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Deflation

The Missing Key for Silver is InflationShould silver price in retail demand or economic sentiment? Silver prices have rallied hard since the beginning of October, up almost 10.5 percent since the October 2 low. However, traders are now budded up against key technical resistance. Will traders’ sentiment reject silver’s upward momentum, as it has done seven times since 2013, or will demand spark higher gains? Silver has had a rough go since crashing from its 2011-highs. Currently, silver is trading around the 200-day EMA, which has proven fickle for silver prices. Every time prices have been able to rally to the key pivot-point, prices have been immediately rejected or the trend’s momentum quickly faded. Despite mints beginning to ration silver bullion coins (again), prices are continuing to show the divide between sentiment and demand. As I have mentioned in several articles previous, silver’s demand is largely based upon economical factors, such as manufacturing and industrial output whereas gold prices are almost entirely derived from investment demand in relation of central bank policy. Some analysts expect silver prices to rally because demand for minted coins has risen, and mints are having a tough time filling orders. But, if history is any indicator, this does not happen. For instance, in July, the U.S. Mint reported that demand for American silver eagles were so high that it depleted their stores and began to ration the bullion coins. Needless to say, silver went on to drop an additional $2 per ounce while breaking $14 per ounce back in August. It may not be all it is cracked up to be. The shortage of minted coins only represents one, small facet of silver demand. According to Smaulgld.com, when the first shortage was reported, the shortage was found in the retail market but not the wholesale market. Silver has long been a trusted go-to for retail investors. It is a tangible asset that tends to be priced reasonably for the everyday investor. The multi-year lows carved out this year has only been seen as a buying opportunity. Although, it is important to understand that silver is not an investment for tough economic times because that is, generally, how market participants price silver. Silver is only a form of protection against inflation, which undoubtedly will show up. Investors will just have to be incredibly patient. (Silver outperformed during recessions that were coupled with higher inflation as seen during the 1940s and 1970s recessions). Unlike gold, silver has no historic evidence of protecting against deflation (gold nearly tripled during the early-1930s). During significant bouts of deflation in the early-1920s, and again in 1929 to 1933, silver’s performance was horrible. It was also horrible as inflation subsided after the stagflation of the 1970s and early-1980s. Again, following the lack of inflation – on paper – during the Federal Reserve’s seemingly endless quantitative easing programs after the financial crisis. Current rates of inflation, as measured by consumer price index (CPI) and producer price index (PPI), could suggest prices have more to fall. The U.S. is seeing the lowest bouts of inflation in decades. The U.S. is experiencing the lowest levels of CPI outside of a recession since 1954 and the lowest PPI since 2001, following the dotcom bubble. However, silver has experienced great gains following a recession as inflation re-enters markets. Silver could get cheaper, but patience is a virtue and could reward big when inflation rears its ugly head. Please check out the original link for additional charts and graphs: bullion.directory Please follow me on Twitter @Lemieux_26 Check my posts out at: bullion.directory www.investing.com www.teachingcurrencytrading.com oilpro.com
FX_IDC:XAGUSD
by CommoditiesTrader
5
Gold Surprises as Dollar Gets Monkey-Hammered LowerIn " Gold Leaps Higher as Worries Mount ," I briefly pointed out how those very same institutions that championed quantitative easing policies implemented by the Federal Reserve are now coming out to proclaim quantitative easing added no substantial benefit to the real economy . Gold was pushed lower on the assumption that central banking policy would all pan out and that the U.S. would finally achieve escape velocity; but the exact opposite is occurring. Despite the near 12 to 16 months of absolutely horrendous, even recessionary data, market participants believed that if the Fed began to tighten monetary policy then the economy must be alright. Central bankers,misguided by classroom academics and abhorrent to real world economic dynamics, believe that if you tinker with interest rates that somehow inflation will magically begin to rise. Not so because it is real, meaningful growth that produces inflation; and it is more evident now that the these policies do not produce meaningful growth. I mapped out the dollar's downward trajectory, which was largely based on the floundering economy and the inability for the Fed to take action that will pop asset inflation. I still believe this is based on the above factors and that the dollar will likely gather strength as the US slips into deflation. Traders and CNBC pundits think that if deflation takes hold then gold will surely decline into the abyss. And just like their "lower gas prices equal booming consumer spending" myth, gold falling off a cliff during deflation is just as preposterous. Gold is unique in that if can act like an insurance policy against both sides of tail risk (inflation and deflation). It is well-known that gold had a massive bull run when stagflation took hold of the US during the 1970s. Inflation ran amok. However, nobody mentions that gold tripled, in inflation-adjusted dollar terms, during the early 1930s (the Great Depression) prior to President Roosevelt outlawing the private ownership of gold. As I wrote last April: " There is an assumption that the dollar and gold’s performance is strictly inverse of one another, but that is not so. The WGC (World Gold Council) indicates that between early 2014 and March 20, 2015, the dollar has gained over 20 percent while gold only fell 1.2 percent. Historically, gold prices more than double on a weak dollar than it falls on a stronger dollar. Thus, a stronger dollar is not indicative of massive gold depreciation. When the dollar declines, gold has appreciated 14.9 percent. Yet, when the dollar strengthens, gold has only fallen by 6.5 percent, according to the WGC. " If you look at this chart, you will notice one thing: gold sure looks to trend with the SPX. There is an argument that this due to simple asset inflation. Notice the massive divergence began when gold began to top in 2011. The divergence is what I call the "perception" gap. I expect that divergence to close. It's no secret that I was right about the volatility of 2015, along with other key macro trends. I believe by the end of 2016 and 2017 is when the real fireworks begin. Gold's recent move has been huge, and, of course, there will be profit taking. But those who follow me know that the underlying fundamentals for gold has been strengthening for some time. (Note: the gold chart is the same I used in the above mentioned gold idea, but the minor uptrend (along with new resistance) were added). Please follow me @lemieux_26 and check out my other ideas, which have links to previous writings.
COMEX:GC1!
by CommoditiesTrader
11
GBPJPY: This might be it...GBPJPY is offering a significantly interesting short opportunity, the telltale signs are there. If we look closely, we see that price has bounced from the biggest mode in the downtrend since 1991, and could never go back over it. In time at mode terms, we have a very clear weekly downtrend signal, confirmed by rgmov in the daily plotting a new 2 month low. This offers a very good short setup if we get a retracement entry. Be sure to take it! Entry would be anything above 191.91, with a stop loss slightly above the weekly mode at 193.468 (make it say 193.568) Good luck! Ivan.
Short
by IvanLabrie
13
GBPAUD: In depth time at mode analysisI spent a long time analyzing this pair, contrasting views with my colleague Nick Coulby, who specializes in Elliott Wave analysis, and working on my own time at mode analysis of this pair, as well as adding the result of insightful discussions held at Tim West's 'Key Hidden Levels' chatroom, regarding this topping pattern, as well as the patterns in the gold chart, and it's Elliott Wave analysis. All this rich information and length analytical process leads me to conclude the following: The uptrend isn't done, and while we see gold rallying, this pair will correct down offering a potentially interesting short setup, before lending us a perfect position trade on the long side if it meets my expectations. Ultimately the structure in gold is corrective, and the faith of the Aussie dollar's strength is connected to it, as well as to other dollar linked commodities (iron ore, copper), and subjected to stronger easing biases, vs those of the United Kingdom's BOE. In this regard, on the subject of fundamental analysis, we can see that the bias it favors is on the long side, but the timing for trading with it wouldn't position us favorably in this trade. I'll be looking for shorts as soon as gold starts rallying again, waiting for a retest of the top area, since I think we're seeing a corrective X wave flat pattern with limited downside. This will lead to new highs to complete the monthly uptrend signal target which will possibly form a new zigzag with a wedge C wave like we have observed before in this pair. This new wedge C wave will be the top of this formation offering an ideal short trade of larger implications, which is what I'm after. Conclusion is: If this model holds, and I think it's highly probable that it will, we will see a range bound situation, leading to a new high in a sharp advance, after which we will probably observe a terminal wedge pattern, which will be our cue for the interesting short setup, which should retrace the whole structure, and lead to a perfect long entry to rejoin the larger quarterly uptrend. I will continue to update this publication, since I think it has great potential and value, both as a journal, and as a testament of both Tradingview.com's and Tim West's 'time at mode' model's power. Good luck, Ivan.
Long
by IvanLabrie
41
U.S. Dollar Awaits FOMC DecisionSome say this week's FOMC decision will be of historical proportions and be the first time the Federal Reserve will increase the Fed funds rate in almost a decade. The U.S. dollar index is in a descending trend. Price action is floating above the minor trend created by the top on April 13. The dollar has not been able to see any significant support higher, likely due to the uncertainty about the Fed's policy. The economy is clearly slowing down, and the Fed has never hiked rates into a slowing economy. Furthermore, financial conditions are already tightening in the wake of a potential boost - if we can call it that -in interested rates. According to Goldman Sachs' financial conditions index, which incorporates equity prices, exchange rates, credit spreads and a slew of other factors, hit the highest level in five years. In regards to what is already occurring with a stronger dollar, increase in borrowing costs and declining asset prices, the market is already undergoing what feels like a 75 bps increase; a 25 bps hike from the Fed would only add insult to injury. Technically, rallies in the dollar have been sold. Price action did see significant pressure in late August and broke key technical support. There was support near 92.50, but the mere close below signals the potential for further weakness. If the Fed remains dovish this weak, and the FOMC minutes continue to be vague and confusing, the dollar could very well retest this year's lows. Momentum on the longer-dated charts are suggesting that upward movement is challenged, and the trend could be changing. Of course, if the Fed did come out and increased rates, the dollar would significantly strengthen. The idea that the Fed would allow that is flaw because they are begging for any sign of inflation in a deflationary world. Multinational corporations have been greatly hurt with the dollar rising against nearly all currencies, and emerging market currencies collapsing. A $3 trillion debt crisis could also occur if the Fed embarks on a path towards monetary tightening. The idea that the Fed can just tighten once and be done with it is foolish. That's not monetary normalcy, and the Fed would only prolong the inevitable. Please follow me on Twitter @Lemieux_26 Check my posts out at: bullion.directory www.investing.com www.teachingcurrencytrading.com oilpro.com
INDEX:DXY
by CommoditiesTrader
USDCAD Pauses as Crude Gains Over 20 Percent from LowsThe USDCAD pauses as crude gains over 20 percent from the recent lows, while having the best three-day gain in nearly 30 years. Upward momentum in crude prices will help the Canadian dollar rebound slightly, but the fundamentals still remain bearish. In all reality, $47 per barrel will not rid the bearish fundamentals within the energy space. While keeping it all in perspective, the pop in crude prices is due to a series of headline factors as crude traded near levels not seen since the financial crisis. First, the Energy Information Administration (EIA) reported that U.S. crude production declined in July. Falling a to a mere 9.3 million barrels, production is roughly 300,000 barrels from the peak. For the first half of 2015, an average of 9.4 million barrels were produced. That's not that optimistic. There was also a headline suggesting that OPEC may have a meeting with producers to determine a "fair" price for crude. What do I expect? twitter.com Speculators try to front-run such events hoping to ride the momentum. These momentum pops tend to be self-sustaining as traders begin to cover their levered-shorts. The market saw the same thing earlier in the year only to engage in another "transitory" breakdown. The USDCAD is up big, and price action will likely test the consolidation channel, which will act as the first line of support. If price action closes underneath it, look for the pair to test support at 1.3090/1.31. The speculative ride could last near-term, where the 200-4H EMA would be a great downside target. The 4H +/- DMI is showing a possible bearish convergence that would further suggest more downside. Key resistance levels will act as upside target is crude begins to unwind, considering that USDCAD does not completely unravel. Minor trend support looks to be broken, and bulls will have to attempt to get back over that hump.
by CommoditiesTrader
7
Gold Leaps Higher As Worries MountFollowing the FOMC minutes on Wednesday, gold has seen a massive two day move that brought the precious metal to five-week highs. Worries mount as market participants are beginning to realize that the Federal Reserve is stuck within a liquidity trap. The minutes statement indicated that the Fed saw risks to near-term inflation (as the five-year breakeven rate hit five-year lows) and growth. The once “sure bet” on a September rate hike quickly dwindled, and the possibility of another round of quantitative easing is growing. There has been a lack of attention to two key revelations within mainstream media: The Bank of International Settlements (the central bank of central banks) and the St. Louis Fed have come out publicly to express that quantitative easing has been the epitome of failure. Both institutions have stated that the massive balance sheet expansion and zero interest rate policy (ZIRP) has not added any growth to the real economy. The BIS has even gone as far as to say that the world is defenseless against the next crisis, which many “Main Street” analysts believe is around the corner. In regards to a efficacy of ZIRP, the white paper publish by the St. Louis Fed said: “A Taylor-rule central banker may be convinced that lowering the central bank’s nominal interest rate target will increase inflation. This can lead to a situation in which the central banker becomes permanently trapped in ZIRP. With the nominal interest rate at zero for a long period of time, inflation is low, and the central banker reasons that maintaining ZIRP will eventually increase the inflation rate. But this never happens and, as long as the central banker adheres to a sufficiently aggressive Taylor rule, ZIRP will continue forever, and the central bank will fall short of its inflation target indefinitely. This idea seems to fit nicely with the recent observed behavior of the world ís central banks.” But, this is not just the Fed’s problem. Quantitative easing has been a failure in Japan and Europe. In a “defenseless” world and crisis looming, gold stands to greatly benefit. Price action for gold is fueled by short-covering (near-term) because the dollar just base-jumped of the hopes and expectations of a Wall Street recovery. However, as Pandora’s box is opened, gold’s upside potential becomes great. Resistance can be found at $1,162, which is slightly below the descending trend created in late January. If price action can close above these key levels, gold will attempt to challenge the 200-day EMA near $1,182. The 50 percent Fib. retracement of January’s downtrend is at $1,189. As long as the dollar remains soft, gold will be relatively supported at these levels. Although, price taking can take place and healthy. The daily RSI is approaching 69, but the weekly and monthly RSI is below 45. Moreover, the weekly chart is showing a bullish +/- DMI crossover, suggesting a potential inflection point in the most hated asset on Wall Street. Please follow me on Twitter @Lemieux_26 Check my posts out at: bullion.directory www.investing.com www.teachingcurrencytrading.com oilpro.com Low cost trading solutions: www.fiverr.com
COMEX:GC1!
by CommoditiesTrader
9
USDJPY To Grind Higher on Interest Rate HopesThe dollar-yen has been rather range bound, floating between 123 and 125. The U.S. dollar is likely to remain firm heading into September, as many market participants believe the Federal Reserve will finally raise the Fed funds rate for the first time since 2006. Many traders are looking at the fact that funds rate future traders are pricing in a 54 percent chance a rate hike will occur, which has dropped four percent since the non-farm payrolls were released. Here is something that suggests that does not mean anything. In 2009, Fed funds traders forecasted a 58 percent chance the Fed would hike rates in Q1 of 2010. That’s how long this Game of Bankers have been playing out. Like Monopoly, the game transcends time until players begin to loose all their money. The hope that the Fed begins to tighten policy will override the fact that Bank of Japan (BoJ) Governor Haruhiko Kuroda said that there is no need for additional monetary easing because he believes inflation will reach the central bank’s two percent target in 2016 – a target that has remained elusive for all easing central banks. Although it is not doubted that Kuroda actually believes a steady two-percent can be achieved, the BoJ has underwritten Japan’s massive deficit spending program and has induced severe financial repression. Despite the QE program that trumps the Fed’s, Japan’s economy remains weak and fragile. The USDJPY is approaching 125, a mark that has not been overtaken since June 5. A close about these key level should get momentum traders to flood the pair, as it did last time to push it just shy of 126. Resistance could be found at 125.38. The pair does have to close over both 125.05 price resistance and the intraday descending trend created at 125.85. If the pair is unable to do so near-term, USDJPY could trend lower to support at 124.40 and 124.15. If traders begin to think the Fed will not tighten in September, the dollar should pullback slightly. The the hope would then be pushed back to December. If dollar will remain supported in terms of the rate hike potential by the Federal Reserve, as well as the disinflationary pressure the dollar is causing by strengthening. Mark Carney, the Bank of England (BoE) Governor who had been recently hawkish, shied away from previous rhetoric on hiking rates citing the strong FX pressures and low inflation. Please follow me on Twitter @Lemieux_26 Check my posts out at: bullion.directory www.investing.com www.teachingcurrencytrading.com oilpro.com Low cost trading solutions: www.fiverr.com
by CommoditiesTrader
1
Crude's Carnage to Continue and Break the 2009 LowPlease check out the full, original post chalk full of information: oilpro.com .... On a market technician's viewpoint, if fundamentals do not shape up quick with support from consumption economies, like the U.S. and China, crude could break 2009's low of $33.20 per barrel. I also expect the dollar to continue to rise, increasing deflationary pressure throughout 2016. Price support is currently $42.02, just $2.22 per barrel less from where it is trading today. 2008's high of $147.27 per barrel creates a "V" shaped support and resistance price channel, which will likely hold prices. If prices break through this key support level, selling could amplify if there is no catalyst to bring prices back north. A "demand" zone - an area where confirmed buying took place - between $38.34 and $34.04 will be the last line of defense for crude prices. A close below this level, and a target of $27.14 per barrel is initiated. Please follow me on Twitter @Lemieux_26 Check my posts out at: bullion.directory www.investing.com www.teachingcurrencytrading.com oilpro.com
NYMEX:CL1!
by CommoditiesTrader
3
Chart of The Day: DXY (7/27/15)The U.S. dollar index is sharply down, following a horrendous day for Chinese equities that did not spark any "safe haven" buying. The 8.48 percent drop in the Shanghai composite was the second worst day ever for the composite since 2007. Traders feared that the Chinese government and the People's Bank of China (PBoC) would pull any assistance to help keep their fragile stock market afloat, just as the Federal Reserve is presumably going to tighten monetary policy somewhere between a year ago and who-knows-when . The euro spiked higher on a combination of a weaker dollar and German Ifo business climate gauge snapping a series of declines. The dollar's losses are keeping steady after another disappointing durable goods print. Although beating economist expectations this month (initially), the last five months of data have been revised lower. Last month's .5 percent increase was reduced to zero. Price action, on the daily chart, is skipping along support at 96.50/55. The DXY has been unable to gain any significant momentum, following a rather poor corporate earnings report all of last week. The DXY is at a crossroads, finding itself breaking the current wave's ascending support but holding onto a minor descending support trend line. A close above these two minor support levels could send the dollar to 95.85 and, potentially, 95.30. However, if support holds, the dollar can retest 97.25 before attempting to challenge the major descending trend line near 98.15. It is important to note that trend strength is dropping with the ADX slopping over. The DMI indicator is suggesting that a bearish DMI convergence is in the works, as negative price action could take over. Expect price action to continue to chop until either major support or resistance is broken, which will have strong implications in terms of direction.
INDEX:DXY
by CommoditiesTrader
Chart of The Day: USDJPY (7/22/15)The dollar-yen has been able to recover a sizable portion of yesterday’s ensanguine price action, following the dollar’s rejection from key technical resistance. Support for USDJPY remains clear with the Federal Reserve’s promise to hike rates, supposedly, sometime this year. With the Fed keeping traders guessing, the dollar remains in an upward trend as the potential for monetary tightening stokes demand. There also is the utter commodity smack down that is flashing signals of globalized deflation. Although, this underlying macro theme has been present for a while now. Gold is undergoing the largest rout is nearly 20 years, and West Texas Intermediate (WTI) crude fell back below $50 per barrel. The 4H chart for USDJPY shows strong follow through after breaking through a descending wedge (shown by the major descending resistance trend line and descending support). However, price action is beginning to chop as the pair snags 124 yen per dollar once again. The intraday chart suggests that dollar-yen will likely grind higher through the ascending channel. Nevertheless, traders should be weary. The ADX, or trend strength indicator, is showing that the current trend strength is easing a bit. If USDJPY fails to close above 124.14, the pair could retest price support at 123.75; and this would also cause a retest of channel support just slightly lower. A close above near-term resistance, USDJPY would have upside resistance targets of 124.50 and 124.70. If the pair broke down, ultimately closing below channel support, support will be sought at 123.47 (coincides with the 72 EMA) and 123.18. Note: The one thing that can upend the dollar is ongoing softness in U.S. economic data that will derail the presumption of a Fed funds rate hike. The geopolitical and global macro climate will likely make yen attractive longer-term, loosing over 60 percent against the dollar since 2012. Feel free to follow me @lemieux_26 Original Post: teachingcurrencytrading.com
by CommoditiesTrader
2
Why isn't the Euro weaker?It could be said that it is slightly strange that the Euro isn't weaker. As of writing, EURUSD is trading at 1.1040 after seeing lows of 1.0458 back in February 2015. From March last year until February this year, EURUSD was in a very steep downtrend with a range of ~3500 pips. Since then, the pair has remained relatively stagnant, after seeing a bounce off of the 1.0460 level. With the Greek situation weighing and another round of Quantitative Easing, you probably would have thought that the Euro would have been much weaker. However that is not the case, evidently. We have 3 fundamental beliefs with regards to this. 1) The market has been poised for a US rate hike for a while. However, to justify a rate hike, consistently strong data has to be printed, but the US has not been able to achieve this as of yet. Combined with this, short term rate differentials would in fact suggest that EURUSD should be above current levels, as well as inflation expectations. These correlations are slightly weak, however. 2) Uncertainty in Greece is causing indecisiveness. Investors do not actually know how Greece will leave the Eurozone, as it has never been done before and there is no real procedure for a country to leave. On the flip side, Tsipras has suggested an extra EUR 60bn to be provided to Greece for the next 3 years. This seems like it would not solve the underlying problem and merely extend the time it takes to pay their creditors. Investors are aware of this. This uncertainty could be causing the lack of Euro weakness. If and when a deal is reached, a rally and fade could most probably occur (i.e a spike in price and then a fall). A good quote for why this situation is taking so long to resolve: 'if you owe the bank £500 it's your problem; if you owe the bank £5m it's their problem.' 3) Many people believed that the Eurozone would be like Japan in terms of reintroducing QE (deflation and QE for a long period of time). However, investors began unwinding short positions when they saw that Eurozone data was actually improving post-QE introduction. This lead to an increase in the price of the Euro which is still having an effect today. Please add comments. If you agree or disagree, I'd really like to hear it. www.admiralmarkets.com Follow us on Twitter: @AdmiralMarkets
by DavidBelleFX
10
Gold Continues in Falling Wedge with Fib. SupportGold is hated but most because it is the antithesis of greed, which has been feed for years by central banks around the world. I'll be frank, I was rather bearish on the shiny metal an forecasted $1,035 per toz. in 2013. However, as the charade of lackluster growth and quasi-monetary policy continued, gold's fundamentals are bullish. It is too simplistic to relate gold to the dollar (in terms of performance) or inflation. At its root, gold is the ultimate currency hedge; and if you have your money on the Fed to come out of this unscathed.. well, they will - you might not be so lucky. Price action has been range bound forever it seems (please check out previous ideas), but given the onslaught of hopes and dreams of a global economic recovery, gold has been supported thus far. A falling wedge is a bullish reversal pattern, and it could be worth watching as the Fed (and most recently the BoJ) talk down the dollar. The volatility in the dollar is alarming on its own. Price action has been supported by a large demand zone that has been evidence since late 2009. Clearly, a close below that is very bearish, and sub-$1,000 could be possible but it might not be probable in current conditions. Gold will need a catalyst, and the lack of credibility in the Fed will be key. If June and September come and go without a rate hike, gold could easily find comfort above $1,300 per toz. To assume the Fed will rise interest rates on a single positive data-point (non-farm payrolls) is myopic. There are no trends in inflation or growth. Keep in mind, the US was in the Great Recession for seven months before the Fed acknowledged it, as it was still projecting growth. Technically, there is support until otherwise broken.
FX:XAUUSDLong
by CommoditiesTrader
8
Gold Holds Under $1,200 For Time BeingTraders knocked gold below $1,200 for the time being, as market participants determine whether or not the Federal Reserve will hike the Fed funds rate for the first time since 2006. The Fed is stringing along financial markets. Either the economy is strong and deserve a tightening of monetary policy, or it is not. The voting members of the FOMC still remain divided and as confused as traders. NY Fed Bank President William Dudley told a crowd at an event held by Thompson Reuters that Fed policy will be highly reactive to the market’s reaction. The dollar pushed higher and holding above 99, while still remaining a key headwind for gold prices. Currently trading at $1,196 per toz, price action is lingering underneath broken support of $1,198/$1,200. The XAUUSD four-hour chart shows two different, potential, bearish EMA crossovers – 72/200 and 20/50 EMA. This could create technical selling trending between $1,186 and $1,180. Secondary support can be found at $1,170. If price action can rebound above $1,200, traders will likely target $1,209 and $1,224, respectively. Gold will likely remain range bound until the Fed makes their mind up on rates, one way or the other. Original Post: bullion.directory More here: bullion.directory
FX:XAUUSD
by CommoditiesTrader
QE4 biggest risk to a bear? Possibly negative interest rates.To be transparent and clear I am short the market, fully invested. This is my further attempt to be objective. Bears will justify many reasons why QE4 is not possible. At the very least it's not probable, but in all honesty, after reading Bernanke's SA on reasons for using QE in a deflationary cycle, there is no reason the US will not go the way of Japan, by effectively perma QEing. Bernanke argues fairly convincingly, however only in theory, that in the face of deflation the Fed MUST at all costs pump the economy. A deflationary trap is the death of economies and empires. As I am almost fully invested to the downside, I am looking for the Fed to increase interest rates. Therefore, the move away from "patience" is a good thing, or is it? The Fed's focus was employment . Now that the US is arguably fully employed and ready to benefit from increasing wages, it was ready for the rate increase, only to be stifled by the USD and sluggish inflation. So what does the Fed do? The focus on employment has now been moved to deflationary worries . For now the Fed says it sees it as transitory, but the focus communicated to the market is committed. Hence, my worry! Every HFT algo, hedge fund and it's pet dog will be looking at inflation with the scrutiny it did with employment. As seen in the chart , the last three times inflation had a flat or decreasing cycle, the Fed QEed. What's happening with inflation now? What did Bernanke say about deflation? Remember, the Fed does not use QE to prop the market, it uses QE to arguably inflate the economy. Now for my conspiracy. Equities will drop in the medium term pulling in every bear, her cubs and all the forest animals. If I owned the market, I would force a move quickly breaking Oct 14 lows, because the Fed will have to act on deflation soon, if not transitory. Smart money buys only for the Fed to have a justifiable reason to QE4 the hell out of us, "deflationary pressures are worrying, we have to act decisively". The Fed has been promising increased interest rates for years, but oligarchs want another capital/income boost. Once QE4 is announced markets will "reach for the sky", as Buzz Light-Year put it. Bears should fear QE4, but ride it while it lasts, if it gets here that is :-)
FRED:CPIAUCSL
by BobbyBlueShoes
Gold To Retest $1,130 As Dollar StrengthensNobody can ignore the greenback gorilla in the room any longer as one percent moves seem to be a natural occurrence. The unprecedented drop in the euro, yen and Swiss franc is forcing the dollar index higher, causing dollar-priced commodities to decline lower. There is a striking pattern with the Swiss franc and gold. For many years, both assets have traded alongside each other. In 2011, gold reached its top of $1,923 per toz. It is also when the Swiss National Bank (SNB) implemented its euro-franc peg. Following the SNB’s decision to shock the world in January and, potentially, break away from the paradigm of policies announced well in advance, the franc steadily began to sink lower. And gold’s impressive run this year ended. (bullion.directory) Some traders may feel that the Federal Reserve is only a few months away from hiking the key benchmark rate, many still believe the later half of 2015 is more likely. Even so, the perceived policy divergence between central banks is moving the dollar higher . The Fed still has yet to tighten monetary policy because they must remain “patient.” Nevertheless, gold is now at a three-month low, while the dollar is at the highest level since the mid-2000s. Gold is hovering at about $1,150 per toz., and price action is looking to retest last year’s low of $1,130. Before this can happen, gold will have to close below the narrow demand zone on the daily chart of $1,144/41. In reality, it could only take another one percent push on the dollar index. Former support levels of $1,163 and $1,175 will be the nearest levels of resistance. The 50-day EMA has crossed underneath the 72-day EMA, confirming bearish sentiment. If the lows are taken out, it could potentially get out of hand if the dollar continues to strengthen as it has. I recently published a piece on a wedge forming in silver, and if one were to look on the weekly chart for gold there is a wedge forming as well. Price action has made a series of lower lows and lower highs, while the price range is narrowing. Theoretically, the descending wedge is a bullish reversal pattern, but there is no rule on how far prices could drop. The wedge support shows that potential support below $1,130 would sit at $1,110/00 depending on where price action could make contact with the descending support trend. Price action support would sit at $1,095 and $1,045, if the wedge is broken. The volume has been large and heavily to the downside. Momentum looks to be picking up to the downside on the weekly chart. The ADX is beginning to tick back up, corresponding to the – DMI pushing higher. The dollar rising is worrying. It is not particularly the fact that it is strengthening, but it is strengthening at a pace not seen in nearly four decades. The dollar has increased 10.68 percent since February. The move is not normal, but it is reality. As mentioned previously, it will likely get a lot worse before the party runs out of drugs and the music stops. The strengthening dollar has hurt commodity prices, but it is also taking a toll of those record profits US companies have been raking in since the Fed implemented ZIRP. Equities are volatile and diverging from the dollar. Those bearish on gold during the S&P’s golden years are now making a case for holding gold. Times are changing. When the dollar’s momentum may wane is unknown due to the ongoing currency war, but one this is certain: a strengthening dollar will rip off the Fed’s band-aid, and the underlying economic rot will be seen for what it is. Please visit for more on precious metals, central banking folly and economics: bullion.directory
COMEX:GC1!
by CommoditiesTrader
6
Platinum Trades at a Discount Against GoldPlatinum has been on a steady decline with slow demand. Platinum trades at a discount to gold, a condition that occurred last month. The spread between the two precious metals has tightened, but were at the widest in two years. Platinum, although grouped in with gold and silver as a precious metal, is typically lumped into the industrial group with palladium. Platinum has many uses in industry, most notably in catalytic converters. With economic data deteriorating globally, there has not been much demand for the metal, which is more rare than gold. The spread between the two widened because gold is an infamous “safe haven” hedge against economic and geopolitical uncertainty. However, some analysts believe the spread will continue to tighten as platinum rebounded off its 5 year low. Caroline Bain, senior commodities economist at Capital Economics, said demand from China could spur a rally. Although demand has been weak of late, China is notorious for picking up platinum when it is discounted to gold. Technically, volume has been weak and dropped off in recent weeks. Prices found support near $1,155, while a close below this level opens up a potential drop to $1,087/85. While, if prices can gain a little strength, prices could challenge $1,224/28 – near the 20-week EMA. The RSI is hovering just above an “oversold” level at 35, but prices have been comfortable within the lower bound. A rally in platinum will likely need a catalyst for ignition. Original Post...http://bullion.directory/platinum-trades-at-a-discount-against-gold/
NYMEX:PL1!
by CommoditiesTrader
A Wedge of Silver: Price Action Weakening to SupportSilver is, at times, violently volatile and noticeably a proxy for the US dollar. With the dollar at levels not seen since 2005 and 2006, sentiment for precious metals remain weak. There are two factors for this, and it does not matter which one chooses. The dollar has been able to hold current levels via the perception that the Federal Reserve will - at some point - incrementally increase the Fed funds rate. Many believe this will happen because the US central bank has not boosted rates since 2006, and it is just time to do so. Others actually feel the US economy is "strong" enough to handle a increase in rates; although, one only has to look to the mortgage applications to see how sensitive to rates Americans really are. The other fraction foresees deflation, if not just a prolonged level of disinflation. With over 20 central banks cutting rates this year alone, the currency war has been nasty. With each major central bank racing to devalue their respective currencies to zero value, the dollar is the de facto "winner." When currencies the dollar is pegged to within the dollar index drop, the dollar increases and further intensifies disinflationary pressures. That alone is negative for precious metals. What is not negative for precious metals is the likely reaction from the Fed to quell dollar strength and "boost" economic growth, more QE. Silver is currently trading within a descending wedge, a technical pattern that consists of two trend lines that follow the trend but with price action ranges that begin to narrow. What is striking is that wedges are reversal patterns. This does not mean silver is poised to jump to the upside immediately, but it is a pattern to watch out for. Essentially, price action will continue to narrow on weakening volume to a point of support. Then, prices rally. In regards to silver's wedge, traders are likely to push silver lower to support within the wedge as long as the dollar's strength remains. The wedge's descending trend began ounce silver failed to move significantly passed $18.50 per toz. Key support levels are seen at $16.05, $15.80 and $15.50 per toz. With using the wedge to a trader's advantage, the rally from support that breaks the descending resistance is typically a "false" move. A pullback from the breakout will likely occur to key support, likely to retest the former descending resistance now support. If it is a true breakout, prices will climb higher from the pullback to support.
FX:XAGUSD
by CommoditiesTrader
6
Time To Abandon Preconceptions on Gold and the Dollar?Historically, gold and the US dollar move inverse of each other. Time to abandon this preconception? The US dollar is going strong, but is it time to change the preconception that a strong US dollar is automatically bad for gold? Perhaps. The inverse relation has historically occurred, but in times of uncertainty, the inverse breaks and gold typically remains on top. BlackRock’s Russ Koesterich, CFA, gives the inverse relationship the benefit of the doubt in Market Realist’s “Why Gold and the Dollar Move in Opposite Directions.” Koesterich goes to say that a strong dollar is bad for gold because it makes the commodity more expensive – this is true in relation to gold priced in any currency. The article also points out to the assumption that the Federal Reserve “may” raise rates, which is also is positive for the dollar, bad for gold. Conversely, this is one of the reasons I believe the Fed won’t raise rates. Deflationary pressures will continue to raise, and that is opposite of the Fed’s intentions. Under normal circumstances, the inverse relationship of the two make sense. However, this is a time in history not seen before. Central banks are omnipotent, and their modus operandi is currency debasement. Gold priced in euros just reached a 21-month high, following the European Central Bank’s quantitative easing announcement; and gold priced in yen has been an amazing trade during the Bank of Japan’s kamikaze monetary policies. But, the dollar is rising, not falling, right? True. The question is not why gold should fall given the strong dollar. The real question is “why is gold not falling given a strong dollar?” It’s simple: gold is a central bank hedge. The ultimate currency hedge. Furthermore, the performance of the dollar – although not new – is not normal. Up over 20 percent since the parabolic move first began, these moves are often foreshadowing destruction of capital which quickly follows. In “US Dollar Rally: The Beginning of the End,” I outlined three previous times the dollar rose by at least 20 percent: 1988-89, 1999-2001 and 2007-9. Each move was followed by double-digit declines of at least 16 percent in the US dollar index. In addition, the last two descents took equities down with it – the “tech bubble” and the “Great Recession.” Omens are lurking as the dollar and gold relationship is mirroring that of 2008. In the above mentioned article, Koesterich presented a graph showing gold and the dollar. Notice January’s decoupling of the US dollar mirrors that in January 2010, following the Fed’s implementation of quantitative easing. So, is more easing from the Fed coming? Likely, and it’s more likely than a meaningful rate hike by the Fed. Gold rose significantly in the dollar collapse in 2000-01 and 2007-09. During the Great Recession, gold was further boosted by the Fed’s ill-fated QE attempts. You do not need inflation for strong gold gains, you just need central banks to remain in business. It is important to rethink common ideologies on investing because markets are dynamic and ever-changing. This is why both fund managers and retail traders are slaughtered in epic market collapses. They fail to evolve along with financial markets, continuously trying to fit the round peg in a square hole with the square peg in plain site. bullion.directory Link to "US Dollar Rally: The Beginning of the End" bullion.directory
INDEX:DXYShort
by CommoditiesTrader
28
Is Lumber Signalling Bad News for US Manufacturing?Lumber is highly correlated to the ISM manufacturing index (or vice versa?). Nevertheless, the weakness in lumber prices is corresponding with the softening manufacturing data, although manufacturing data from Markit suggest manufacturing is weaker than ISM reports. New orders index collapsed from Nov/Dec 66 to 57. Prices have noticeably declined, too. Anyways, price action is nestled so snugly on price action support at $310.XX, while support was found on the uptrend channel support. This also aligned with a small asymmetrical triangle. A close below these levels, prices are likely to sell-off to $278, while $268 remains a possibility on weakening economic data. However, a rally from these levels could push prices to $326.
LShort
by CommoditiesTrader
Gold Looks Promising Longer-Term(Originally posted yesterday with appropriate charts) Gold takes a breather, while negative data continues to pour in. Gold’s inability to close above $1,300 is a mild hit for bulls, but prices will likely consolidate prior to the next leg higher. Prices declined to $1,280 per toz., just above the descending trend line, now support. The likely scenario is that gold will reenter the ascending channel and grind higher. Prices will look to regain $1,295, while a close below $1,273 will cause prices to push lower to $1,259 per toz. The longer-term, monthly chart does look promising, however. The price action in January has caused an overwhelming bullish monthly candle that trumps the previous two. Currently, price action is hung up around September’s close of $1,285 per toz, while price action resistance is found at $1,303. Gold has been able to recover from testing a longer-term ascending support trend line, but prices are still stuck within a descending channel created when the bull market correction first took place in 2013. If prices can close above $1,303 then near-term resistance would be seen at $1,353; but, the next monthly target is found at $1,391. There is accumulation of gold futures, which picked up since gold first bottomed at $1,130. Gold was overbought in regards to the near-term chart, and the easing off of $1,300 will correct that. The RSI is well from overbought, and it is ticking upward – a positive sign of more gains to come. The +/- DMI is also looking promising. The negative price indicator (- DMI) has remained on top since the correction was first initiated, but it has recently given up ground. The + DMI is pushing higher, and a bullish convergence on the monthly chart could prove positive for that push beyond $1,353. Please see full, original post here bullion.directory
COMEX:GC1!
by CommoditiesTrader
11