Gold continued the move higher today but had at $13 range making its typical Fed week volatile moves. The dollar however is stronger because of Brexit fears and a weaker Euro with the vote coming June 23rd and the chances of a Brexit increasing.
But gold will be all about the Fed decision on interest rates tomorrow. Will they raise or won’t they?
Turning to data to speculate we have May retail sales increasing by .02%. We also saw US import prices post their largest gains in 4 years and US small business confidence rose modestly but there is worry about anemic sales. All in all this micro data for the day was more bullish for a rate increase but the jobs report from last Friday should put a damper on any rate hike. Yet even with the lousy jobs report, Janet Yellen was talking up higher rates.
No one is predicting a rate increase and any surprise increase would be a shock to gold and send it south. No rate increase would push gold and silver a bit higher with gold moving past $1,300 and silver back up to $18, both still resistance levels till broken. The dollar would fall with no rate hike.
But next up will be the Brexit vote and this again is dollar bullish. It seems we will have opposing forces going at it until June 23rd and we should have a clearer picture for the short term move in the metals. I expect us to be range-bound until then with a chance to break $1,300 before if we can get the Fed to stand pat. While they will probably stand pat, they will definitely continue the Yellen mantra of gradually raising rates this year and next with the false assumption that all is well in the economy. It’s not bad in the economy mind you, but it is the rest of the world that is in a bigger mess at present that will eventually have an effect upon the U.S.
We have had a little blip up in shipping activity costs, but if anyone thinks this is a sign of a recovery abroad, then they are missing the fact that this is only because of higher costs for fuel, not demand for products.
Japan’s exports have fallen for 7 straight months. No demand abroad there.
Chinese exports tumbled again in May with weak global demand.
U.S. exports have increased this year with the falling dollar, but not enough to raise economic forecasts. Some of that reasoning for the increase was for oil (got to sell it at these higher prices to make money), weapons (there’s always a conflict somewhere and the military industrial complex is ready to supply it and the U.S. always leads in this export category) and corn (people got to eat).
If no one is buying, what does this do for GDP of a nation? Can the Fed see this or do they have their higher interest rate blinders on?
Granted there is more to the story than that, and I can go into much more detail as to what I see. The good news is you’ll be able to read this detail soon as I finally heard from my formatter that my book Illusions of Wealth is about ready. Should be less than two weeks I hope at this point.
If you haven’t signed up for the book release announcement yet, you can do so here: http://illusionsofwealth.com
Thank you and I’ll have more to say tomorrow after the Fed.
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
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