the U.S. economy, one cannot determine. We're close to turning the page on October already. 

We should be back to normal late next week. Do you remember normal?

Wishing you as always good trading, 

  

 Gary S. Wagner - Executive Producer

Gary S. Wagner - Executive Producer