From the Trading Desk
At the beginning of last week, it looked like gold was running out of steam as it failed two days in a row at the psychological resistance level of $1,200. But then Federal Reserve Chair Janet Yellen gave a two day testimony which breathed new life into the yellow metal. The comment that really caught the gold market’s attention was when Yellen said she was unaware of anything preventing the Fed from having a negative interest rate. A negative interest rate environment would be decidedly favorable for gold as the opportunity cost of owning it versus other assets would be lowered. The negative interest rate chatter circling around the markets allowed gold to race all the way up to $1,260 before profit taking capped it.
Yesterday, China returned from being off a week in celebration of their New Year as an active seller of gold. Before their holiday, the Chinese were accustomed to a gold price $100 cheaper than the one they saw this past Monday morning. And with equities recovering and attracting investment, the Chinese were eager to liquidate gold positions. Gold has now erased all of its gains since Yellen’s negative interest rate commentary. It touched into the low $1,190s today before rebounding but it feels like it wants to test lower after such a big run up over the past several weeks. Silver has tracked lower with gold this week but will look to find support at its 200 day moving average at $15.07.
More coming later. For those that don’t know, I did write an article on gold and silver and my thoughts. You can read it here (Seeking Alpha site has comments by me to those who had questions).
http://seekingalpha.com/article/3898486-nothing-changed-gold-call-1000
I noticed something in the comments to some negative gold articles on Seeking Alpha today. Not comments to my my article but comments made to some news reports that Seeking Alpha put out, like the one on Goldman Sach’s calling for $1,000 ounce gold.
Most of the comments were from newcomers to Seeking Alpha and maybe to the gold trade. I have noticed that gold dealers were putting out more commercials, scaring people into gold and more articles from the usual suspects who talk of a dollar crash. What do they have to say about the $35 drop in the price of gold today? Not much. Their advice never changes; buy, buy, buy. They have said it the entire move down in the price of gold.
Stay tuned.
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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
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.