This is a sample entry from Leslie Burton’s newsletter, The Weekly Gold Digger, published on Friday, December 04, 2015.
Finally the oversold Gold bounced in light of the US Dollar weakening! The Gold may takes cues from the US Dollar and the Crude Oil from time to time
The Gold market finally bounced as it had been drastically oversold in light of the Fed’s muchly anticipated rate hike. We may get some support here, but it will really be a matter of the Fed delivering monetary policy at the December 15th and 16th’s FMOC! Gold can move swiftly in wide ranges in a moment’s notice. While we have little to propel it higher at this vantage point in fundamental news, any catalyst such as global unrest, currency devaluation, threat of inflation and momentum buying may move it. The majority of Gold investors possibly may hold Gold for any of the potential catalysts that may make Gold the ultimate currency. We may even see the Gold decouple from the US Dollar as global fears may continue. China may have increased their Gold holdings in the reserve central bank to 1,709 tons in their quest to become a reserve currency with the IMF. Gold may be coming into a time where it becomes a currency and allocations may gravitate toward it the more that people lose faith in the global currencies. The International Monetary Fund (IMF) with its 188 member nations announced that the Chinese Yuan meets the criteria set for the Special Drawing Rights (SDR) basket validating that China has met with the reforms necessary to maintain the SDR standing. The reserve status will be introduced October 1st of 2016 with the Yuan making up about 10.92% of weight in the basket of currencies. The US Dollar makes up about 41.9% of the basket. The global monetary basket is also made up of the Euro FX with about a 30.93% weight, the Japanese Yen accounting for about 8.33% and the British Pound making up about 8.09% of the currency basket. The IMF may find additional countries to qualify in the future, but China had the largest foreign exchange reserves totaling about $3.53 trillion. China may have to step up contributions to the United Nations for the status that comes with the new standing. The question of how much money can be printed without that currency losing value remains to be seen. When countries refuse to take certain currencies or US debt instruments, then perhaps the Gold may have extreme valuations.
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 should be a boon for Gold at this moment, but the minute that the Fed schedules a rate hike, all bets are off. Central Banks increased their holdings to 179.5 tons for Q3:2015. Russia added Gold reserves in the 3rd quarter equaling about 77.2 tons. The People’s Bank of China added 50.1 tons July thru September. According to the World Gold Council, the US holds 8,000 tons of Gold. 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.
The Nonfarm Payrolls for November was 211,000 while the previous reading was 271,000. There was an impressive increase in the construction jobs by 46,000 new workers. Trade and transportation was up 49,000. Retail workers increased by 31,000. There was a dip in temporary employment by -12,000. Professional and technical services increased by 28,000 while accounting increased by 11,000 employees. Health care increased by 24,000 new workers in November. Hospitals expanded their employee base by 13,000 new jobs. Food and beverage establishments expanded by 32,000 workers. US Fed Chairwomen Yellen has said that the US only has to create 100,000 new jobs each month to keep up with new individuals coming into the workplace. The Real GDP for Q3p:2015 came in at 2.1% while the previous reading was 1.5%. The GDP Price Index was 1.3% while the previous reading was 1.2%. The household consumer spending that accounts for about 70% of the GDP increased 3% annualized rate while estimated at 3.2%. The Federal Reserve is expected to raise interest rates this next month, but inflation remains a concern.
The strong US Dollar and the low oil prices still negatively affects the marketplace. The Organization of Petroleum Exporting Countries actually increased production to 31.5 million barrels a day from 30 million barrels a day. The potential gradual rate hike as spoken of by the Fed has been well received by the financial community, so the climate has led to an upbeat marketplace. The FOMC minutes confirmed that a potential lift-off in December remains data dependent. It was even suggested that should the economic conditions decline that new monetary stimulus may be considered. 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. The majority of traders may now believe that the first rate hike may be December of 2015.
The US Dollar may strengthen once the Fed announces the rate hike. Other countries may use currency devaluation to their advantage thus adding to the economic condition. One of the key components in determining the next Fed policy changes was inflation, yet now the Fed may meet criteria based on projections. As we approach full employment, the sentiment gets stronger favoring the Fed potential rate hike at the next FMOC on December 15th and 16th. The potential Fed hike may mean that the US may slow more but that the country is healthier to withstand the hike. If the Fed does not raise interest rates then it may be viewed that the economy is slowed. US Fed Chairperson Janet Yellen said that the US economy is performing well and the December rate hike remains a “live possibility”. She has continually stated that the move may be “data dependent” but now we are talking in terms of forecasts of potential inflation targets that have been unmet to date. Chairperson Janet Yellen has said that “markets and the public should be thinking about the entire path of policy rates over time” insinuating that the earlier rate increases may lead to more gradual increases over time. The FOMC forecasts the interest rates in the US to be at 1.4% by December 2016. Strength in the economy may be a boost in confidence. Stimulus used by China, the Bank of Japan and perhaps the Euro Zone may impact the Fed’s action. The stimulus abroad decreases the foreign currency against the US Dollar thus making the dollar stronger. The strength of the dollar is somewhat blamed for the economic conditions in the US as it makes export business decline and corporations that do business overseas also will feel the imbalance. Foreign buyers do not want to pay more for US goods. Yellen seems to want to prepare investors for the possibility of a rate hike in December or a potential motion to announce one for the beginning of 2016.
The Nonfarm Payrolls for November was 211,000 while the previous reading was 271,000. The Unemployment Rate was 5.0% while the previous reading was 5.0%. Private Payrolls was 197,000 while the previous reading was 268,000. The Average Hourly Earnings was up 0.2% while the previous reading was 0.4%. The average workweek was 34.5 hours while the previous reading was 34.5 hours. The Participation Rate or level was 62.5% while the previous reading was 62.4%. International Trade Balance Level for November was -$43.9 billion while the previous reading was -$40.8 billion. The Initial Jobless Claims for the week of November 28th was up 9,000 to 269,000 while the previous reading was 260,000. Continuing Claims were up 6,000 to 2.161 million. Factory Orders for October were at 1.5% while the previous reading was -1.0%. The ISM Non-Manufacturing Index for November was 55.9 while the previous reading was 59.1. The PMI Services Index for November was 56.1 while the previous reading was 54.8. The Challenger Job-cut Report for November was 30,953 while the previous reading was 50,504. The layoff announcements were down about 20,000 indicating a strong labor market. The Bloomberg Consumer Comfort Index for the week of November 29th was 39.6 while the previous reading was 40.9. The Gallup Good Jobs Rate for November was 44.9 while the previous reading was 45.3%. The Fed Balance Sheet Level for the week of December 2nd was $4.478 trillion while the previous reading was $4.477 trillion. The Total Assets were $1.0 billion while the previous reading was -$9.6 billion. The Reserve Bank Credit was -$11.4 billion while the previous reading was -$9.0 billion. The Money Supply for the week of November 23rd was $19.8 billion while the previous reading was $9.4 billion.
The ADP Employment Report for November was 217,000 while the previous reading was 182,000. Productivity for Q3:15 was 2.2% while the previous reading was 1.6%. The Unit Labor Costs were 1.8% while the previous reading was 1.4%. The Gallup US Job Creation Index for November was 31 while the previous reading was 32. The MBA Mortgage Applications Composite Index for the week of November 27th was -0.2% while the previous reading was -3.2%. The Purchase Index was 8.0% while the previous reading was -1.0%. The Refinance Index was -6.0% while the previous reading was -5.0%. The Beige Book highlights reflects an economy that may be healthy enough to forego an interest rate hike. Motor Vehicle Sales for November (Domestic) was 14.4 million while the previous reading was 14.5 million. The Total Vehicle Sales were 18.2 million while the previous reading was 18.2 million also. This has been a strength within the US economy with the expansion in light truck sales and the decrease in crude oil prices to support it. The PMI Manufacturing Index for November was 52.8 while the previous reading was 54.1. The ISM Manufacturing Index for November was 48.6 while the previous reading was 50.1. Any number under 50 points to contraction with this report.
Construction Spending for October was 0.1% while the previous reading was 0.6%. The Gallup US ECI for November was -13 while the previous reading was -13 as well. The Redbook Store Sales for the week of November 28th were 3.9% while the previous reading was 1.5%. The Chicago PMI Business Barometer index for November was 48.7 while the previous reading was 56.2. Pending Home Sales Index for October was up 0.02% to 107.7 while the previous reading was down -2.3% to 106.8. The Dallas Fed Manufacturing Survey or General Activity Index for November was -4.9 while the previous reading was -12.7. Farm Prices for November were down -9.2% while the previous reading was -3.9%. The Real GDP for Q3p:2015 was 2.1% while the previous reading was 1.5%. The GDP Price Index was 1.3% while the previous reading was 1.2 Consumer Confidence for November was 90.4 while the previous reading was 97.6. The Nonfarm Payrolls came in an astounding 271,000 new jobs while the previous reading was 142,000. The Unemployment Rate was 5.0% as forecast while the previous reading was 5.1%. The Private Payrolls was 268,000 while the previous reading was 118,000. The Average Hourly Earnings were 0.4% while the previous reading was 0.0%. The Average Work Week was unchanged at 34.5 hours. The Participation Rate was 62.4% unchanged.
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! In light of potential interest rate hikes, the metal may sink further. The Gold (April) contract is in a bullish temporary mode if it stays above $1046.60. $1070.90 may be the comfort level. The range may be $1100.00 to $1050.00 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. Currency devaluations would be the key to a rise in Gold!
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