As mentioned in yesterday’s thoughts, gold and silver are struggling to catch footing and the miners I mentioned last week were set to break their 52 week lows again. GDX closed just above its 52 week low. JNUG closed just above it’s 52 week low but is under it after hours. NUGT is also just above its 52 week low.
GLD turned to a score of -55 and SLV is the weakest metal sitting still at -100. Things do not look good for gold, silver and the miners. But this is typical action before a Fed meeting where we should see some sparks the next couple days. The problem being of course, any sparks may not lead to a fire being lit under gold and silver.
The Fed is expected to end QE as scheduled. This despite some at the Fed saying they should hold off. Group think will take over and if anything the Fed is more worried about Europe than they are about things here in the U.S. Germany business confidence dropped to a 6 month low. Europe is fighting deflation too and the ECB will have no choice but to implement more measures to get business activity going.
Central Banks
This is all central banks know how to do. Deflation in and of itself isn’t bad as it weeds out the weak, non-profitable companies and prices fall overall to where competitiveness comes back and the economy grows. The central banks of the world can’t afford for business to slow down as their inflation targets need to be met for their system to function properly. The fact that money velocity is zero isn’t what they bargained for. Why the Fed is stopping QE when money velocity is still zero and inflation hasn’t picked up is beyond my comprehension. The Fed will of course implement any new QE after they realize that the economy needs more stimulus. Watch and see.
How this relates to gold and silver may not mean anything. While we do see some price movement along with Fed announcements, any bullish moves are short lived. We are not bottoming with a stronger dollar, higher stock market (overall we are still in a bull market), Treasuries strong, interest rates low and Europe a mess (European money coming here). My indicators are still showing lower prices ahead. But by Wednesday we may see some whipsaw action with the Fed’s telling us what they think they know.
Other one’s I am watching like UGAZ hit another 52 week low. Not quite ready for a move, but still keeping an eye on it. TNA can go either way with the wind right now so not expecting anything.
Star of the Day
JDST is the star of the day again up 7.68%. Tomorrow we should see the aforementioned mining related ETFs breaking their 52 week lows and JDST continuing to have some fun. But with the Fed can come quick reversals so take profits when handed.
In Dennis Gartman’s letter today he mentions the weakness of gold, is dismayed about it, but still advises his clients to stay the course. He isn’t predicting, as I am, a further decline. But Richard Russell can see a possible further decline.
Richard Russell’s Thoughts on Gold and Silver
The following is from Richard Russel’s newsletter yesterday and I thought worth reposting here along with his chart. I have highlighted the important part to consider.
I don’t usually comment much on gold but I thought this was worth pointing out. Many people felt that the triple bottom gold recently traced out was a bullish sign, as a major support line held. What may have been lost in that perspective is that gold is tracing out a textbook bearish descending triangle. There is a war going on between gold bulls and bears, and frankly, I’d have to give the advantage to the bears at the moment. Note in the chart below that each successive rally since mid 2013 has failed to penetrate previous highs. This is almost as textbook as it gets. These patterns suggest that gold will eventually break below the support at 1180. A significant and sustained rise above the upper declining trendline would be your indication that something has changed and the bulls may once again be taking charge.
I’ve also included the “zoom thumbnail” to the right which provides us an up close view of the most recent action. Here we can see that gold was unable to penetrate through resistance at its 50-day moving average and has since turned down. All these factors together suggest that gold is still facing headwinds and the bears are still in control.
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10-27-14 GLD Chart
10-27-14 JDST Chart
10-27-14 SLV Chart
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About Doug EberhardtDoug 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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