The biggest influence over the prices of gold and silver today are the ruminations over what the Fed may or may not do when it next meets. Two non-voting members (from Philadelphia and Dallas) and one voting member (from the San Francisco Fed) are saying that the Fed ought or may be ready to wind QE3 down. Although the comments from SF seem very soft once you read the entire statement.
In fact, John Williams, President of the Fed Bank by The Bay, specifically cited a stronger labor market as being a prerequisite for scaling back QE3. If weekly unemployment claims are any indication, we are making ugly progress toward the goal.
Often enough, these statements are issued with a motive behind them. How will markets react? How will currency traders react? How will the news trickle down from Wall Street to Main Street? (Not that Main Street thinks anything said on Wall Street ever helps them.) These leaks are propelling the dollar higher and higher.
But the big shoes that will be poised to drop next week belong to Chairman Ben Bernanke. Here is a heads up concerning what might be said by Big Ben next week,
The Consumer Price Index fell in April for the second month in a row. The rate of inflation is 1.1% annually right now, the lowest since 2010. Unemployment is 7.5%. Former Fed Chairman Paul Volcker suggested GDP is stuck in a 2% growth trend.
Bernanke's term is ending in less than a year. Look for him to begin thinking "legacy," and perhaps, while curtailing QE3 to some extent, the Fed may devise something altogether new and different come June 18 and 19. Somewhere in the FOMC minutes that will be released next week - one of two speaking opportunities for Bernanke - will be some of the answers we are seeking as precious metals traders.
Something that should be pointed out, however: whatever is decided in mid-June, the QE3 is so massive and has been in effect for so long, that we will not see the effects it has generated cease when the easing ceases. The U.S. and other big world economies are not weekend cabin cruisers puttering around Long Island Sound hoping to land a flounder or two. They are aircraft carriers that take dozens of miles to stop, turn and re-orient.
So, the equities boom may continue. Those markets may go into warp drive and see a huge correction. The housing situation may continue to improve slowly. Young people may finally get their turn at working real jobs and not serving as unpaid "interns." But, when all is said and done, 2014 is an election year. There will be a lot of pressure to keep some sort of stimulus going, to increase or at least maintain the momentum.
Monetary easing is not the only path. Bernanke himself has said it is no panacea. It may be time for Congress and the President to come up with a real plan - an Apollo moon shot idea, a high speed Internet initiative - to not just help fix the U.S. economy but to inspire a country weary of things not working the way they ought to in America.
As always, wishing you good trading,
Gary S. Wagner - Executive Producer
Market Forecast: On a technical basis the primary question we need to ask ourselves is whether or not we have seen a primary and dynamic shift from a bull market in gold currently in a bearish correction, to a bear market in gold moving in its primary direction. Although there are two schools of thought at the moment each taking a position on one side of the fence, the technical data as well as fundamental information available to us continues to add more credence in weight to the distinct possibility that gold’s bull market has run out of steam. On today’s video we will look at the technical data which supports that assumption. Throughout the week, and ever since the market broke through primary critical support we have seen more and more evidence supporting the end of a bull market. However even with that in mind there is another school of thought that I believe must be presented.
It was reported yesterday that gold is lost 6% of its value over the last six trading days, today’s drop will only add to that number. Even with this kind of severe price drop there is good evidence to support the continuation of lower prices. The key level in the market right now is 1320. My current belief that if gold will find support it must find support at that level. A failure to hold above 1320 would put pressure to the downside with no major support till just below $1200. Based upon those parameters we will look to adjust our trading style to enter both long and short trades within the marketplace.
Market Sentiment: Bearish
From the week of 05.17.2013
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