Can't Win For Losin'
The topsy-turvy markets continue to confound. Yesterday, on the wings of better economic news, equities soared. Today, on news that the American economy expanded at a much slower rate in the first quarter than previously thought, equities soared again.
To return to a note at the end of yesterday's fundamentals portion in the daily email and on our website, we noted that Morgan Stanley called for gold in the 1410 range this year.
"With investor demand for safe-haven assets waning against the backdrop of a strengthening U.S. dollar and rising U.S. bond yields, market conditions for gold and silver have become markedly less favorable," Morgan Stanley analysts wrote.
We observed that from 1278 to that upper level, there was a lot of money to be made. Now there is even more. The spread between today's price point (at 3:10 PM NY time) of 1228 and Morgan Stanley's target is almost $185. We hope to ride the market up once it turns, once technicals tell us it is time.
We are waiting for physical buying to inject some new vitality into gold trading. This may take a while since India has been somewhat sidelined due to a host of tariffs on imported gold and a tightening of the use of gold as a convertible "currency."
But back to the U.S. economic data today.
Figures from the Commerce Department showed today gross domestic product expanded at a drastically revised 1.8 percent annualized rate from January through March, lowered from a prior estimate of 2.4 percent. That is 25% less expansion than the earlier prediction. Household purchases, which account for about 70 percent of the economy, were revised to a 2.6 percent advance compared with the 3.4 percent gain estimated last month.
Analysts say that equities like the bad news since it adds conviction to the notion that the Fed will not begin tapering QE3 as soon as experts once believed.
Wait a minute again: yesterday, even with strong performance in consumer confidence, durable goods and home sales, the stock markets reacted positively. So why aren't those entries in the ledger book telling analysts QE#will be cut back?
We have to just be patient for proper technical signals before re-entering the market. The year is only halfway over, so there are plenty of opportunities.
The fact of the matter is that analysts and traders simply don't know.
Wishing you as always good trading,
Gary S. Wagner
On a technical basis my short-term Outlook for both gold and silver remain bearish. Yesterday we spoke about the fact that if gold were to break through its current support level at 1277 we could easily see the market meltdown as we would witness massive liquidations and stops being hit. We also submitted our current target at 1202 per ounce for the price of gold. Under no circumstances was I expecting this meltdown to occur in a 24-hour period and happen so quickly. However that is exactly what happened as we currently are witnessing gold trading off over $50 below 1225. On today’s video we will look at the possibility of gold breaking the recent lows and moving to the $1200 price range as we do not see support until 1202 – 1194.
Proper Action: Look for lower prices
Support at 1202 then 1194 Bearish outlook
From the week of 06.07. 2013