This is a sample entry from Leslie Burton’s newsletter, The Weekly Gold Digger, published on Friday, September 04, 2015.
The Gold market may be pressured by the strong US Dollar and the upcoming potential rate hike.
The Gold market was looking brighter in the midst of the Chinese devaluation and the Euro Zone potential additional stimulus. China has since conveyed that they want to stabilize the Yuan. The global slowdown and uncertainty are still looming but the last two days was all about the domestic economic condition. China’s markets were closed due to the WWII commemorating events. The Fed has created a fed led stock market bull that they may have to bring back to the normalization period. The stimulus may have helped the labor sector to some degree but today’s numbers just showed that the sustainable recovery may have been slighter than expected. The majority of analysts believe that the September Fed hike may be possible. With that in mind, the Gold could head lower to the previous lows or further. $1109.10 may be a consolidation area. $1173.70 may be then the next point of interest. The stimulus impacted the US economic condition to the point that in the future the US Dollar may be compromised. With that in mind, the Gold may have its day, just not now!
The World Gold Council forecasts that the global central bank reserves added about 120 tons of Gold in the first quarter. In the second quarter, the Gold demand was 137.4 tons. Russia bought about 67 tons in the first half of the year. Their reserves may be about 1.275 tons to date. Gold had been hurt this year by a listless chart. Risk allocations had remained preferred by investors such as the equities. The Fed’s potential rate hike had impacted the Gold negatively. The People’s Bank of China released data showing their Gold reserves to be at 1.658 tons according to the World Gold Council. Russia and China seem to be opting for Gold reserves as opposed to US Dollar reserves.
Nonfarm Payrolls for August were 173,000 while the previous reading was 215,000! It may seem initially unsettling to have employment coming in under the 200,000 mark, but the two previous months were revised up to 44,000 in total and the unemployment rate was down to 5.1% right in the Fed’s target area. Wage growth was up 0.3% from the previous 0.2%. Some analysts think that this figure was subdued due to the lower energy prices and the wages reduced in that sector. Private payrolls were quite weak at 140,000. The government had added 33,000 new jobs. Manufacturing actually lost some 17,000 jobs while the mining industry decreased by 9,000 jobs. The annual retooling by manufacturers including automakers in August could account for the drop in jobs. Professional and business services added 33,000 new jobs and even the part-timers were increased by 11,000 jobs. While this is far from the best labor numbers we have seen, analysts clearly feel that the Fed may continue on schedule with a possible rate hike announcement at the next meeting, September 16th and 17th. While the numbers were not as expected, the Fed may see them strong enough to move toward normalization. IMF Managing Director Christine Laggard and the World Bank has asked US Fed Chairperson Yellen to hold off on a rate hike until 2016. Financial instability and market volatility if anything may delay the Fed rate hike this year. The S&P 500 Market has been a Fed led market since 2008 introducing stimulus three times to fuel the economy, the tightening may tighten the productivity and derail some of the recovery leading to the bull market. Fed Chairperson Janet Yellen has been fixated on normalization and must tighten at some point. They want to be “reasonably confident” before the rate hike. 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. Yellen prefers an early and gradual hike rather than a late and steep tightening process. The strong US Dollar has hurt US exports as it is, so now it may just be the key in whether the US Fed may still launch their rate hike in September, December or wait until 2016.
Nonfarm Payrolls for August were 173,000 while the previous reading was 215,000. The Unemployment Rate was 5.1% while the previous reading was 5.3%. The Private Payrolls was 140,000 while the previous reading was 210,000. The Average Hourly Earnings was at 0.3% while the previous reading was 0.2%. The Average Work Week was 34.6 hours unchanged from the previous reading. The Participation Rate was 62.6% unchanged from the previous reading. The Initial Jobless Claims for the week of August 29th came in up 12,000 at 282,000 while the previous reading was 271,000. Continuing Claims decreased by 9,000 to 2.257 million with a one-week lag time. The Gallup US Payroll to Population for August was 45.3 while the previous reading was 45.5. The Challenger Job-Cut Report of announced layoffs for August was 41,186 while the July was 105,696 announced layoffs. The PMI Services Index Level for August was 56.1 while the previous reading was 55.7. The ISM Non-Manufacturing Index Composite for August was 59.0 while the previous reading was 60.3. The Bloomberg Consumer Comfort Index for the week of August 30th was 41.4 while the previous reading was 42.0. The Fed Balance Sheet for the week of September 2nd level was $4.476 trillion while the previous reading was $4.475 trillion. The Total Assets were $0.8 billion while the previous reading was -$12.1 billion. The Reserve Bank Credit was -$9.3 billion while the previous reading was $70.8 billion. The International Trade Balance Level for July was -$41.9 billion while the previous reading was -$43.8 billion. The Money Supply for the week of August 24th was $33.1 billion while the previous reading was $33.4 billion. The ADP Employment Report for August was 190,000 while the previous reading was 185,000. Nonfarm Productivity for Q2:15 was 3.3% while the previous reading was 1.3%. The Unit Labor Costs was -1.4% while the previous reading was 0.5%. Factory Orders for July were 0.4% while the previous reading was 1.8%. The MBA Mortgage Applications Composite Index for the week of August 28th was 11.3% while the previous reading was 0.2%. The Purchase Index was 4.0% while the previous reading was 2.0%.
The Refinance Index was 17.0% while the previous reading was -1.0%. The Gallup US Job Creation Index for August was 32 while the previous reading was 32. The Beige Book for the September 17th FOMC Meeting came out today rendering a vision of moderate to modest growth in eleven districts. Job growth was slight or modest. Inflation was regarded stable. Some districts cited China as a reason for slowed demand. Manufacturing was boosted by the auto industry while the strong dollar continues to pressure the overall manufacturing sector. Farm conditions were mixed. Construction was the bright spot with added strength. Retail Sales were also healthy. Domestic Motor Vehicle Sales for August was 14.91 million while the previous reading was 14.2 million. The Total Vehicle Sales were 17.8 million while the previous reading was 17.6 million. The PMI Manufacturing Index for August was 53.0 while the previous reading was 53.8. The ISM Manufacturing Index for August was 51.1 while the previous reading was 52.7. Construction Spending for July was 0.7% while the previous reading was 0.1%. Redbook Store Sales for the week of August 29th was 1.3% while the previous reading was 1.7%. The Chicago PMI Business Barometer Index for August is 54.4 while the previous reading was 54.7. The Dallas Fed Manufacturing Survey General Activity Index for August was -15.8 while the previous reading was -4.6. The Real GDP was 3.7% while the previous reading was 2.3%. The GDP Price Index was 2.1% while the previous reading was 2.0%. 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.
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 bearish mode if it stays below $1162.80. A key consolidation area may be $1100.00 to $1150.00 for the moment. $1122.00 may be the comfort level. The range may be $1100.00 to $1150.00 for now. The stimulus in other parts of the world such as China and the Euro Zone is good support for Gold. If the Fed delays the rate hike or even introduces additional stimulus, it would be positive for the Gold market. In the near-term, we look for a lower trade. The really long-term range remains very optimistic.
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