This is a sample entry from Leslie Burton’s newsletter, The Weekly Gold Digger, published on Friday, August 01, 2014.
It is a mixed bag of factors for the Gold market, but today’s chart formation shows promise!
The Chicago Mercantile Exchange lowered the margin at the close of the day to an initial of $5,060 from the $5,940 and the maintenance to $4,600 from $5,400 for the 100 troy ounce Gold contract! This may reflect a decreased volatility prediction. The merger and acquisition arena may be opening new doors for the Gold market. Seabridge had sought confidentiality agreements about potentially investing in KSM. This area has been rather subdued to date, so a potential advance in interest may be a boost.
This week was all about the Fed! The Fed somehow kept a neutral stance on interest rates and the Gold market held its range rather well. Assuming the range is held high due to; September weddings season, festivals in India and the jewelry industry preparing for Christmas. We are approaching harvest where typically the fruits of one’s labors may be realized. The World Gold Council reports that the demand for Gold has dropped 16% year on year for the 2nd quarter or 964 tons compared to last year. The global demand for jewelry was steady at 53%. Chinese demand has become more interested in the brands of the Gold rather than the acquisition. Investment demand is reaffirmed in the sideways movement of the market as shown below, even with the bars and coins. Total investment demand over the 2nd quarter amounted to 341.1 tons. The 53% decline in demand on the bars and coins were attributed to the Chinese and Indian consumers. India imports decreased to 351 tons in the first half almost half of last year. It is thought that the stringent Indian rules on the importation of Gold may lead to and has led to smuggling. 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. The Central Banks purchases in the 2nd quarter were about 117.8 tons or approximately $4.9 billion US. Gold mining has increased this last quarter by 58.2 tons of Gold. The rate is supposed to decline from this point on. In July, the ETP Gold products increased $540.7 + million. SPDR holdings are down about 0.1% for the year to 797.65 metric tons. 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.
US Fed Chairperson Janet Yellen spoke on the Labor Market at the Kansas City Fed’s annual symposium in Jackson Hole! She managed to pacify the entire trading community with her vague but amicable remarks. Analysts were expecting her typical rhetoric about the underutilized labor force and maintaining an accommodative stance until the job market becomes healthy again. She did manage to express the slack in the jobs market referring to “pent up wage deflation” but also added that the labor area had recovered more quickly than expected, so now it will be a matter of estimating or rather guesstimating the timing of the tightening. Her need for flexibility may have even allowed for shorter-term action with less warning. Undecided or a desire to maintain balance in the marketplace? She also referenced the aging workforce as a factor weighing on worker reallocation. It may be that the older workers ideally want to stay closer to home taking lower paying positions in lieu of travel. Yellen on the other hand has 19 varied indicators as tools to guide her action. The Labor Market Conditions Index is a model that includes such gauges as the JOLTS report or the Labor Department’s Job Openings and Labor Turnover Survey along with hiring trends obtained by the National Federation of Independent Business. The data has supported the recovery and they may feel that the tightening may begin sooner. There was an additional goal of inflation and currently employment is moving closer to Fed targets! This may sway analysts into moving up their expectations date of Fed tightening to perhaps the first half of 2015. The labor market still may be regarded as slack do to the slow wage increases. The monetary policy may still remain data dependent, so investors may continue to forecast marked to market. The tapering should end in October, on schedule as expected. The stock market seems to stay suspended on the nurturing words of Janet Yellen. This may be the sweet spot in the market as the data screams growth, yet the inflation remains subdued allowing the Fed more flexibility on the stimulus front. The next FOMC Meeting will be held on September 16th and 17th.
In the meantime, US President Obama had been placed in a tough spot as the ordered airstrikes against the Islamic State militants to contain their advances. The retribution of this act may have led to the execution of a US journalist. The US policy of not paying ransom on prisoners taken by terrorists may be under debate due to this vile act. More recently worshipers at a Sunni mosque were killed by gunmen. The Sunni militants attacked in Northern Iraq, and the Yazidi people also suffered at the hands of the Islamic State militants. A dam in Mosul had been taken previously by the Islamists. The Israeli airstrikes are said to have killed three Hamas leaders which may impede the peace talks. As a result the Hamas has executed eighteen individuals that may have tipped off the Israeli troops. Although the Hamas has stated that the tunnels are still in effect where they may live and use to their means. The Ukraine has been making significant progress in containing the rebel forces. Until an accord is reached, there is no set course. Russian President Putin could support the rebel forces further coming to their aid or negotiate with leaders to lift the sanctions on Russia. The Ukraine and Russian leaders should be meeting on August 30th at a European Union summit in Brussels and then on September 4th in the UK for another summit. It is believed that neither side wishes to continue the conflict. It is questionable now whether Russian President Putin will admit to having involvement in the conflict or whether he obtained what he wanted in the first place. It will be interesting to see if he asks for any lenience for the rebels. The Russian humanitarian aid was sent to the rebel controlled areas in conjunction with the Red Cross with security in force. However, the Ukrainians regard the intrusion as a ploy for Russia to invade the Ukraine. Russian troops have been given an ultimatum to leave the Ukraine or suffer further sanctions. This may not aid in the peace talks. Fitch had cut the Ukraine credit ratings to CCC from B- as a high risk of default due to the military conflict which is a great hindrance to the growth economically.
Today, US Fed Chairperson Janet Yellen spoke at the annual Fed Summit in Jackson Hole Wyoming. She was a bit more hawkish than typically expected but it seemed to be taken as more neutral and built into the market to some degree. The Initial Jobless Claims for the week of August 16th was at 298,000 while the previous reading was 311,000. The Continued Claims was down 49,000 to 2.500 million. The Philadelphia Fed Survey of General Business Conditions Index for August was at 28.0 while the previous reading was 23.9. The Leading Indicators for July were at 0.9% while the previous reading was 0.3%. The Existing Home Sales for July were at 5.015 million annual rate while the previous reading was 5.04 million. The PMI Manufacturing Index Flash for August was 58.0 while the previous reading was 56.3. The Bloomberg Consumer Comfort Index for the week of August 17th was 36.6 while the previous reading was 36.8. The Fed Balance Sheet for August 20th was -$19.0 billion Total Assets while the previous reading was 21.8 billion. The Reserve Bank credit was -$3.7 billion while the previous reading was $11.5 billion. The Money Supply for the week of August 11th was -$8.7 billion while the previous reading was -$34.4 billion. The MBA Purchase Applications for the week of August 15th Composite Index was 1.4% while the previous reading was -2.7%. The Purchase Index was -0.4% while the previous reading was -1.0%. The Refinance Index was 3.0% while the previous reading was -4.0%. The FOMC Minutes today caused little stir in the markets today as no monetary changes were mentioned and the same accommodative rhetoric was used. There was additional mentions of moving closer to Fed target employment and inflation. The Consumer Price Index (CPI) for July was at 0.1% while the previous reading was 0.3%. The CPI excluding food and energy was at 0.1% while the previous reading was 0.1%. Housing Starts for July were at 1.093 million while the previous reading was 0.893 million. The Housing Permits were 1.052 million while the previous reading was 0.963 million. The ICSC-Goldman Store Sales for the week of August 16th was -1.3% while the previous reading was -1.4%. Redbook Store Sales for the week of August 16th were at 3.7% while the previous reading was 4.8%. The Housing Market Index for August was at 55 while the previous reading was 53. The last 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.
The safe-haven properties of the Gold are perfect for those times of conflict in the world and it certainly has a run when the conditions seem their worst, but that does not seem to be the case now.
The Gold (December) contract is in sell mode if it stays below $1318.20. A key consolidation area may be $1320.00 to $1270.00 for the moment. $1312.40 may be the comfort level. The range may be $1320.00 to $1270.00 for now. Some Analysts seem, to be fairly bearish toward the Gold now with projections down to $1050.00. However; if it holds $1273.40, this could be a short-term bounce to possibly buy.
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.
The StoneX Group Inc. group of companies provides financial services worldwide through its subsidiaries, including physical commodities, securities, exchange-traded and over-the-counter derivatives, risk management, global payments and foreign exchange products in accordance with applicable law in the jurisdictions where services are provided. References to over-the-counter (“OTC”) products or swaps are made on behalf of StoneX Markets LLC (“SXM”), a member of the National Futures Association (“NFA”) and provisionally registered with the U.S. Commodity Futures Trading Commission (“CFTC”) as a swap dealer. SXM’s products are designed only for individuals or firms who qualify under CFTC rules as an ‘Eligible Contract Participant’ (“ECP”) and who have been accepted as customers of SXM. StoneX Financial Inc. (“SFI”) is a member of FINRA/NFA/SIPC and registered with the MSRB. SFI does business as Daniels Trading/Top Third/Futures Online. SFI is registered with the U.S. Securities and Exchange Commission (“SEC”) as a Broker-Dealer and with the CFTC as a Futures Commission Merchant and Commodity Trading Adviser. References to securities trading are made on behalf of the BD Division of SFI and are intended only for an audience of institutional clients as defined by FINRA Rule 4512(c). References to exchange-traded futures and options are made on behalf of the FCM Division of SFI.
Trading swaps and over-the-counter derivatives, exchange-traded derivatives and options and securities involves substantial risk and is not suitable for all investors. The information herein is not a recommendation to trade nor investment research or an offer to buy or sell any derivative or security. It does not take into account your particular investment objectives, financial situation or needs and does not create a binding obligation on any of the StoneX group of companies to enter into any transaction with you. You are advised to perform an independent investigation of any transaction to determine whether any transaction is suitable for you. No part of this material may be copied, photocopied or duplicated in any form by any means or redistributed without the prior written consent of StoneX Group Inc.
© 2021 StoneX Group Inc. All Rights Reserved