Friday, January 10, 2014

weekly gold

The poor unemployment report was just the juice that the Gold market needed to create a bounce to $1249.10 (April).  Now it is a variety of factors that may determine if it can possibly penetrate the resistance of $1260.00.  Technically, it could be sustained as a momentum trade or a parabolic trade per the indicators on the chart.  This week held some volatility but today was a total surprise.  This week has been interesting with the flash crash earlier on this where a trade of about 4,200 contracts were dropped on the market.  It could have been a fat finger trade or fund sales.  Now, it will be a matter of looking at the recovery as a glass half full or a glass half empty.  Traders will be questioning if the jobs report was an anomaly or will the economy head for a potential recession.   The April Gold has been pummeled last year stripping it of its luster, but 2014 may have a different look!  Two things that remain the same through time are: bargain hunting and potential inflation.  These two ingredients could potentially feed the Gold market.  Of course, the April Gold must get through $1260.00 to confirm momentum.  The chart looks promising, but must continue momentum otherwise this may just be another selling opportunity.  The markets should begin their natural cycles.   Gold has definitely not had a bright 2013.  Long-term projections may still be extremely good regarding Gold as inflation should follow as a part of the recovery.  Boom to bust, the markets will follow the same pathways with some differences in the details.   For now, Gold holdings in the SPDR Gold Trust (NAR:GLD) has decreased by about 40 %.  India has blocked imported Gold by their import tax increases, but have recently lightened up on them.  China has increased their Gold products by about 30 % to 996.3 metric tons for the year ending September 30th according to the World Gold Council.  India has increased their Gold holdings by 24 % to about 977.6 metric tons according to the World Gold Council.   The US Mint sold 56,000 American Eagle Gold coins in December.  The UK Royal Mint ran out of the 2014 Sovereign Gold coins.  Rebalancing could be another factor creating the bounce in Gold.  This rebalancing may have supported the Gold, but now the continuation must have flight to safety buying. China has been a bargain hunter buying the Gold, but will their deficit situation?  Purchases could increase in front of the China Lunar New Year festival which begins on January 31st.   

The employment numbers today definitely did not reflect recovery or a successful quantitative easing program.  US Fed Chairman Ben Bernanke must be re-evaluating his policy moves over the past years, yet every recovery is not without setbacks.  The weather has been a factor as the US has faced one of the coldest most devastating cold spells in years.  When the weather turns harsh, no one wants to shop and work is often put on ice (please excuse the pun).   Only 74,000 new jobs were created this December.  Construction jobs decreased by 16,000.  Sporting events and entertainment jobs decreased by 11,600.   Health care and other social programs decreased by 1,000.   Accounting jobs decreased by 24,700.  Manufacturers increased employment by 9,000 jobs.  Concerns linger for those who fall in the long-term unemployment as the benefits ran out for them in December.  Concerns regarding the Unemployment reports are that a number of the out of work individuals will simply drop out of the labor force which will give us an inaccurate reading.  Going back to around 2010 around this time, we were at a 10 % unemployment rate.  85,000 jobs were lost in December of 2009.  Since then, about 6.5 million jobs have been added, but it is thought that perhaps about 11 million had just given up looking for employment.  Baby boomers approach retirement and may simply decide to take it rather than continue to search  for a job.   There has been a great deal of exhilaration over the healing economy and the projected growth going forward.  US Chairman Ben Bernanke regales us with his expectations and reasoning for his accommodative policies.  The Fed will begin reducing their $85 billion a month bond buying program to $75 billion beginning this month.  The program will be contingent on the US economy showing expansion.  If the economy strengthens and the unemployment decreases as projected, interest rates will be the focus.   Inflation and higher interest rates should increase along with the expansion.   Bernanke has been considered well-versed and a critic of the Great Depression.  He has been determined that his tenure would show a successful detour away from a depression.  He steps down from his post on January 31st leaving it to Janet Yellen, who has also been pro-active on the recovery.  She had been confirmed by the Senate on Monday.  The next Fed meeting is scheduled for January 28th and 29th.  Expectations call for a continuation of the $10 billion reduction of purchases by the Fed over perhaps the next  meetings.      The Fed hopes to be finished with the tapering by October of 2014.  The International Monetary Fund (IMF) President Christine Lagarde stated that the IMF will increase the projected growth of the US in 2014 from 3.6 %.  The real GDP did not disappoint at 4.1 %!   The GDP is made up of about 70 % consumer spending  and is one of the broadest measures of estimates for the US economy covering about every sector.   While the US growth looks extremely promising, the jobs outlook in the Euro Zone seems to pause.   Euro Central Bank (ECB) President Mario Draghi is holding interest rates at 0.25 %.   His tone was extremely cautious regarding projections for the Euro Zone citing the downside  economic risk.  He said that inflation may remain subdued perhaps keeping the Euro FX weaker.  He further stated that it is too soon to regard the Euro Zone as out of danger.  The Bank of England (BOE) also left the rates unchanged at 0.5 %.  The ECB had infused about $1 trillion euros into the banking system with three-year loans in December of 2011 and now they should come due toward the end of this year.  They could possibly use its Long-Term Refinancing Operation (LTRO) this month even to boost bank lending.  The global health is part of the expansion of the US.   Euro Zone manufacturing has picked up in Germany and Italy.  The Markit Euro Zone PMI increased to 52.7 in December from the previous 51.6.  Germany's PMI increased to 54.3 from 52.7.  Manufacturing slowed in France and Britain.  The PMI in China decreased to 50.5 from a low average of 51.0.  China's growth has slowed.  China's exports come in at 4.3 % with a trade surplus at $25.6 billion.    Today's employment number may have added an element of surprise and increased volatility.

Today's Employment Situation was a bit of a shocker with the market place becoming complacent with words of recovery.  The Nonfarm Payrolls for December came down to 74,000 new jobs created while the previous reading was 203,000.  The Unemployment Rate was 6.7 % while the previous reading was 7 %.   The Average Hourly Earnings was 0.1 % while the previous reading was 0.2 %.  The Average Work Week was 34.4 hours while the previous reading was 34.5 hours.  The Private Payrolls was 87,000 while the previous reading was 196,000.  Wholesale Trade Inventories for November were 0.5 % while the previous reading was 1.4 %.  The US Initial Jobless Claims were down 15,000 at 330,000 while the previous reading was 339,000.  Continuing Claims were higher by 50,000 to 2.865 million.  The Challenger Job-Cut Report for December of announced layoffs were at 30,623 while the previous reading was 45,314.   The US Gallup Payroll to Population report for December was 42.9 while the previous reading was 43.7.  The Bloomberg Consumer Comfort Index for January was -28.4 while the previous reading was -28.7.    The Money Supply for December 30th was -$10.2 billion while the previous reading was $23.5 billion.  The ADP Employment Report of Private Payrolls for December was 238,000 while the previous reading had been 215,000.  This payroll measure is often viewed as a preliminary peak in what the employment report of Friday may be like.  The MBA Purchase Applications Composite Index for the week of January 3rd was 2.6 % while the previous reading was -6.3 %.  The Purchase Index was -1.0 % while the previous reading was -4.0 %.  The Refinance Index was 5.0 % while the previous reading was -8.0 %.   Consumer Credit for November was $12.3 billion while the previous reading was $18.2 billion.   Revolving credit such as credit cards increased by $457.8 million.  Non-revolving credit such as auto purchases and student loans was up $11.9 billion.  The International Trade Balance Level for November was -$34.3 billion.   US Trade Exports were -$194.86 billion while the previous reading was -$192.7 billion.  The Trade Imports were -$229.11 while the previous reading was -$233.3 billion.  Redbook Sales for the week of January 4th  was 4.1 % while the previous reading was 4.5 %.    The ICSC-Goldman Store Sales was -5.4 % while the previous reading was 1.0 %.  The Gallup US ECI for December was -19 while the previous level was -25.  Factory Orders for November were 1.8 % while the previous reading was -0.9 %.   The ISM Non-Manufacturing Index for December was 53.0 while the previous reading was 53.9.  Any number over 50 points to expansion.  The Gallup US Consumer Spending Measure for December was $96 while the previous reading was $91.  Motor Vehicle Sales for December (Domestic) were 11.9 million while the previous reading was 12.8 million.  The Total Vehicle Sales were at 15.4 million while the previous reading was 16.4 million.  The reports were disappointing and attributed to the cold weather conditions across  the US.  Auto Sales has been a strong spot for the American economy often leading the way for other consumer sales.  About 70 % of the GDP represents consumer sales.  Fears of potentially higher interest rates could be a factor though.  The Construction Spending for November was 1.0 % while the previous reading was -0.3 %.    The ISM Manufacturing Index for December was 57.0 while the previous reading was 57.3.  Factories seem to be buoyed by stronger auto sales.  Bloomberg Consumer Comfort Index for December was -28.7 while the previous reading was -27.4.  The PMI Manufacturing Index for December was 55.0 while the previous reading was 54.7  The last GDP for Q3 2013 was a true testament to recovery as real GDP was 4.1 % while the previous reading was 3.6 %.  The GDP Price Index was 2.0 % unchanged.  GDP will come toward the end of this month.  It is projected to come in over 3 %!

Today was a game changer for Gold!  This was just the thing for Gold to not just go up due to rebalancing but continue on up with a slower recovery than anticipated.  The jury is still out on whether the Fed jumped the gun on tapering.  There has been a great deal of exhilaration over the healing economy and the projected growth going.  Seasonally, this would be the time for the Gold market to rally, but for now the market may simply range trade between $1270.00 and $1215.00.   If it can break through $1270.00, it may be able to continue with momentum.  Traders need to confirm that this is a trend before they will risk the trade.  If the market cannot penetrate the $1270.00 level, then we could see some range trading.  $1270.00 is your focus!    The good thing is that the fear and anxiety with uncertainty is still lurking.   While the bounces may be appealing, they may only be places to short.  Approach with caution!  

April Gold Chart 

 Take a close look and feel free to call in and talk to me in greater detail.  It would be my pleasure.  Good trading!


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