The Weekly Gold Digger (Aug 07 2015)

This is a sample entry from Leslie Burton’s newsletter, The Weekly Gold Digger, published on Friday, Aug 07, 2015.

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Could this be the time to buy Gold? Technically, there is a consolidation and oversold conditions. The Gold (December) may be in a potential bullish pattern.

The Gold market has been totally oversold and was due for a bounce! Inflation is still subdued and the stock market has traded toward the highs with a strong US Dollar to boot. The economic condition is not ripe for Gold at this particular time, but the true nature of Gold as a safe-haven calls for fear and anxiety to increase the demand for Gold. Gold serves as a hedge against inflation. Gold hedges against currency devaluations and conflict. The International Monetary Fund had decreased its forecast on global economic growth down to 3.3% from the earlier 3.5% which also may boost the Gold prognosis. In the near term we have a bounce which is natural for an oversold market. There is still nothing to stimulate buyers yet. Long-term there is a much different scenario where Gold may have its day. Currency devaluation and inflation may be projected further out. The Fed hike may be negative for Gold, but a drop in the stock market would perhaps be enough to create a spike in the Gold.

The World Gold Council forecasts that the global central bank reserves added about 120 tons of Gold in the first quarter. The global central banks added about 10.7 tons of Gold in April. Central banks would not store assets with no value. The US Mint reported their Gold Eagle coin sales to have increased by 57% in June. Last week alone the sales topped 33,000 ounces. January thru June, a total of 1.4 metric tons of Gold was purchased. The US Mint sales may have sold about 110,000 ounces of Gold Eagle (one ounce) coins so far this month while June’s total was about 76,000 ounces. So far this year, they may have sold about 374,000 ounces of Gold in the American Gold Eagle coins. The Perth Mint in Australia may have sold about 21,962 ounces of Gold coins in June.

China has only opened the privatization of Gold to the people in 2002 so the 1,530 tons has been fairly strong. Gold jewelry purchased in China was up around 5,282 tons at about $189 billion. The Peoples Bank of China revealed their holdings of 53.3 million ounces of Gold or 1,658 in June. China has craved to have their currency become a premier currency to compete with the US Dollar. China has pursued the drawing rights from the International Monetary Fund (IMF) for years. Now their renminbi is being considered by the IMF. China may also be extending their mining interest. China’s Commercial Bank and Industrial Bank is attempting to participate in the London Gold price fix. Zijin Mining in China is tendering for mine acquisitions in Australia. The recent lower moves in the Chinese Stock Market may lead to increased allocations in the Gold market as there seems to be an inverse relationship there. Fear and anxiety trigger Gold interest in years past and any selloffs in the stocks may cause a shift in the allocations. Hong Kong exported about 64.2 tons of Gold to mainland China in May which is an increase of 36%. Switzerland exported Gold to China as well increasing the Gold by 24% in May. Switzerland may export a total of 2,000 tons of Gold this year. Chinese demand for Gold still is down 18% from last year still. The Chinese Gold fix may be a boost for the metal that is typically seen as the fear and anxiety safe-haven product, but now may be the buyers choice trade. The Chinese love to buy Gold. China has sought to have their investment counselors suggest Gold to consumers as an investment product for years now. The Shanghai Gold Exchange (SGE) may have lofty plans for the metal which may be the boost that Gold needs to reclaim its former safe-haven value. The SGE may want to establish a yuan-denominated Gold fix price.

Today’s employment report seemed to confirm a potential rate hike for September for many traders and analysts! The Employment Report for July was 215,000 while the previous reading was 223,000. Factories increased labor by 15,000 workers. The Retail Sector increased jobs by 36,000 employees. Health-care related jobs increased by 30,000 in July. There was some wage advancement of about 0.2% to an average $24.99. The average workweek increased about 6 minutes to 34.6 hours. The longer work week could have contributed to the wage growth. We still have about 8.3 million people out of work in America. July produced about 668,000 discouraged applicants that simply took themselves out of the job search. The Participation Rate was 62.6% perhaps due to baby boomers retiring or discouraged job hunters.

The ADP Employment Report of private industrial sectors for July were at 185,000 while the previous reading was 237,000. The ADP Employment Report covers the private industrial sectors and was below expectations. The unemployment rate has stayed at 5.3% thus adding to the positive employment data. The Fed is staying with their mandate of improved employment and inflation increasing toward the 2% target. The next Fed meeting is September 16th and 17th. There is the Fed annual conference in Jackson Hole on August 27th – 29th but US Fed Chairperson Janet Yellen will not be attending. Yellen prefers an early and gradual hike rather than a late and steep tightening process. IMF Managing Director Christine Laggard and the World Bank has asked US Fed Chairperson Yellen to hold off on a rate hike until 2016. She is still using the appropriate policy “accommodation” in her talks and is still referencing that a hike may be data dependent. The Fed noted that over the last year 2.9 million jobs were created to set the US growth on course. Fed Chairperson Yellen feels confident that if tightening in a “prudent and gradual manner” it shall be easier keeping stability in the marketplace.

The Fed maintains that the economic recovery is on track and does not anticipate a strong reaction from the potential rate hike perhaps in September or December. The service sector has been a major boost for the US economy and accounts for about 80% of all the labor. The ISM Non-Manufacturing Index for July was 60.3 while the previous reading was 56.0. It beat expectations by a long-shot as increases in business activity, new orders and employment all came in strong. Any reading over 50 points to expansion. This was the highest reading we have had in about ten years. Retail trade, transportation, construction and warehousing all were supportive while manufacturing remains challenged. The ISM Non-Manufacturing Index covers services, mining, construction, agriculture, fishing, hunting and forestry. The services sectors may balance the weaker manufacturing segment.

Another services sector index is the PMI Services Index for July which was 55.7 while the previous reading was 54.8. This survey encompasses about 400 companies based on new business, employment and business expectations. Again any number over 50 points to expansion. Factory Orders for June were 1.8% while the previous reading had been -1.0%. The durable components increased 3.4% as of last week. The non-durables components increased 0.4% for oil and chemicals. The civilian aircraft orders increased 65% while furniture increased 0.5% and 0.6% for motor vehicles. Inventories increased 0.6% for June. The stockpiling may turn out to be a drag on the economy next quarter. The increased demand for transportation equipment was a boost to manufacturing. Manufacturing had been stifled by the strong US Dollar and decreased spending particularly in the energy area across the US. Transportation equipment increased about 9.3% in June. The Motor Vehicle Domestic Sales for July were 14.2 million annualized rate while the previous reading was 13.6 million. The Total Vehicle Sales were 17.6 million annualized rate while the previous reading was 17.2 million. US Auto Sales were up 5.3% to 1.51 million vehicles. Manufacturing reports seem to wane yet the proof of solid manufacturing is our aircraft and car sales sectors. Personal Income for June was 0.4% while the previous reading was 0.5%. Consumer Spending was 0.2% while the previous reading was 0.9%. US Dollar strength is still regarded as the culprit for sluggish US data.

The Employment Report for July was 215,000 while the previous reading was 223,000. The Unemployment Rate was at 5.3% unchanged. The Private Payrolls is at 210,000 while the previous reading was 223,000. The Average Hourly Earnings is at 0.2% while the previous reading was 0.0%. The Average Workweek is 34.6 hours while the previous reading was 34.5 hours. The Participation Rate was 62.6% unchanged. Consumer Credit for June was $20.7 billion while the previous reading was $16.1 billion. The Initial Jobless Claims was up 3,000 to 270,000 while the previous reading was 267,000. Continuing Claims was down 14,000 to 2.255 million with a one-week lag time. The Challenger Job-Cut Report for July of announced layoffs was 105,696 while the previous reading had been 44,842. The Gallup US Payroll to Population for July was at 45.5% unchanged. The Bloomberg Consumer Comfort Index for the week of August 2nd was 40.3 while the previous reading had been 40.5.

The Fed Balance Sheet level for the week of August 5th was $4.486 trillion while the previous week was $4.486 trillion. The Total Assets was $0.9 billion while the previous weeks was -$15.0 billion. The Reserve Bank Credit was -$9.0 billion while the previous week’s was -$4.5 billion. The Money Supply for the week of July 27th was $12.1 billion while the previous reading was $18.3 billion. The ADP Employment Report of private industrial sectors for July were at 185,000 while the previous reading was 237,000. The MBA Mortgage Applications for the week of July 31st Composite Index was 4.7% while the previous reading had been 0.8%. The Purchase Index was 3.0% while the previous reading was -0.1%. The Refinance Index was 6.0% while the previous reading was 2.0%. International Trade for June was -$43.8 billion while the previous reading was -$41.9 billion. The Gallup US Job Creation Index for July was 32 while the previous reading was 32. The PMI Services Index for July was 55.7 while the previous reading was 54.8. The ISM Non-Manufacturing Index for July was 60.3 while the previous reading was 56.0. Factory Orders for June were 1.8% while the previous reading had been -1.0%.

The Gallup US ECI (Economic Confidence Index) for July was -12 while the previous reading was -8. The Redbook Store Sales for the week of August 1st was 1.7% while the previous reading had been 1.0%. The Motor Vehicle Domestic Sales for July were 14.2 million while the previous reading was 13.6 million. The Total Vehicle Sales were 17.6 million while the previous reading was 17.2 million. Personal Income for June was 0.4% while the previous reading was 0.5%. Consumer Spending was 0.2% while the previous reading was 0.9%. The PCE Price Index was 0.2% while the previous reading was 0.3%. Core PCE Price Index was 0.1% while the previous reading was 0.1%. The Gallup US Consumer Spending Measure averaged $91 in July while the previous reading was $90. The ISM Manufacturing Index for July was 52.7 while the previous reading was 53.5. The PMI Manufacturing Index for July was 53.8 while the previous reading was 53.6. Construction Spending for June was 0.1% while the previous reading was 0.8%. GDP for Q2a:2015. Real GDP was 2.3% while the previous reading was -0.2%. The GDP Price Index 2.0% while the previous reading was 0.0%.

The safe-haven properties of the Gold are perfect for those times of uncertainty and/or conflict in the world! The Gold (December) contract is in a bullish mode if it stays above $1076.50. A key consolidation area may be $1075.00 to $1200.00 for the moment. $1091.80 may be the comfort level. The range may be $1075.00 to $1200.00 for now. The main catalyst that may support the Gold would be unexpected inflation although subdued to date. The stimulus in other parts of the world such as the Euro Zone is good support for Gold. In the near-term, we look for a bounce. The bounce may be short-lived but seasonally this is the time we start to look for the Gold to make a move toward December. The really long-term range remains very optimistic. The bounce could be short-lived as the fundamentals do not add up yet but the chart is extremely enticing.

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