This is a sample entry from Leslie Burton’s newsletter, The Weekly Gold Digger, published on Friday, September 11, 2015.
The US Dollar is trending lower for a short time, but it cannot seem to boost the Gold market in front of next week’s possible rate hike.
The Gold market has been driven lower all week as we approach the FMOC next week which has possible signs of a rate hike. Increased interest rates may strengthen the US Dollar and weaken the Gold prices. The long-term views of Gold remain quite positive in a global perspective. The support of $1073.70 may be taken out should the Fed move to increase the interest rates at next week’s meeting. The decision has never been so controversial and mixed to project. It is hard to imagine US Fed Chairperson Janet Yellen brushing off the advice of the World Bank and the IMF to detain the rate hike until 2016!
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. The Shanghai Exchange in China may be allowing physical Gold to be used as collateral on the futures contracts beginning September 29th. The A-shares, treasuries and exchange traded funds may be used as collateral for the Gold futures. The physical Gold may cover up to 80% of the margin value. The Gold may be coming back into vogue as a currency over the longer timeframe. Gold consumption should regain its footing more in the second half of this year. The World Gold Council Indian imports may be about 95 to 100 tons in August alone. The Gold sales decreased to 33,900 ounces in August at the Perth Mint.
Just days away from the Fed meeting and the markets are poised for uncertainty awaiting the Fed decision! The majority of analysts remain with the opinion that the Fed may raise the interest rates at the September meeting, yet there are outside factors now. The Fed’s mandate remains fixated on stability in the markets along with the economy, so how much thought will be on the US markets reaction to a rate hike? Would the Fed consider their decision a major market factor? So is the Fed the cause ultimately of the next market direction or will the Fed’s decision be based on the market’s reaction. There may be a reluctance by the Fed to realize the crucial relationship, but it is a distinct cause and effect relationship both ways. The volatility of the markets currently create wider ranges of the markets and the uncertainty makes it critical to depend on technical points. The PPI-FD for August was 0.0% while the previous reading was 0.2%. The PPI-FD excluding food and energy was 0.3% while the previous reading was 0.3%. The PPI-FD excluding food, energy and trade services was 0.1% while the previous reading was 0.2%. Consumer Sentiment for Sept(p), 2015 was 85.7 while the previous reading was 91.9. Consumer spending is really regarded more valid than Consumer Sentiment though. The Treasury Budget for August was -$64.4 billion while the previous reading was -$149.2 billion. The deficit may have been smaller due to about $42 billion in payments that credited the August balance sheet. The end of August left a year-to-date deficit of about $530 billion. The outlays for August were at $275 billion while the receipts totaled $211 billion. Fed Chairperson Yellen has emphasized that the Fed decision would be data dependent, but will that include the markets. One must also wonder if the global economic growth coming out of China will be considered within the Fed’s formulas to make the policy decision. She has made clear that if the policy change comes sooner than the increases may be more gradual whereby she inferred that if the Fed delay’s the hike then the increases may be escalated. The Chinese currency devaluation truly weighed in on the markets. The devaluations may not be over. China may continue to devalue the yuan or other countries may devalue their currencies. With a possible interest rate hike, will the markets be able to sustain their current levels or could the market slide further? China is considering adding an additional 1 trillion yuan into the marketplace over the next three years to stimulate growth.
The JOLTS (Labor Department’s Job Openings and Labor Turnover Survey) for July was at 5.753 million while the previous reading was 5.249 million. Open positions to be filled were up by 430,000. The sentiment of the employers took a positive outlook as more job boards reported more postings. The added bonus is that wages should also increase as the increased demand for help increases, it should bid up the payrolls as well. The JOLTS report monitors the rate of hiring with the job postings and resignations throughout the year. This is followed by the Fed to determine the extent of the recovery. New labor hired decreased to 4.98 million down to 3.5%. The quits in July added up to about 2.7 million which also may reflect confidence in the economy. Voluntary dismissals were about 1.61 million in July. All of the data is factored into the Fed’s rate decision for next week. The added factors that are more difficult to anticipate would be China’s economic condition and the policy changes possibly coming out of China. The Chinese Ministry of Finance projects that the government may strengthen its fiscal policy and possibly increase growth of the nation. China had a poor imports number down 14.5% while exports decreased 5.5% less than expected to $196.89 billion. The poor data allowed the market sentiment to look toward further stimulus as incentive. The anticipation of incentive from the People’s Bank of China was positive yet it is thought that the US economy may be slowed to possible a 0.2% growth rate. The Chinese market regulators also introduced their “circuit breaker” rules to attempt to harness some of the selloffs during the high volatile market conditions. They have attempted to control the selling activity somewhat but this should help reign in the panic selling. The market seems to be banded in a range until the Fed meeting. While the majority of analysts may believe that the rate hike may still take place in September, the enthusiasm of the projection seems a bit weak.
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.
The PPI-FD for August was 0.0% while the previous reading was 0.2%. The PPI-FD excluding food and energy was 0.3% while the previous reading was 0.3%. The PPI-FD excluding food, energy and trade services was 0.1% while the previous reading was 0.2%. Consumer Sentiment for Sept(p), 2015 was 85.7 while the previous reading was 91.9. The Treasury Budget for August was -$64.4 billion while the previous reading was -$149.2 billion. The Initial Jobless Claims for the week of September 5th forecast was down 6,000 to 275,000 while the previous reading was 282,000. Continuing Claims was increased 1,000 to 2.260 million with a one-week lag time. Export Prices for August were -1.4% while the previous reading was -0.2%. Import Prices were -1.8% while the previous reading was -0.9%. Wholesale Trade Inventories for July was -0.1% while the previous reading was 0.9%. Wholesale Sales was -0.3% while the previous reading was 0.1%. The Bloomberg Consumer Comfort Index for the week of September 6th was 41.4 unchanged from the previous week. The Fed Balance Sheet for the week of September 9th level was $4.478 trillion while the previous reading was $4.476 trillion. The Total Assets were $2.3 billion while the previous reading was $0.8 billion. The Reserve Bank Credit was $1.6 billion while the previous reading was -$9.3 billion. The Money Supply for the week of August 31st was $17.5 billion while the previous reading was $33.1 billion. The MBA Mortgage Applications for the week of September 4th Composite Index was -6.2% while the previous reading was 11.3%. The Purchase Index was -1.0% while the previous reading was 4.0%. The Refinance Index was -10.0% while the previous reading was 17.0%. The Redbook Store Sales for the week of September 5th was 1.3% while the previous reading was unchanged at 1.3%. The JOLTS (Labor Department’s Job Openings and Labor Turnover Survey) for July was at 5.753 million while the previous reading was 5.249 million. The Quarterly Services Survey for Q2:15 of Information Revenue was 1.3% while the previous reading was 0.4%. The NFIB Small Business Optimism Index for August was 95.9 while the previous reading was 95.4. For an in depth look at the NFIB, please visithttp://www.nfib.com/. Consumer Credit for July was a seasonally adjusted 6 ¾%. Revolving Credit was 5 ¾% and Non-Revolving Credit was 7%. 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 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 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 $1149.20. A key consolidation area may be $1125.00 to $1075.00 for the moment. $1105.50 may be the comfort level. The range may be $1125.00 to $1075.00 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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