“Woe to the land whose king is a child and whose leaders are already drunk in the morning. Happy the land whose king is a nobleman, and whose leaders work hard before they feast and drink, and then only to strengthen themselves for the tasks ahead”. (Eccl 10: 16-17)


"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat


Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput


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Wednesday, February 19, 2014

Hawkish Fed Derails Gold Rally

Not that it was "new" news but the FOMC minutes set the tone for gold ( and equities) for the rest of the session once they were released. The consensus seems to be a more upbeat view of the economy by the majority of the FOMC members. Keep in mind that this merry group does not exactly have a sterling track record of which to boast!

Either way, the hawkishness lent some support to the US Dollar and pressured gold as a result. Interest rates bumped a bit higher and once again we were back to gold having to compete with higher US interest rates.

I still have my doubts about the strength of the US economy but I suppose we will get a better sense of how things stand in reality after we get through this round of frigid weather and get back to more seasonal norms. Maybe then we can see what retail sales really look like, what housing really looks like and what the trend in the jobs picture really looks like.

If the market starts to believe that the US economy is faltering, interest rates will move lower, the Dollar will move lower and gold should get some further support. If the contrary is the case and the US Dollar bounces away from chart support near the 80 level basis USDX, look for gold to move lower.

Two noteworthy developments today on the heels of that FOMC statement - the mining shares led the bullion price lower with the HUI moving down and, more importantly, there was a rather large dishoarding of gold out of the ETF, GLD - about 5.5 tons to be exact. This brings the total holdings reported to 795.61 tons which incidentally is now BELOW THE STARTING LEVEL of 798.22 tons for the year.

It was just last week that the usual gold hucksters were out heralding the "surge" in gold holdings in GLD as evidence that the bull train was fast leaving the station. Yes, the technical chart posture of gold has improved tremendously, of this there can be no doubt for any unbiased observer. To see GLD give up this much gold so quickly however tells me that bulls are scared to death of any further bond buying reductions by the Fed. There was even chatter today about the Fed actually raising short term interest rates sooner than expected. I personally find that hard to believe but nonetheless, the market did not and thus gold was jettisoned out of interest rate fears.

Gold throws off no yield as any gains must come from price appreciation. Investors looking for yield will often look first at interest bearing Treasuries rather than a non-interest bearing asset, IF THEY ARE NOT FEARFUL OF INFLATION ERODING THOSE GAINS. If inflation becomes a concern, then real rates become important to the gold price.

Here is a chart of the ETF, GLD for your reference. Not exactly awe-inspiring as of yet is it?



Gold, from a technical standpoint, is riding the 200 day moving average. It strongly cleared this level last week and has been backing down this week. Thus far it remains above the moving average, which is friendly. The ADX is continuing to rise indicating that the uptrend is still intact.



We will have to wait to see at what level dip buyers, should they come back in right away, surface. I cannot help but think that today's price weakness is going to give Asian buyers some reason for pause. After all, the metal has risen, practically non-stop since the beginning of February. At some point, price sensitive Asian buyers are going to back away from the market and see if the price will move lower.


Psychological support should come in near the $1300 level. Below that is better support emerging first near $1280 and extending down towards $1270. Resistance is first at today's high near $1330.

Several commodity markets screamed higher today, most notably coffee, which suddenly is the darling of the commodity complex after being the ugly stepsister for a long, long time. Corn also showed some life today and wheat continues pressing further away from the $6.00 level.

Speaking of the $6.00 level, natural gas blew through it like a hot knife through butter. The genius forecasters changed the weather forecast again, this time putting another shot of frigid air into the longer term forecast. The words, "polar vortex" are fast becoming the natural gas equivalent of the grain market's " high pressure ridge". Mention it and traders become raving lunatics devouring their children and anything else that happens to stand between them and the buy button.

I will be watching the Euro to see what it does with the 1.38 level. Gold has essentially been following its movements almost exactly this entire month.






31 comments:

  1. Given the Feds absymal record of forecasting the economy and the poor economic data announcements I fear they may induce a market slump by tapering too fast.

    Banks and all other business are holding on to cash as you pointed out a couple days ago.

    As a sometime businessman I would be reluctant to make any invesent I could not get out of instantly on the next regulation change.

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  2. Dan,
    The market has been rising on low volume and declining on rising volume with several distribution days this month. Doesn't that mean something is not right in the stock market despite perma bulls? I hope you will talk about it as I think the stock market is not thriving with all hawkishness out of the FED despite the terrible economic reports lately. Something has to give.

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  3. Wynn's and Green Mountain Coffee hitting new highs today.

    The consumer is stronger than ever. Which is good for gold investors because everyone is going to want some new "bling" in 2014, so there will be intense demand for gold plated everything.

    Stay in the system. Don't be bamboozled at Q & A sessions or by headlines created by those with wild imaginations.

    LOL...

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  4. Yep … I think you should change your name to Bitcoin Mark , the fastest cowboy in the universe .

    ps . are you taking a loss on your short in coffee , or you just doubling up …?

    LOL …. WOW

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  5. Anon....

    XLY still above the ascending 50-day EMA. $14 to $65 in 5 years with a stagnant economy and terrible employment.

    Anyone who thinks the consumer is dead can't read a chart. Joe Sixpack is obviously spending like mad, and will spend even more once the job market improves and the economic boom really kicks in next year.

    So many gloom and doomers have gotten kicked in the head the last 12 months, including well known guys like Marc Faber and Richard Russell.

    Funny how they get paid millions for advice that is wrong over and over.

    Proof that doomsaying pays very well. I bet Tyler Durden is a millionaire many times over by chain posting article after article of how "any minute now!" the financial market is going to collapse in a flaming heap.

    Like I said, I should just sell all my equities and start a gloom and doom blog and do all sorts of podcasts with the same guys over and over again predicting the end of the world. I'll be rich within 9 months.

    LOL.....

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    Replies
    1. Seems the mining sector is blasting off. I guess soon we will see if the Dow can get back growing stakes over 16588, as it does appear it is settling, filling the gap, and readying for the final collapse. It is a new year. Dow minus 2% GDX + 20%. Yeah team.

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  6. you would be rich …. I would still be poor …. but I would probably be happier , 'cause you would post your non sense crap in your blog , and I would not have to go through your crappy reporting summary of the MSM every day … you see Bitcoin Mark … money doesnt necessarily make you happier , its the little things that count ….. LOL

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  7. Hey Mark,
    I for one enjoy your twisted sense of humor and relentless ridiculing of the self-serving, doom-saying, cheap thrill websites who claim they do service to humanity by telling the "truth" (give me a break!).
    I am sick and tired of those same six or seven 40+ year veterans who are mindlessly repeating the same stuff and hurting people in process for their own financial benefit. It does not matter that they were wrong over and over and over. They do the same thing that they accuse MSM, the government and the FED of doing, namely, shamelessly lying through their teeth and trying to fool as many gullible readers as possible. I don't agree with your positive outlook on the economy, but what do I know? It's important to get as many diverse opinions as possible (at least here).
    Keep posting!

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    Replies
    1. Well thankfully jims mine will be finally set to produce in 6 weeks as stated during the q and a in dallas. Cant wait for those dividends....

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    2. I happen to think that right now the whole world is crumbling with the NWO concerned and not happy how the American Banking cartel (large US banks and INTEL) creating a shadow system that is way too big to destroy unless you create hyperinflation. The distrusting world does not know how to choose a side. Let's face it the news and what Mark is spouting is all BS. There cannot be a recovery unless there is a sound market, and a non lying government. HFT's run wild, no rule of law being adhered to, and the US labor market is no more growing than a man getting lowered into his grave. We are at International war my friends. Currencies and bonds are being manipulated, and gold is a side bar (FOR NOW). We are stuck until a new path in International trade is agreed upon. If you want to believe a guy like Mark then so be it. It is the Pravda side to a sound money side and JS will be proven correct once we enter the next phase. Japan, Europe, Emerging Markets, war in South China sea, Middle East with Iran or Israel, take your pick. That is what happens once you blow up a shadow banking system and try to manipulate all things financial. It is just floating, not able to move forward, not able to move back. Stranded with no fuel. Waiting for the torpedo.

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  9. We went through that Fibo level on the way up, but we bounced on it on the way back : 1307 was another fibo of the (1435-1180) move.

    ReplyDelete
  10. New Title at Today's ( Thu ) Close:

    HAWKISH FED DERAILS GOLD RALLY...FOR A DAY ''

    Appears Gold still has some legs ..for now

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    Replies
    1. BUT...big resistance on the way at 1330.
      Look at the nice downtrend pitchfork on the 2week time unit : we are hitting the mlh sup. It is this resistance which led all the move down!
      I'll be extra careful as long as 1330-1340 hold.
      In fact zoon on the weekly scale...another upwards pitchfork, and it seems to me that we may remain within this triangle of mlh.
      So...I'll be waiting for gold as a patient bull at 1270 area.
      No idea if it will get there.
      If it does, I know I'll watch and probably buy some more.

      http://i59.tinypic.com/330bw35.jpg

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    2. 1330 sounds like a reasonable stopping point for correction and consolidation; the real question was the last move up here just a relief rally or is the start of a cyclical ( or secular) bull market. Right now I treated it as a relief rally and sold half my positionsin many gold and siver stock when the bobbed over their 200 day moving averages ( KGC, HL, come to mind ) . A disappointment for me has been IAG. I also loaded up in Dec on FSAGX in my IRA and BGEIX in my non-IRA money at American Century--sold half of those positions too this week. A little silver lining to my black cloud of massive losses in 2013 on my TWM and SDS position.

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    3. Hubert - good for you making some money during these volatile times. Any opinion on the GDX you'd care to share? I'd like to see some more blood letting before I put more into the gold miners, but if $1330 breaks on gold, I think I'll have no choice but to buy in. I hope the GDX comes back to retest its 200D moving average...but not sure I'll be so lucky.

      Delete
    4. Hi John,
      I consider myself a total rookie about gold mines, and I cautiously stay away from them for that reason, though I follow Dan's comments about them with a lot of interest.

      Regarding gold prices, and further to my previous post, there is in fact a support area before 1270 where I may be tempted to buy : the ema15 daily which is also the middle of the body of the weekly candle chart, at 1290. Having sold lately at 1230, anything above 1307 is not really worth playing on my time horizon, as I usually don't like to get in / out for less than 30 points.

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    5. Hey Hubert - thanks for that. The joy of trading the GDX and NUGT is that they are a composite of the miners as a whole so you dont have to get bogged down with the issues of individual miners.

      I've just noticed that Barrick and AEM are breaking out to the upside. I think they'll come back to touch resistance then launch away to the upside. AEM has been rising on the weekly chart for around 9 weeks running!!! If GDX doesnt break down today, i'll increase my exposure.

      Have a good weekend!

      Delete
  11. Dan you should have this guy nandy hanged

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    Replies
    1. Alex - what buying opportunity are you referring to? Shorting long term TBs? Buying gold miners?

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    2. Alex, you are right about Faber; sparks

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  13. Alex,

    I've been watching CNBC and Bloomberg for 20 years and have never heard Faber make those kind of correct calls over and over again. He's been all gloom and doom for the most part, except for the market bottom in 2009.

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  14. Why are Gold Silver, and the dollar just sitting there today? Like no movement whatsoever?

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  15. Newmont Mining getting destroyed again today at multi-decade lows.

    While the Biotech Index continues to make new world record, lifetime, all-time highs.

    Stay in the system.

    Holders of BBH are up 57% since June, a 15% - 20% "bail in haircut" won't even matter to those who have been riding this rocket.

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    Replies
    1. A 15 to 20 percent haircut for those that rode trx from 9 to 2.50 wont matter much either.

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    2. Holders of XPL are up nearly 20% today + if they followed management's lead buying at .84, would be up nearly 100% (hit $1.6 today) in under 9 months. Following insider buying, those that eat their own dog food, is better than following the pundits.

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  16. @ John. Buying 10 year bills. Rates could still fall a lot further as Dan said in a flight to safety. I think money will leave stocks and go into bonds and gold. Gold will go to 1700 by the end of 2014 or 2015. @Mark he appears on a lot more shows than just CNBC. You can Google all of these calls. He also called the top in apple when it was at $700.

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  17. "The West" is now basking in the glory of world record highs for companies like Facebook, Priceline, Salesforce.com, and Tesla. All selling for insane multiples of both sales and earnings.

    Never before in stock market history has there been the opportunity to make so much money so fast with legitimate tech powerhouses who are changing the world for the better.

    Nice to know that the Fed has your back on these names, whereas investors still clinging to their gold shares are constantly fighting "The Man" trying to beat the system.

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  19. Dan -

    You once wrote a lot about how the gold miners were not hedging. With the recent price boost in gold - are you seeing any indications of gold miners starting to take out hedges at this point in time.

    Thanks!

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