Today’s sharp decline in gold leaves many traders, Dazed and Confused | The Gold Forecast

Today’s sharp decline in gold leaves many traders, Dazed and Confused

January 8, 2021 - 7:08pm

 by Gary Wagner

Been dazed and confused for so long, it's not true … Lotsa people talkin', few of them know” - Led Zeppelin, Songwriters: Page, James, Patrick.

Many traders and market participants are quite frankly bewildered at the extent of today’s selloff in all the precious metals. You could even say that it is left many gold investors dazed and confused. Market commentators and analysts cited today’s dramatic $66 price drop in gold as a result of U.S. government bonds extending their yields. The belief is that higher potential return from bond yields could be a rational reason for traders to move allocated capital that was positioned in gold into a safer asset class; U.S. government bonds, even though the higher yields are dismal in comparison to past returns.

As of 4:46 PM EST gold futures basis the most active February 2021, Comex contract is currently fixed at $1846.40 after factoring in today’s deep decline of $67.10, resulting in a decline of 3.51%. The damage was not only contained to gold, silver was battered in a 12-round heavyweight bout that ended in a KO. The belt holder in the precious metal division, the white metal lost today’s title fight giving up the championship as well 6.66%, a total of $1.81. Currently, the most active March 2021 Comex contract is fixed at $25.46. Both precious metals had a fractional percentage of today’s drawdown directly related to dollar strength. Currently, the U.S. dollar is fixed at 90.050 which is a net increase of 3/10 of a percent, a mere fraction of today’s dramatic selloff.

This can be illustrated indicate KGX (Kitco Gold Index) when looking at spot gold and silver pricing. Spot gold is currently at $1846.80 after factoring in today’s decline of $67. Noteworthy is that only $4.80 of the decline can be attributed to dollar strength. Spot silver is currently fixed at $25.33, after today’s decline of $1.78, and just as in the case of gold only $0.07 can be attributed to the U.S. dollar getting stronger.

Lastly, there has been a growing bullish market sentiment about equities and great interest in bitcoin that could have added to the selling pressure. However, all of these factors collectively do not rationally explain the depth of today’s price decline. This is why today’s title reflects the overall bewilderment to the cause-and-effect relationship that took the precious metals so dramatically lower.

The rationale behind the title of today’s article “dazed and confused” goes deeper than the rationale cited to explain today’s decline. You merely have to look a few weeks out into the future specifically January 20, when President-elect Joe Biden will become the 46th United States president.

According to Reuters, “U.S. President-elect Joe Biden said his administration’s economic package will be in the trillions of dollars and include unemployment insurance and rent forbearance. It is necessary to spend the money now,” Biden told reporters. “The answer is yes, it will be in the trillions of dollars, an entire package.”

Bloomberg TV reported that President-elect Biden announced that the price of the stimulus plan will be high. In a statement, he said that there is a “dire” need to act immediately. The exact amount of his economic stimulus package and how the aid is allocated will be announced in a detailed economic package on Thursday.

Then there is the sad truth that the current pandemic is entering a new wave with a much higher infection rate than ever before. CNN today reported that “The US reported more Covid-19 cases and deaths in the last week than any previous seven days during the pandemic, data showed Friday morning. And more than 4,080 US coronavirus deaths were reported on Thursday alone -- the most ever reported in a single day during the pandemic and the first time the daily tally rose above 4,000, according to Johns Hopkins University.

In Los Angeles county it was reported that some ambulance crews have waited hours for their patients outside hospitals because the facilities are overwhelmed with one person dying of Covid-19 on an average of every eight minutes. Texas reported high Covid-19 hospitalization’s statewide for the fifth day in a row Thursday. But more alarming is the fact that Dallas County which is the second-largest county in Texas had only 13 adult ICU beds available on Wednesday. With the United States averaging about 228,400 new infections of the coronavirus daily over the last week, the disheartening news is that currently, recent infections are at an all-time high 3.4 times the infection rate that occurred in the summertime peak.

This week will be yet another period detailed in history books. The actions of a minority of “so-called protesters” although armed militia might be a much better description of the individuals that stormed both the House and Senate this week. The global pandemic has had optimistic news that a vaccine has been created however new mutations bring into question if the efficacy rate will be as high as for the original virus the vaccine was created for. The tremendous spike in new daily cases necessitates a much greater expenditure of capital from the government. This is also created a new level of economic contraction and job loss and collectively these issues will haunt us for at least the first two quarters of 2021.

After a week such as this, the only statement that makes any real sense is that the majority of individuals who have been watching and absorbing the events of this week must be absolutely “dazed and confused”.

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

We are currenlty flat with no active positions. On December 27th we sent a trade alert to buy gold and silver. Sunday we sent out a trade report to raise stops. On January 10 stops were hit.

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
Correction: long GLD @ $177.26 and stop hit @ $178.00. Market open 176.85. Trade resulted in 0.41 loss per share
Correction: long SLV @ $24.67 and stop hit @ 25.00. Market open 24.73. Trade resulted in brake even.
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
Long December Silver (SI Z20) @ $27.07 - Stop hit @ 25.56 for a loss of $1.51 per ounce
Long GLD @ $183.91- stop hit @ $178.50 for a loss of $5.41 per share
Long SLV @ $ 26.33 - stop hit @ $23.53 for a loss of $2.80 per share
Long December gold (GC Z20) @ $1947.00 - Stop hit @ $1952 for a profit of $500.00 per contract
Long Forex gold (XAU A0-FX) @ $1939.00 - Stop hit @ $1944.80 for a profit of $5.80 per ounce
Long December gold @ $1956.50.Stop hit @ $1960 for a profit of $350.00 per contract
Long December silver @ $27.39.Stop hit @ $27.80 for a profit of $2050 per contract
Long forex gold @ $1948.55.Stop hit @ $1955 for a profit of $6.45 per ounce
Long GLD @ $183.57.Stop hit @ $184.36 for a profit of .79 per share
Long SLV @ $25.10.Stop hit @ $25.75 for a profit of .65 per share
Long September silver at $26.68. Our stop was hit @ $26.87 for a profit of $1000 per contract.
Long December Gold at $1955.50. Our stop was hit @ $1979 for a profit of $2350 per contract
Long Forex Gold at $1947. Our stop was hit @ $1967,52 for a profit of $20.52 per Ounce
Long September silver at $24.40. Our stop was hit @ $25.99 for a profit of $7950 per contract
Bought GLD @ $166.74. Our stop was hit @ $$183.00 for a profit of $16.87 per share.
Bought SLV @ $18.00 Our stop was hit @ $23.80 for a profit of $5.80 per share.
NUGT – we sold all shares and took profits of $33.19 per share
Long December gold at $1997, we covered the trade @ $2035 for a profit of $3800 per contract
Long Forex gold at $1977, we covered the trade @ $2017 for a profit of $40.00 per ounce

Gold Market Forecast

Simply put the explanations given as to the reasons both gold and silver sold off dramatically are not only oversimplifications, but quite frankly deny common logic and sense to say that these events would take gold down by 3% and silver down by over 6%. On the surface when we consider the upcoming expenditures that will be allocated by President-elect Joe Biden who was quoted today saying that there will be immediate stimulus that will take trillions of dollars to initiate.

Traders, mark your calendar for Thursday of next week because that is the day President-elect Biden will lay out in detail his proposal and plan to revitalize our economy and to accelerate the rate at which the pandemic comes to a conclusion. It is the second component that is most worrisome because at the moment not only is the pandemic leveling off or flat lining, but rather spiking to the highest levels we’ve seen since the beginning of this scourge. In the most populous county of Texas for example there are only 13 available ICU with beds available in all of the hospitals in the county. The number of daily infection rates and deaths continue to rise, and with mutations occurring in question arises as to the efficacy of the current vaccines in regards to these new mutations of the coronavirus.

In other word, simply put it seems as though it will get much worse before it gets better. More so capital expenditure necessary to take us to a pre- pandemic states could take years and trillions upon trillions of dollars when we combine the expenditures of all of the countries in the world.

In short it seems all the fundamentals of play have only one possible outcome which contains both the US dollar weakening dramatically and gold rising recently. The exact opposite of what we saw in the market today which is why I believe many traders are now the only dazed but also confused.

 

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