29
Oct

Gold and Silver Outlook 10-29-14

In today’s midday report I pointed out some of the shortcomings of the Fed reading the market which is why they are still keeping their low interest rate policy for the time being despite ending QE. Will they do QE again if necessary? Sure they will. How will any new QE be viewed differently than the old QE if it comes?

Sorry Fed, This Is NOT a Recovery

First off, to think that QE was responsible for the improved unemployment numbers is a reach. As I noted midday, the U-6 number still shows over 11% are unemployed. How many people do you know that are unemployed? How many that are temporarily employed? How many are recent graduates that can’t find a job? How many that are older working jobs? How many working 2 or more jobs?

This leaves the economic data for us to gauge whether or not we are indeed experiencing an improving economy. What does the data say? I eluded to the latest durable goods report as not being so hot. Same with mortgage applications. I also wrote recently about Germany’s contraction. If you look at pretty much all commodities, they point to deflation. But the Fed would never admit to such. This is why we will have more QE in the future, especially if rates rise too quickly.

Future QE Consequences

It is in my humble opinion that if the Fed does more QE in the future, some may view it as failure and others may view it as the Fed being proactive. In reality, they are reactive. They can’t see deflation in front of them and believe the trumped up unemployment data at prima facie. They can’t see Europe imploding. Can a stronger dollar really be good for the economy? A guy on CNBC today said he saw the dollar being strong for the next 10 years. Wouldn’t a stronger dollar bring in higher rates when the Fed is clearly saying they want lower rates? Can they get what they want? I don’t think so. A “reactive” Fed will wait and make a move AFTER the fact. Only one Fed member was against the group think today, wanting to maintain QE until the 2% inflation target is hit. I guess he understands what 28 months in a row of not hitting their goal really means! See the midday thoughts from today for an explanation of the 28 months.

Gold

Gold’s score fell to -75 slowing catching up to the -100 silver score. The miners all hit new lows. A trader could have played the news and easily bought JDST, an ETF I have mentioned here a few times. JDST was trading under $19 a share when the Fed report came out and went as high as $23.68. It closed up 18.63%.

UGAZ

The bright spot of the day was UGAZ, a Natural Gas play.

Yesterday I had this to say about UGAZ;

If Thursday’s Natural Gas report comes in better than expected, then UGAZ has a way to go. I like the risk vs. reward here for a play into Thursday’s numbers, even though the numbers may not come out good. If we get a dip I would be a buyer tomorrow. If we don’t get a dip I may still be a buyer. These leveraged plays bounce pretty hard when news hits them. The high today was $11.19 as a reference point.

UGAZ was down 37 cents pre-market and opened up slightly higher. Those that can trade pre-market were handed a gift. Those that traded after the market opened still say UGAZ go as high as 11.95 before closing up 3.99%. Tomorrow’s report one can sell a long position and still come out ahead or wait for the news and buy UGAZ or DGAZ depending on the data. I am still slightly bullish up until the numbers come out despite a report in the WSJ today that was simply playing Monday morning quarterback as to what Natural Gas has done this year, not what it will do next. You can read the article here: Natural-Gas Prices Fall Even With Chill Nearing.

UGAZ 10-29-2014

JDST 10-29-2014 Marketwatch

10-29-14 GLD Chart

10-29-14 GLD Chart

10-29-14 SLV Chart

10-29-14 SLV Chart

10-29-14 GDX Chart

10-29-14 GDX Chart

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About Doug Eberhardt

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

Disclosure:

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.