Current Thoughts for 12/17/2015

From the Trading Desk

As expected, the Federal Reserve raised its benchmark interest rate for the first time in nearly a decade yesterday.  The commentary associated with the rate hike was moderately dovish though.  Future increases will likely be made slowly and the Fed will consider the overall strength of the economy as well as inflationary concerns.  Nevertheless, the interest rate move reflects the central bank’s confidence in the US economy and its belief that it can handle higher borrowing costs.

For as highly anticipated as yesterday’s FOMC was, it didn’t translate into majorly drastic price movements for the precious metals.  The rate hike was clearly already priced into gold and while the yellow metal dropped immediately following the announcement, it recovered as the day dragged on.  The USD is on the offensive today and crude oil is down nearly 2% as it approaches seven year lows.  US equities have rolled over and the precious metals have succumbed to the liquidation pressure.  Gold has so far managed to find bids to consistently lift it back above the $1,050 handle but should this give, next support is coming in at $1,000.

As we get closer and closer to that magic $1,000 figure, many are wondering what will occur next. There isn’t really much thought given to how low we can really sink. The only thing that has me worried is the fact that my entire book is making the case for deflation and only the commodities markets have experienced some real deflation. We saw it in a few charts I pointed out yesterday too and we see it in the data I pointed out all year long. And I can speculate even the Fed is worried about it. Otherwise why would Fed Chairman Yellen mention “global deflation” in her speech yesterday?

The market allegedly traded with oil today and fell over 200 points. Yesterday CNBC was all cheerful and today they don’t know what hit em. But they also blamed the stronger dollar for the market weakness. I thought a stronger dollar meant that the economy was fine? (as I laugh to myself)…

A stronger dollar is only, and I repeat, only indicative of a weaker euro, yen, pound, Canadian dollar, Swedish krona and Swiss franc. Nothing more and nothing less. For the dollar to rise it just means these 6 currencies are collectively falling.

That dollar index was up .85 today to 99.03 and once again seeing if it can break 100 on the index and stay there. If it does, gold will be under $1,000 this time I think because it is so weak right now. But I do note today it did not break to a lower low.

It is the dollar we watch now to see what gold will do next. But you know that already.

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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


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