This is a sample entry from Leslie Burton’s newsletter, The Weekly Gold Digger, published on Friday, October 16, 2015.
The US Dollar has backed off the highs allowing the Gold to have a sustainable rally for the time being. The Fed has delayed any rate hikes for the near-term giving the Gold a reason to trend higher.
The governments seem to be devaluating their currencies and foreign entities do not seem keen to allocate to currencies as they would Treasuries or the precious metals. The World Gold Council reminds us that Gold should not be influenced so much by interest rates as the true role of the metal is as a safe-haven vehicle or a currency in troubled times. The economic climate is a boon for Gold at this moment, but the minute that the Fed schedules a rate hike, all bets are off.
China gold reserves increased by 14.9 tons at the end of September. The central bank increased their reserves by 16.2 tons in August. According to the World Gold Council, the US holds 8,000 tons of Gold. China may have added 16 tons of Gold in August as reported by UBS. China has typically been accumulating the metal while decreased the purchases of US debt instruments. Chinese net Gold imports from Hong Kong may be 59.9 tons year over year as of August. 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.
Consumer Sentiment for October was increased to 92.1 while the previous reading was 87.2. This bodes well for the outlook on the jobs market and the consumer spending. Despite the struggles with the stronger US Dollar and the slowed growth, the overall sentiment is positive toward the US economy. One of the factors contributing to the sentiment has been the lower energy prices allowing for additional spending in other areas. The demand for US goods has suffered at the mercy of the US Dollar hurting the exports. Exports decrease in production may contribute to losses of about 50,000 jobs per month. On the other hand, manufacturing remains weak while the service sector remains consistently strong. Industrial Production for September came in -0.2% while the previous reading was -0.4%. The declines may have been more in the appliances, computers and electronic products. Next week, the market may be focused on earnings to fuel the market trend, but Sunday evening is the potential catalyst that could move the market. China reports third-quarter GDP late Sunday evening (9:00 PM CST). The projections are for about 6.8% GDP in China while the government’s target remains 7%. China is a strong trade partner that buys agricultural products and contributes to industrial growth. The growth of China is key in the balance of the currencies and the growth may determine the stock market direction as well. Japan and Europe may come in with additional stimulus. The annual inflation in the Euro Zone may have turned lower in September due to the energy prices thus calling for the additional stimulus. The Fed rate hike seems to be thought of off the table pretty much for 2015 so the sentiment was a boost to the market. Global fears seem to have faded for the moment. Increased tax receipts helped the US budget deficit decrease the most since the last 8 years. The receipts were up 7.6% while the expenditures were decreased by 5.2%. All and all, it was a positive day with an uptrend that should take this market higher.
Retail Sales for September was 0.1% while the previous reading was 0.2%. The Retail Sales excluding automobiles was -0.3% while the previous reading was 0.1%. Retail Sales excluding automobiles and gasoline were 0.0% while the previous reading was 0.3%. The US holiday sales are projected to increase 2.8% this year. The National Retail Federations projects a 3.7% increase in holiday sales. The consumer spending accounts for about 70% of the GDP. Consumers seem to be putting more of their earnings into savings perhaps due to the lack of stability felt in the economy today. The US Dollar has been the culprit according to most analysts for the decreased exports. China shows that their annual consumer inflation growth decreased to 1.6% in September below the projected 1.8% and also the 2.0% increase in the previous month. Chinese imports decreased 20.4% to $145.3 billion while their exports declined by 3.7% to $205.6 billion. Translated into Yuan terms the imports decreased 17.7% and exports declined by 1.1%. The recent devaluation of the Yuan opened the door to focus on trade imbalances and the importance of the Chinese slowdown. The strength of the US Dollar has held the US economy down in terms of exports. The stronger dollar means that foreign buyers must spend more for American goods and services than other currency denominations. The Peoples Bank of China introduced additional stimulus. The Chinese Finance Minister Lou Jiwei spoke at the IMF’s annual meeting discouraging the US from engaging in a rate hike while the global economy may not be in condition to handle it. The International Monetary Fund (IMF) has cut its growth outlook for 2015 to 3.1% from 3.3%. Globally, countries are not expanding with China being the main focus of the contracting global scheme. Although the IMF has kept the growth outlook for China at 6.8%. The US has been projected to grow at 2.6% this year. The IMF would prefer to see China increase consumption growth. The marketplace has turned toward the global fear trade sentiment. The IMF has further fears of foreign currency exposure of companies and the increase volatility in the marketplace.
The Yuan, when or if it goes to reserve currency status should be in high demand. The Non-Farm payrolls came in at 142,000 while traders were expecting 203,000! To keep up with the population growth only 100,000 are needed but to move toward full employment, much more is needed. US Fed Chairperson Janet Yellen has been forthcoming in her desire to introduce the rate hike this year yet it seems to be pushed back to date. It is difficult to see how she may do so in light of the World Bank, China and the IMF all asking her to refrain from a rate hike until 2016. The IMF has in fact asked the Bank of England and Japan to stay the course and not tighten until further signs of recovery. US Fed Chairperson Janet Yellen stressed patience citing the risks inherent with the global slowdown. The transitory inflation effects may also be a factor in the decision. While labor has improved, the inflation target has not been met. The focus was pushed out to the October 27th-28th or December 15th – 16th FMOC meeting stressing that the Fed may make an unscheduled announcement as well. There are two Fed meetings yet, but there is no guarantee that a Fed hike would take place this year. Traders may now believe that the first rate hike may be March of 2016.
Industrial Production for September came in -0.2% while the previous reading was -0.4%. The Capacity Utilization Rate was 77.5% while the previous reading was 77.6%. The Manufacturing was -0.1% while the previous reading was -0.5%. The JOLTS or Labor Department’s Job Openings and Labor Turnover Survey for August was 5.370 million while the previous reading was 5.753 million. Consumer Sentiment for October was increased to 92.1 while the previous reading was 87.2. This bodes well for the outlook on the jobs market and the consumer spending. The Atlanta Fed Business Inflation Expectations for October was 1.8% while the previous reading was 1.7%. The Treasury International Capital for August was $20.4 billion while the previous reading was $7.7 billion. The CPI for September is -0.2% while the previous reading was -0.1%. The CPI excluding food and energy is 0.2% while the previous reading was 0.1%. The Initial Jobless Claims for the week of October 10th are down 7,000 to 255,000 while the previous reading was 263,000. The Empire State Manufacturing Survey of General Business Conditions for October were -11.36 while the previous reading was -14.67. The Philadelphia Fed Business Outlook Survey of General Business Conditions Index for October was -4.5 while the previous reading was -6.0. The Bloomberg Consumer Comfort Index for the week of October 11th was 45.2 while the previous reading was 44.8. The Treasury Budget level for September was $91.1 billion while the previous reading was -$64.4 billion. The Fed Balance Sheet for the week of October 14th was $4.505 trillion while the previous reading was $4.486 trillion. The Total Assets were $18.5 billion while the previous reading was $2.1 billion.
The Reserve Bank Credit was $4.6 billion while the previous reading was -$1.3 billion. The Money Supply for the week of October 5th was $2.1 billion while the previous reading was -$46.6 billion. The PPI-FD for September was -0.5% while the previous reading was 0.0%. 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 -0.3% while the previous reading was 0.1%. The MBA Mortgage Applications for the week of October 9th Composite Index were -27.6% while the previous reading was 25.5%. The Purchase Index was -34.0 5 while the previous reading was 27.0%. The Refinance Index was -23.0% while the previous reading was 24.0%. Retail Sales for September was 0.1% while the previous reading was 0.2%. The Retail Sales excluding automobiles was -0.3% while the previous reading was 0.1%. Retail Sales excluding automobiles and gasoline were 0.0% while the previous reading was 0.3%. Business Inventories for August were 0.0% while the previous reading was 0.1%. The Beige Book which was prepared for the FOMC October 27th and 28th meetings date was slightly negative. The factory sector was fairly weaker with auto sales showing some real strength. Home sales and prices are showing as fairly positive. Agriculture is regarded as mixed. Jobs may be tightening and wage growth is subdued for the moment. The NFIB Small Business Optimism Index for September was 96.1 while the previous reading was 95.9. For further information on the NFIB, visit their site directly at http://www.nfib.com/. The Redbook Store Sales for the week of October 10th was 1.1% while the previous reading was 0.7%. The Employment report’s Nonfarm Payrolls for September were down to 142,000 while the previous reading was 173,000. The Unemployment Rate was 5.1% while the previous reading was also 5.1%. The Private Payrolls were 118,000 while the previous reading was 140,000. The Average Hourly Earnings were 0.0% while the previous reading was 0.3%. The Average Workweek was 34.5 hours while the previous reading was 34.6 hours. The Participation Rate was 62.4% while the previous reading was 62.6%. The ADP Private Payrolls Employment Report for September was 200,000 while the previous reading was 190,000. The Real GDP for Q2f:2015 was 3.9% while the previous reading was 3.7%. The GDP Price Index is forecast at 2.1% while the previous reading was 2.1%.
The safe-haven properties of the Gold are perfect for those times of uncertainty and/or conflict in the world or a time of easing! The Gold (December) contract is in a bullish mode if it stays above $1135.00. A key consolidation area may be $1150.00 to $1200.00 for the moment. $1180.30 may be the comfort level. The range may be $1150.00 to $1200.00 for now. The stimulus in other parts of the world such as China and the Euro Zone is good support for Gold. The delay in the Fed’s potential rate hike was supportive to the Gold but this will be a month by month or even a day by day view which the Fed may change at any time. The really long-term range remains very optimistic. The potential of this move if the Fed maintains their delayed stance would be $1234.00. It must break through $1191.70 to continue the move up.
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