Gold and Silver Outlook 12-16-2014

I have told you in both the last two Current Thoughts that the week of the Fed meeting would give us the potential of a whipsaw and prices and the market makers didn’t disappoint. This was a hard week to trade so far and if anyone just stuck with the green triangles of JDST, they would be doing ok. JNUG and GDXJ hit another 52 week low as gold and silver both closed lower after rising in Asia and Europe overnight, breaking above the $1,200 and $17 mark and then closing below. GDX managed to stay above its 52 week low.

Tomorrow’s Fed meeting is said to be a non-event according to the talking heads at CNBC. I personally don’t think the Fed will do or say anything drastic except hint at how great everything is here in the U.S. This is the last meeting before Christmas and they don’t want the markets to be rattled anymore than they are because of what’s going on in Russia with their currency the ruble.

Look for some more volatility tomorrow but expect more weakness in gold and silver moving into the Holiday’s and into next year. Money may have flowed into the safe haven 10 Year treasuries where we saw the yield fall to 2% at one point today but it is not flowing into gold and silver. They simply look weak and the scores of the miners weaker.

I will watch the Fed’s words closely and write about what I heard them say versus what I think they’ll do tomorrow.

UGAZ hit another 52 week low today as the weather reports still have a warm front upon us for the next couple weeks. The report on Thursday may not do anything to change this trend. A little more patience is required before attempting a long but typically you get some potential tradeable patterns the day of the report. DGAZ has been the star and its score improved to +70 with a daily and weekly green arrow up.

USO opened lower and had a bounce for a bit but couldn’t break yesterday’s high. Today’s high of $21.73 is a tradeable position. Some may want to start scaling into a longer term hold by dollar cost averaging into a position in USO.

TZA gave back some of the profit from yesterday but it is still above $14. If long I would keep a stop at $14 and possibly switch to TNA for a trade into Christmas. TNA is at $68.53.

From the Trading Desk

With the ruble depreciating 50% this year, the Russian central bank decided overnight to raise its benchmark interest rate by an astonishing 6.5%.  The currency crisis threatening Russia’s economy “forced” the central bank to increase rates from 10.50% to 17%.  The ruble initially made gains off the news but ended up reversing course and slid below all time lows against the USD.   There was also a headline out this morning that Russia is deploying nuclear weapons to be held next to the Ukrainian border.

The combination of developments out of Russia has the financial world uneasy.  US equities sold off while gold was tugged in both directions and traded in a $35 range.  Bids materialized in gold immediately after the Russian nuclear deployment headline but selling emerged later in the session with crude oil losing 3.25% on the day.  Support for gold is coming in at $1,182 and firm resistance is in place at the 100 day moving average of $1,232.  Silver has fallen 7% over the past two trading days but found intraday support at $15.50.  The 50 day moving average at $16.57 was the high of today and this should prove to be near term resistance for the remainder of the week.

My Thoughts on Gold and Silver Presently

Many investors may think the mining stocks are beaten down to where they are a buy. With a very long term outlook, this is probably true. But the mining stocks can still fall hard from here if gold does get closer to that $1,000 level I think it may breach. Silver looked very weak today compared to gold and very well may lead gold down during this deflationary spiral.

I still say dollar cost averaging into a longer term position is the way to go. It was a busy day here for sales despite what I write. The Russian ruble falling 50% since the beginning of August has a few people worried that it can spread elsewhere. I’ve even got investors from other countries calling here and wanting to buy and store metals in the U.S. because they fear they may wake up and find their bank accounts frozen.

Bring on the Fed!