From the Trading Desk
Over the past two trading days, gold has traded in an unremarkable $9 range. A part of this dull trading activity may have been attributed to the Rosh Hashanah holiday, but it is predominantly due to market participants trimming positions ahead of the FOMC on Thursday. Volume of the December Comex gold contract for each of the last two days sat at just over 74,000 contracts, easily the smallest volume days since it became the actively traded contract at the end of July. The stock market surging today also did not encourage participants to flock towards the yellow metal.
Silver has rolled slowly over and has now had three down days in a row. A double bottom at $14.30 is providing mild support but much larger support awaits at $14, the low from a few weeks ago and also a seven year low. Platinum continues to look heavy but is so far treading water ahead of $950. Should this break, $900 is the next projected target.
Was interesting to see how quickly faith can be restored in the economy because of one of the biggest factors in GDP growth; consumer spending as retail sales were up today. The truth is, consumers are the last to know what’s really going on so it’s befitting that they would be still spending when the economy itself is deflating. For proof of this, look no further than today’s manufacturing data where business inventories edged up 0.1%, the smallest since March and inventories in June revised lower.
Let’s face it, consumers have a disease and that disease is spending. For the most part they don’t have any control over it. When they found extra money coming from the refinancing of their homes during the housing bubble, what did they do with it? They bought second homes, boats, more cars and other frivolous items. More, more, more is what they needed. And when the crash came, they sold more, more, more. Now we are repeating the same pattern. While the smart consumer is hoarding away their wealth and paying down debt, your typical consumer is out making themselves feel good with more goodies. You need only look to the last financial crisis to see how this eventually turns out. But instead of the housing bubble it will eventually be the bond bubble that will burst and that will also affect stocks for awhile.
Lucky for us wise folks we have the ability to position our assets to take advantage of the bubbles to come but we’re not quite where we need to be yet to go “all in” with gold and silver. More patience is needed.
Here’s how I see things unfolding. We will see what the Fed does Thursday which I believe is a 1/4 point rise in interest rates. They are arrogant enough to believe the CNBC hype that all is well with the economy, and let’s do what we can to get the stock market going based on good economic data (as only those with CNBC blinders can see). This rise in rates will more than likely lead to some bullish move in the stock market and a rise in the dollar. Gold and silver should fall.
But all this euphoria over the U.S. economy isn’t reality. The rest of the world isn’t running to buy our products, especially with a stronger dollar. The rest of the world is in a Global Trade Slump according to a report today from the Wall Street Journal. I’ve been calling for deflation everywhere for quite some time and we are now seeing mainstream media catch up to what I have been predicting. If you haven’t noticed, commodities have been slumping for years. Gold and silver keep falling. Copper, grains, oil, natural gas; all falling. Baltic dry index; falling. To combat this as much as they can, central banks around the world have been implementing QE to “stimulate” the economies. We did that with the Fed here in the U.S. as well. How did we do? is the economy booming? If you only look at a false unemployment report (not the real U-6) report and consumers spending, yeah, we’re doing great. But I have been pointing to the real data all year long here: What Does This Economic Data Tell Us?
Japan is in trouble. China is in trouble. Other countries are experiencing their own bubbles. Latin America and Africa are never spoken about or basically ignored. Most of Europe is in trouble. Do you even hear anything about Greece on CNBC or anywhere else any longer? Did that problem just disappear?
Prediction: After this token rise to save credibility by the Fed, they will implement more QE once again as that’s all central banks know how to do. They can’t get money velocity (inflation) moving to keep their business model intact so they MUST do something to stimulate or have the system collapse on THEM. That is NOT an option for them. This raise in rates is a joke, the economy is a joke but when they implement more QE, digging a deeper grave for the monetary system, the final joke will be on you unless you possess some gold and silver as insurance.
If you don’t own gold and silver, dollar cost average into a position on the dips. Buy some now and buy some at lower prices for a better overall good price. The future will take care of itself. Governments will always screw it up.
We have the lowest prices for gold and silver bullion in the nation. Call us at 888-604-6534 to place an order.
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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.