You Were Expecting The Earth To Stand Still?

November 19, 2014 - 5:12pm

 by Gary Wagner

 

The minutes from the FOMC revealed nothing, changed nothing, except to tell people the economy is getting stronger but not leaving rubber. That’s really no surprise. So hold off on the brass and also – hold off on the mourning shroud. We’re pretty much in the same patter we’ve been in for a few months.

Left to their own devices, investors and traders are saying, “There must be a rate hike soon.” That’s all well and good, but they’ve saying it for two years and so far… well, you know. It’s reminiscent of old cartoons where a wizened man in robes holds his sign up say “The End Is Near.” Another man says to him, “Do I have time for a haircut?”

The Fed did say some interesting things concerning inflation.

“These participants continued to expect inflation to move back to the FOMC’s two percent target over the medium term as resource slack diminished in an environment of well-anchored inflation expectations, although a few of them thought the return to 2 percent might be quite gradual,” the minutes said.

“A couple of participants noted that it was likely too early to draw conclusions regarding these developments, especially in light of the recent market volatility. However, many participants observed that the Committee should remain attentive to evidence of a possible downward shift in longer-term inflation expectations; some of them noted that if such an outcome occurred, it would be even more worrisome if growth faltered,” the committee added.

But, onward and upward for the short sellers. Does this mean the mini-rally we experienced as of late is over? It’s far too early to tell. But there are some circumstances to be examined.

Even the unrelenting verbal attacks by Neo-comrade Vladimir Putin couldn’t push up gold. Perhaps the strategy of the desperate Russians is this: threaten Ukraine, buy gold, wait for prices to rise on your massive purchases. Since they have no real economy aside from oil and gas, what else can they lean on? Wishin’ and hopin’. With the long tumble of the ruble, president Putin will be going down in history as Vlad The Devaluer.

We are hearing from friends in Europe that the ECB is “getting closer” to more economic stimulation. If you trace our fundamentals analysis back to the early part of this year, you will see that this has been part of the European Central Bank’s talking memo for around six months.

If the E.U. does stimulate, this will further enhance the buying power, the power and prestige of the U.S. dollar at the expense of the euro. The dollar was a bit stronger today, adding about a dollar to the price of gold. Stock markets in New York were subdued and seemed to want to digest the FOMC minutes.

Oil continued downward. It stayed solidly under $75 per barrel (WTI).

We are already entering the “holiday zone,” so expect low volumes, high volatility and some interesting trends in precious metals trading. 

 

Gary S. Wagner - Executive Producer

Sentiment Indicator:

Gold Forecast: Proper Action

We are currently flat with no open positions.

Gold Market Forecast

Today's dramatic downside move in gold, shows tremendous resistance at 1200. New support level now becomes 1180.

If the 1180 price point is breached we could see another test of recent lows at 1131.

It now appears that any upside rally might have to wait until we have fully completed the wave 5 down, which would complete the long correction. Based upon the relationship between wave 1 and wave 5, which should be equal in size, we could see gold go as low as 980.