This is a sample entry from Leslie Burton’s newsletter, The Weekly Gold Digger, published on Friday, August 01, 2014.
The US Dollar may be overbought, but should remain strong in the near-term.
This week was one of those times where the Gold market should have taken off more. Seasonally, it should be taking off toward August with the weddings and festivals in India and the jewelry industry preparing for Christmas. Harvest is typically where the fruits of one’s labors may be realized. Gold imports to India increased 65% to $3.12 billion in June, up about 50% from a year ago. The Reserve Bank of India allowed companies to import more Gold as the deficit became more controlled. In July, the ETP Gold products increased $540.7 + million. Thailand may purchase possibly 150 to 200 metric tons given the lower prices of Gold. The US Mint sales in the month of June had increased by 48,500 ounces but in July were down 40% to about 35,500 ounces. Australia’s Perth Mint sold about 39,405 ounces in June. At times the increased price of the metal will work against it as bargain hunters back away from the table on the higher cost such as July verses June Hedge funds and money managers are said to have increased their bullish positioning in the week of June 22nd to 136,120 while short holdings declined to 21,112 contracts. For now, the Gold could be somewhat supported by the Ukraine and the Gaza Strip unrest. Next week has no major economic data or events which should contain the focus to the global conflict. Gold is still the valued market to hold during tumultuous times!
The better the data, the lower the stock market is headed it seems! The Fed may be the reason as the potential tightening may come sooner than anticipated if the economy is showing strength. The perceived weakness may be derived from the stagnant wages according to US Fed Chairperson Janet Yellen. The employment report today showed that 209,000 new jobs were created below expectations, but the sixth month of 200,000 plus jobs created in a row. The average wages growth was 0.0%! The average hourly earnings maintained at $24.45 for July. The Federal Reserve will simply continue the asset purchases as planned. The reduction in purchases by $10 billion will bring the remaining purchases down to $25 billion. The data has supported the markets and US Fed Chairperson Janet Yellen has the global marketplace believing that the accommodative stance remains intact. Yellen still insists that for the long-term that full employment remains the goal with the Fed. She remains vigilant in monitoring the recovery to prevent a false reading from taking the Fed off course. While there is no formula or mechanical answer, she stays on course with her fixation on the employment and inflation numbers. She regards the low wages as significant slack and a factor to be considered. She stated that labor conditions have improved, with the unemployment rate declining further, yet she added that “a range of labor market indicators suggests that there remains significant underutilization of labor resources.” The underemployment rate which is made up of part-time workers and those that have simply stopped looking for a job increased to 12.2% while the previous reading was 12.1%.
US Fed Chairperson Janet Yellen may be looking for better wage inflation numbers before pulling back the accommodative stance on monetary policy. Yellen may be weighed on her balance and delivery as traders attempt to read between the lines of the meetings. US economic expansion remains the will of the Fed as they continue to support the recovery through the bond purchases. The bond buying is tapered according to schedule as there is no catalyst to derail the Fed’s plans. The Fed has been nurturing the economy at every turn, so they may not be as anxious to unleash the tightening until there have total confidence in the recovery. Housing remains slack and inflation is close to the Fed’s target. The Fed is to conclude their tapering in October as planned unless some unexpected factor derails the market. The Fed has expressed that the tightening may take place the first six months of 2015, but nothing is confirmed. Analysts have expectations ranging from January 2015 into 2016. The Fed is vigilant in monitoring the data releases and the trader is tracking the Fed for potential monetary policy changes. The Fed’s balance sheet is at about $4.41 trillion. The ADP Private Sector Jobs came in at 218,000 new jobs created. Manufacturing jobs increased by 16,000. Construction jobs increased by 12,000. Factories added 3,000 workers. Hourly wages do remain stagnant which is a problem since consumer spending accounts for about 70% of the GDP. The GDP came in at a whopping 4.0% which was above expectations. Consumer spending increased by 2.5%. Durable goods such as appliances, furniture and automobiles increased 14% on an annualized rate. The GDP turned out to be a confidence booster for the recovery hence validating the first quarter economy as temporary weather influences. Other influences that helped the decline may have been mixed earnings, Portugal’s Banco Espirito Santo experienced a 3.6 billion euro net loss and must raise capital. The bank’s shares were suspended from trading due to the loss. Argentina’s $1 billion in default insurance contributed to the negative sentiment as the country as the bank could not pay interest on its bonds.
Israel had initiated a ceasefire, but the Hamas took the opportunity to seize an Israeli officer and kill two more during the ceasefire adding more fuel to the fire. The capture has been one of Israel’s greatest fears as the control may be a manipulation. The Hamas may use the captive to seek terms for a surrender. They may torture the prisoner to garnish information. They may televise an execution to pierce the hearts of the Israeli people. The United Nations is overwhelmed in the Gaza Strip as rescue facilities have been set up to aid the refugees. The United Nations Relief and Works Agency (UNRWA) is in need of $187 million to support their rescue efforts with food, medicine and bedding. Jabalya refugee camp was hit which included a school. The Hamas have rejected a temporary cease fire in the wake of increased violence until the economic embargo is lifted. Monday was actually the beginning of a Muslim holiday “Eid al-Fitr”! US Secretary of State John Kerry is attempting to broker a truce on the Gaza conflict. Hamas have been regarded as a terrorist organization, yet have been targeted with an economic embargo. Global pressure has been placed on Israel to end the violence on the Hamas which have taken a defensive on the Gaza Strip. Israel claims that there are tunnels going into Israel which the Hamas may use to attack the nation, but now the US and the European Union are questioning the claim. Israel had launched a ground attack of Gaza in an attempt to target the Hamas. It is unclear whether Israel will expand their attacks on the Gaza strip. They may be under scrutiny for war crimes as the civilians have been hit by Israeli forces.
New sanctions are being implemented to increase the pressure on the Russian President by the G-7. The G-7 was emphasized by US President Obama as it was the G-8 prior to Russia’s absence. The Russian sanctions are set to impede the finance, energy and defense areas of the Russian government. The Russian bank VTB, United Shipbuilding Corp. and the Russian Agriculture Bank were named in addition to Novatek, Gazprombank, Rosneft, OAO Bank of Moscow and Kalashnikov. The sanctions are also to impede technology in the energy sector which is the main resource from Russia. The rig leases used for equipment come from Seadrill Ltd. The pressure in lending, production and confinement of business shipments may increase contraction in the Russian economy. The World Bank projects in Russia may be stifled amounting to about $1.5 billion. The G-7 has about 40% voting power on the board of the World Bank. US President Obama and Russian President Putin spoke yesterday of the concerns regarding the support of the rebels. Putin still insists that Russia has no involvement and spoke at a Moscow tribute event saying “tragedies worldwide are caused by the ambitions of leaders and called for peace”. Russia was told to pay $50 billion in fines due to allegations of illegal seizure to the Yukos shareholders. The Russians seem pleased that the rebels released the black boxes and the deceased back to the Malaysian representatives from the Malaysian Boeing 777 crash site! The situation seemed to be diffused from the conflict perhaps in global grief from the incident as the global investigative teams may attempt to piece together the information to find the answers that the world needs. Sanctions for Russia have been discussed again as the crash site at Grabovo was covered by investigators. The Organization for Security and Cooperation in Europe had access to the site, but there was no perimeter or real security was set up. The site could have tampering as the rebels controlled the site for some time before other agencies could arrive. This may take a long time as they must compile data, any communications, satellite images. The Dutch investigators finally were unable to access the site. There were routes leading to Russia from varied battle zones indicating that the weapons may have been routed to or from. Russia is accusing the Ukrainian Security of tampering with the evidence retrieved and the Ukrainian’s concludes that the Buk (SA-11) missiles were photographed returning to Russia after the incident. It may be that whichever side may have shot it down; it was accidental or a case of mistaken identity. The timing is remarkable as Russian President Putin is blamed for the incident as he is accused of supplying the rebel warriors with arms just after new more stringent sanctions are imposed on Russia. Putin fires back blaming the Ukraine with “This tragedy wouldn’t have happened if there was peace in this land, or at least if fighting hadn’t resumed in the southwest of Ukraine”! Now there is talk that the Russians may become even more embedded in the battle supplying larger weapons and using Russian troops. The Russian President may have had a dream to restore the Russian Empire to its former expansion, yet it may be difficult in the face of recession. It had been one of the largest empires in the world extending about a sixth of the earth’s landmass or 8,600,000 square miles. Investigations have been launched regarding the downed jet. It seems as though a Russian missile weapons system, the SA-11 or Buk as it was known, was used to take down the jet. Radar may have identified the signal from the plane as civilian, but at 33,000 feet, it is unknown if the shooters could identify it as such. It may have been viewed initially as a Ukrainian transport. It is also unknown if the airliner had mapped this course in light of the conflict or had been unaware. The downing of a civilian aircraft could be a serious act with serious consequences globally. Additional sanctions were imposed on the Russian banks and oil companies in an attempt to impede the Russian economy from any expansion. The support for the rebels that oppose the Ukraine have been validated and the US government is set on pressuring Russia economically until the country ceases to support the rebels. Russian tanks and other military equipment have been used by the rebels. Now, many countries supply weapons to other countries without thoughts on future events that may turn those countries adversely. The US has supplying arms to the Iraqi government. It is difficult to monitor the global arms sales. Putin insists that he has not supplied the rebels with weapons and blames the Ukraine, but regards the territory in conflict as the New Russia. The Ukraine has lost shipments of arms in the past, so it is possible to have had the weapons coming from multiple sources, yet Putin is said to have the power to subdue the conflict and yet he does not. European purchases of bonds or shares by Russian Banks have been targeted. The penalties continue to be imposed on Russian President Putin’s close alliances but have had little success. German Chancellor Merkel is under pressure from her party to be prudent in the sanctions of Russia as billions of debt owed may be frozen in the sanctions. The US accuses Russia for the conflict and says that they have proof to attest to Russia’s involvement. Poland, for example sells there fruit and vegetable exports to Russia and the Euro Zone depends on Russia for a great deal of natural gas. Also Russia has banned soy imports from the Ukraine and may prohibit Greek fruit. US Treasury Secretary Jacob Lew concludes that further sanctions on Russia could drive the nation into a Recession. The European Union has given Russia an ultimatum to halt the rebellion or face further sanctions that could cripple the country economically and perhaps tarnish his popularity with his people. The sanctions are said to add more people to the list of individuals along with KGB officials for which the sanctions have been imposed. This was all prompted by Russia’s move into Crimea. Petro Poroshenko is the elected official of the Ukraine. His openness to speak to Moscow is a welcome development which could decrease any conflict, yet there were 108 violations of the truce which hardened the leader toward any peaceable solution in the near-term. The meetings between the Ukraine President and Putin were to strengthen and preserve Ukrainian unity and ensure lasting peace. Putin is attempting to avert further sanctions in his quest for peaceful cooperation. Both leaders are stressing the need for peace in the area. The Ukraine President is nicknamed the “Chocolate King” for his business in the confectionary sector. He had been the head of the parliamentary budget committee but had been accused of misplacing funds. A great deal of hope has been placed in the new President in the negotiations with Russia. They met in France during the D-Day commemorations. US President Obama also met with the Russian President during the D-Day celebrations. The US and Russia had fought side by side during WWII. The Ukraine President has taken advantage of his meeting in Brussels making economic ties to boost the Ukraine by about $1 billion euros worth of exports. The country now qualifies for a second tranche of loans. The Ukraine was offered a possible entry into the European Union with little to no cost.
Today, the Motor Vehicle Sales (Domestic) for July was at 13.2 million while the previous reading was 13.5 million. The Total Vehicle Sales for July were at 16.5 million annual rate while the previous reading was 17.0 million annual rate. The Nonfarm Payrolls for July were at 209,000 while the previous reading was 288,000. The Unemployment Rate was at 6.2% while the previous reading was 6.1%. The Average Hourly Earnings was at 0.0% while the previous reading was 0.2%. The Average Work Week is forecast at 34.5 hours unchanged. The Private Payrolls was at 198,000 while the previous reading was 262,000. Personal Income for June was at 0.4% unchanged. The Consumer Spending was at 0.4% while the previous reading was 0.2%. The PCE Price Index was at 0.2% while the previous reading was 0.2%. The Core PCE Index was at 0.1% while the previous reading was 0.2%. The PMI Manufacturing Index for July was at 55.8 while the previous reading was 57.3. The Consumer Sentiment for July was at 81.8 while the previous reading was 81.3. The ISM Manufacturing Index for July was at 57.1 while the previous reading was 55.3. Construction Spending for June was at -1.8% while the previous reading was 0.1%. The Initial Jobless Claims for the week of July 26th was up 23,000 to 302,000 while the previous reading was 284,000. The Continue Claims increased 31,000 to 2.539 million. The Employment Cost Index for Q2:14 was at 0.7% while the previous reading was 0.3%. The Chicago PMI for July was at 52.6 while the previous reading was 62.6. The Gallup US Payroll to Population level for July was 45.1 while the previous reading was 45.0. The Challenger Job-cut Report of Announced Layoffs for July were 46,887 while the previous reading was 31,434. The Bloomberg Consumer Comfort Index level for the week of July 27th was at 36.3 while the previous reading had been 37.6. The Farm Prices for July were -3.6% while the previous reading was -2.6%. The Fed Balance Sheet of Total Assets for the week of July 30th was -$4.1 billion while the previous reading was $12.5 billion. The Reserve Bank Credit was $0.2 billion while the previous reading was $14.7 billion. The Money Supply for the week of July 21st was $23.5 billion while the previous reading was $54.5 billion. The ADP Private Payroll Employment Report for July was at 218,000 while the previous reading was 281,000. The GDP for Q2a:2014 was at 4.0% while the previous reading was -2.9%. The GDP Price Index was at 2.0% while the previous reading was 1.3%. The MBA Composite Purchase Applications for the week of July 25th were -2.2% while the previous reading was 2.4%. The Purchase Index was 0.2% while the previous reading was 0.3%. The Refinance Index was -4.0% while the previous reading was 4.0%. The FOMC Meeting Announcement kept the Fed Funds Rate at 0 to 0.25% unchanged. The S&P Case-Shiller HPI for May 20-city SA was at -0.3% while the previous reading was 0.2%. The 20-city NSA was at 1.1% while the previous reading was 1.1%. Consumer Confidence for July was at 90.9 while the previous reading was 85.2. The ICSC-Goldman Store Sales for the week of July 26th was 0.2% while the previous week’s was -0.4%. The Redbook Store Sales for the week of July 26th was 3.0% while the previous reading was 3.7%. The State Street Investor Confidence Index for July was at 114.7 while the previous reading was 119.5. The PMI Services Flash for July was 61.0 while the previous reading was 61.2. Pending Home Sales Index for June was -1.1% to 102.7 while the previous reading was 103.9. Dallas Fed Manufacturing Survey Business Activity Index for July was 12.7 while the previous reading was 11.4. The Production Index was 19.1 while the previous reading was 15.5.
This is where the long-term safe-haven qualities must be viewed to determine the true value of Gold. It is not the type of commodity that is typically day-traded. Its true purpose is as a currency when others are devalued. It is a hedge against inflation and deflation. It is a backup plan for a world in conflict or crisis. It is the type of investment that one may not need all the time but when an event takes place, it is worth its weight in Gold. The safe haven qualities of the Gold may last over time, but for all speculative purposes, it remains in a negative sentiment trading environment for the moment.
The Gold (December) contract is in sell mode if it stays below $1318.60. A key consolidation area may be $1325.00 to $1250.00 for the moment. $1314.10 may be the comfort level. The range may be $1325.00 to $1250.00 for now. Some Analysts seem, to be fairly bullish toward the Gold into next week with the current conflict in Iraq and the Ukraine. Actually, it is more mixed as the global conflicts are a roller coaster ride of events. The Fed may actually be the deal breaker for the Gold. Should the conflict diminish, inflation subside and the data come in spectacular, $1050.00 may be in sight still long-term.
The options may give a trader the right to control a futures position at a specific price or to simply profit/loss on the premium itself. It is suggested to consult your broker without delving into options if you are unfamiliar with them.
Take a close look and feel free to call in and talk to me in greater detail. It would be my pleasure. Good trading! Call me at (877) 224-1952 or email me at firstname.lastname@example.org
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