Saturday, February 8, 2014

The Weekly Gold

Gold got a boost today on the disappointing jobs numbers!  The worse the economy, the better for Gold.  The harsh weather conditions have been the scapegoat again for the lackluster data.  This has been just the perfect storm with Gold as the Governments come in to devalue currencies and change their policies favoring some more than others.  Treasury yields may also affect the Gold as the correlations kick in.  The Chinese data that perhaps was the trigger for this recent move up in Gold may have been the Flash Markit/HSBC Purchasing Managers Index (PMI) which decreased to 49.6.  Readings under 50 point to contraction.  The Chinese have been major buyers of the Gold and this may even increase the interest in buying the physical metal.  The Chinese New Year began today which may also affect the Gold sales in China.  Everything virtually comes to a halt at this time.  China has surpassed India as buyers of Gold jewelry in 2013.   India's Government has imposed restrictions to impede Gold imports and encourage currency purchases to strengthen the Rupee.  As of 2013, China purchased about 1,158 tons of Gold from Hong Kong.  The lower the price for Gold, the more the demand in China.  The reduction in mining may help boost the Gold.    The UK’s Royal Mint has increased demand on the Sovereign Gold coins to where there were waiting lists for inventory.  The US Mint sold 91,500 ounces last month.  The physical metal remains in strong demand, but there is a separation there.  The paper Gold products remain under some pressure as previous market action dictates caution and vigilance in determining the Fed’s actions.  The worst the economy, the better for Gold.   The ETF's have had outflows of about 900 tons of Gold backed products.  During this economic cycle, inflation may come to pass giving Gold some major support.    

Today’s January Unemployment Report came in again under expectations at 113,000 blaming the harsh weather conditions for the shortfall!  The December jobs report only produced 74,000 new jobs, so really the increase shows some recovery.  Slow and steady may be the pace and this marketplace wants to see “WOW” numbers.  If next month’s Unemployment Report shows any substantial decrease, then perhaps the Fed will reconsider the tapering plans.  For now, it looks as though the Fed will remain on course with plans to taper the quantitative easing program by $10 billion each month for about the next consecutive six months.  The US is in expansion or a growth phase regardless of the size.   Manufacturing came in weak and consumer spending could be better.  The weather conditions sweeping over the US have been to blame for some of the poor data and earnings.  The Senate had not been able to come up with the vote for a bill to renew expired benefits for the long-term unemployed which may be a setback for the economy as a whole.  It is thought that over 1.3 million US citizens lost their benefits and more may add to the figure as time passes.  The Trade Gap had expanded 12 % to about $38.7 billion perhaps attributed to decreased exports.    The next shoe to drop could potentially be the debt ceiling $16.7 trillion cap on borrowing which had been previously postponed until today.  It is thought that a US default could lead to a severe economic downturn. House of Representatives Speaker John Boehner has suggested that while raising the debt limit that the jobs and economy should also be dealt with.  The budget deficit according to the Congressional Budget Office is projected at about $514 billion.  Projections continue that the debt should continue to fall further in the future years.  The forecast for the US economy may still be bumpy for the next few years.   This is the Chinese Lunar New Year holiday where the volume simply may be light.  When the volume is thinner, it takes less to move the market.   China and Russia are experiencing slowdowns.  The Equities and the VIX may also have an inverse relationship.  This will be a matter of how far the bulls may go to defend their positioning.  The US economy still has strength, but it is tested by the data and the earnings reported.  The pick-up in demand boosted exports and investments.   The Euro Zone banks are still paying back the loans accumulated during this crisis period.  The European Central Bank is expected to keep rates unchanged when they meet Thursday.  The Euro FX has enjoyed the safe-haven status as of late keeping the currency fairly stable.  The strength in the US Dollar may keep the Euro FX capped.    The European Central Bank President (ECB) Mario Draghi states that he will support the economy giving the Euro FX some traction.   He may wish to address the issue of interest rates next month when he has more data.  Some major analysts have predictions regarding the valuation of the currencies in the long-term.  It is true that the US and others have printed their currency to stabilize the economies, but for time being the US Dollar should remain stable.  The contagion risks that began at the onset of this crisis remain and could still affect the marketplace.

Today’s US Unemployment came in a meager 113,000 new jobs created for the month of January while the previous reading was 74,000.  Traders again managed to blame the light numbers on freezing weather conditions sweeping across the US.  The Unemployment Rate came in at 6.6 % while the previous reading was 6.7 %.  The Manufacturing Payrolls were 21,000 while the previous reading was 9,000.  The Private Sector Payrolls were 142,000 while the previous reading was 87,000.  The Government Payrolls was -29,000 while the previous reading was -13,000.  The Federal Government Payrolls was -12,000 while the previous reading was -2,000.  The Service Sector Payrolls was 66,000 while the previous reading was 77,000.  Temporary help agencies increased by 8,100.   The Average Hourly Earnings was $24.21 + 6 cents.  The Average Work Week Hours was 34.4 unchanged.  Consumer Credit for December was $18.8 billion to $3.1 trillion while the previous reading was $12.3 billion.  The Revolving Credit (credit cards…) increased by $5 billion.  The Non-Revolving Credit  (student loans, auto loans…) increased by $13.8 billion.  The US Initial Jobless Claims for the week of February 1st was down 20,000 to 331,000.   Continuing Claims were increased 15,000 to 2.964 million.    The Challenger Job-cut Report for announced layoffs in January was 45,107 while the previous reading was 30,623.   The Gallup US Payroll to Population for January was 42.0 while the previous reading was 42.9.  Productivity in the Non-farm sector was 3.2 % while the previous reading was 3.0 %.  The Unit Labor and Costs was -1.6 % while the previous reading was -1.4 %.  Chain Store Sales are showing significant weakness compared to Decembers.    The International Trade Balance Level for December was -$36.7 billion while the previous reading was -$34.3 billion.    The Bloomberg Consumer Confidence Index Level for February was -33.1 while the previous reading was -31.8.  The ADP Employment Report for January was 175,000 while the previous reading was 238,000.  The Gallup US Job Creation Index was 19 while the previous reading was unchanged.  The ISM Non-Manufacturing Composite Index for January was 54.0 while the previous reading was 53.0.  Any number over 50 points to expansion.    The MBA Purchase Applications for the week of January 31st Composite Index was 0.4 % while the previous reading was -0.2 %.  The Purchase Index was -4.0 % while the previous reading was 2.0 %.    The Refinance Index was 3.0 % while the previous reading was -2.0 %.  The Factory Orders for December were -1.5 % while the previous reading was 1.8 %.  Redbook Store Sales for the week of February 1st was 2.7 % while the previous reading was 3.2 %.  The ICSC-Goldman Store Sales were 0.3 % while the previous reading was 0.2 %.  The Gallup US Economic Confidence Index (ECI) for January was - 16 while the previous reading had been -19.  The ISM Manufacturing Index for January was 51.3 while the previous reading was 57.0.  The PMI Manufacturing Index for January was 53.7 while the previous reading was 55.0.  Construction Spending for December was 0.1 % while the previous reading was 1.0 %.  The Gallup US Consumer Spending Measure for February 3rd was $78 while the previous reading was $96.  Motor Vehicle Sales for January for was  down 3.1 % to 1,011,188.  Bad weather was again held as the culprit for the decreased sales.  Ford Motor sales decreased 7.1 % to 154,644 units.  Ford increased incentives by 14.6 % from last year according to TruCar.   GM sales decreased 11.9 % to 171,486 units.  Chrysler increased 8 % to 127,183 units.  

If the April Gold contract can penetrate $1275.20, it may have a short-term trend higher.  Support should be maintained at $1235.50.  $1330.00 may be a near-term target.  We may remain cautiously bullish for the moment.   One must be cautious as traders have found that they love to sell a bounce.  Any possible moves to the upside may be temporary. 

  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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