From the Trading Desk
Despite the Dow being down nearly 300 points at the time of writing, gold is still struggling to break through the significant resistance level of its 200 day moving average at $1,131. This technical barrier has capped the market the last two days and gold has not been above it since October of last year. Besides the 200 day moving average, the $1,131 area is also the fifth point of trendline resistance dating back to early December. Traders on the short side of the yellow metal are protecting this level but will be forced to cover positions should it give way. Gold certainly has the potential to run up if it does.
Investors finally warming up to gold again is best exemplified by the SPDR gold ETF which has added nearly 400,000 ounces in holdings over the past two days. The US Mint also sold 124,000 ounces of American Eagle gold bullion coins in January, up 50% from a year ago. Silver ETFs are not experiencing the same inflows as gold ETFs right now though. Silver ETFs continue to shed ounces with overall holdings sitting at lows not seen since the end of 2012. In the fabricated world, silver is much more readily available than it was just a few months ago and premiums on products are falling. Silver will need to break out of its current range in order to attract physical investors.
Today was another non-eventful day in gold and silver. Dollar was down and metals should have risen but were stymied by an overall sell off in the market, including gold mining stocks. I repeat that this again will continue until we reach the bottoms I have been talking about for some time.
We know the markets are weak. We know the data is weak. We know the Fed made a mistake in December when they raised rates. We know they didn’t raise rates this last meeting. We know Fed members are coming out and talking down the number of rate increases they expect. Even Steve Liesman who I mentioned yesterday is saying not 4 increases, not 3, but has turned down his rhetoric to say 0-4.
What is clear is things aren’t right for the markets and again there is a reason why my book Illusions of Wealth has some pretty good timing behind it. If you haven’t signed up for announcement of the release of the book you can do so by going here; http://illusionsofwealth.com.
Doug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with capital you can’t afford to lose. This is neither a solicitation nor an offer to Purchase/Sell futures or options. No representation is being made that any account will or is likely to achieve gains or losses similar to those discussed in this outlook. The past track record of any trading system or methodology is not necessarily indicative of future results.
All trades, patterns, charts, systems, etc. discussed in this outlook and the product materials are for illustrative purposes only and not to be construed as specific advisory recommendations. All ideas and material presented are entirely those of the author.