Best of the Week
Most Popular
1. TESLA! Cathy Wood ARK Funds Bubble BURSTS! - 12th May 21
2.Stock Market Entering Early Summer Correction Trend Forecast - 10th May 21
3.GOLD GDX, HUI Stocks - Will Paradise Turn into a Dystopia? - 11th May 21
4.Crypto Bubble Bursts! Nicehash Suspends Coinbase Withdrawals, Bitcoin, Ethereum Bear Market Begins - 16th May 21
5.Crypto Bubble BURSTS! BTC, ETH, XRP CRASH! NiceHash Seizes Funds on Account Halting ALL Withdrawals! - 19th May 21
6.Cathy Wood Ark Invest Funds Bubble BURSTS! ARKK, ARKG, Tesla Entering Severe Bear Market - 13th May 21
7.Stock Market - Should You Be In Cash Right Now? - 17th May 21
8.Gold to Benefit from Mounting US Debt Pile - 14th May 21
9.Coronavius Covid-19 in Italy in August 2019! - 13th May 21
10.How to Invest in HIGH RISK Tech Stocks for 2021 and Beyond - Part 2 of 2 - 18th May 21
Last 7 days
Gold Prices Investors beat Central Banks and Jewelry, as having the most Impact - 18th Jun 21
Has the Dust Settled After Fed Day? Not Just Yet - 18th Jun 21
Gold Asks: Will the Economic Boom Continue? - 18th Jun 21
STABLE COINS PONZI Crypto SCAM WARNING! Iron Titan CRASH to ZERO! Exit USDT While You Can! - 18th Jun 21
FOMC Surprise Takeaways - 18th Jun 21
Youtube Upload Stuck at 0% QUICK FIXES Solutions Tutorial - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations Video - 18th Jun 21
AI Stock Buying Levels, Ratings, Valuations and Trend Analysis into Market Correction - 17th Jun 21
Stocks, Gold, Silver Markets Inflation Tipping Point - 17th Jun 21
Letting Yourself Relax with Activities That You Might Not Have Considered - 17th Jun 21
RAMPANT MONEY PRINTING INFLATION BIG PICTURE! - 16th Jun 21
The Federal Reserve and Inflation - 16th Jun 21
Inflation Soars 5%! Will Gold Skyrocket? - 16th Jun 21
Stock Market Sentiment Speaks: Inflation Is For Fools - 16th Jun 21
Four News Events That Could Drive Gold Bullion Demand - 16th Jun 21
5 ways that crypto is changing the face of online casinos - 16th Jun 21
Transitory Inflation Debate - 15th Jun 21
USDX: The Cleanest Shirt Among the Dirty Laundry - 15th Jun 21
Inflation and Stock Market SPX Record Highs. PPI, FOMC Meeting in Focus - 15th Jun 21
Stock Market SPX 4310 Right Around the Corner! - 15th Jun 21
AI Stocks Strength vs Weakness - Why Selling Google or Facebook is a Big Mistake! - 14th Jun 21
The Bitcoin Crime Wave Hits - 14th Jun 21
Gold Time for Consolidation and Lower Volatility - 14th Jun 21
More Banks & Investors Are NOT Believing Fed Propaganda - 14th Jun 21
Market Inflation Bets – Squaring or Not - 14th Jun 21
Is Gold Really an Inflation Hedge? - 14th Jun 21
The FED Holds the Market. How Long Will It Last? - 14th Jun 21
Coinbase vs Binance for Bitcoin, Ethereum Crypto Trading & Investing During Bear Market 2021 - 11th Jun 21
Gold Price $4000 – Insurance, A Hedge, An Investment - 11th Jun 21
What Drives Gold Prices? (Don't Say "the Fed!") - 11th Jun 21
Why You Need to Buy and Hold Gold Now - 11th Jun 21
Big Pharma Is Back! Biotech Skyrockets On Biogen’s New Alzheimer Drug Approval - 11th Jun 21
Top 5 AI Tech Stocks Trend Analysis, Buying Levels, Ratings and Valuations - 10th Jun 21
Gold’s Inflation Utility - 10th Jun 21
The Fuel Of The Future That’s 9 Times More Efficient Than Lithium - 10th Jun 21
Challenges facing the law industry in 2021 - 10th Jun 21
SELL USDT Tether Before Ponzi Scheme Implodes Triggering 90% Bitcoin CRASH in Cryptos Lehman Bros - 9th Jun 21
Stock Market Sentiment Speaks: Prepare For Volatility - 9th Jun 21
Gold Mining Stocks: Which Door Will Investors Choose? - 9th Jun 21
Fed ‘Taper’ Talk Is Back: Will a Tantrum Follow? - 9th Jun 21
Scientists Discover New Renewable Fuel 3 Times More Powerful Than Gasoline - 9th Jun 21
How do I Choose an Online Trading Broker? - 9th Jun 21
Fed’s Tools are Broken - 8th Jun 21
Stock Market Approaching an Intermediate peak! - 8th Jun 21
Could This Household Chemical Become The Superfuel Of The Future? - 8th Jun 21
The Return of Inflation. Can Gold Withstand the Dark Side? - 7th Jun 21
Why "Trouble is Brewing" for the U.S. Housing Market - 7th Jun 21
Stock Market Volatility Crash Course (VIX vs VVIX) – Learn How to Profit From Volatility - 7th Jun 21
Computer Vision Is Like Investing in the Internet in the ‘90s - 7th Jun 21
MAPLINS - Sheffield Down Memory Lane, Before the Shop Closed its Doors for the Last Time - 7th Jun 21
Wire Brush vs Block Paving Driveway Weeds - How Much Work, Nest Way to Kill Weeds? - 7th Jun 21
When Markets Get Scared and Reverse - 7th Jun 21
Is A New Superfuel About To Take Over Energy Markets? - 7th Jun 21

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

Gold and Silver Analysis - Precious Points: Why Not Gold?

Commodities / Gold & Silver Apr 28, 2007 - 09:57 PM GMT

By: Dominick

Commodities

"Despite a minor struggle last week, the trend continues to be up until it's not. Weaker consumer confidence and existing home data could be the start of that reversal." ~ Precious Points: Sailing the Seas of Liquidity , April 21, 2007

The dollar is sharply lower for April, and stocks are up largely on that fact, but precious metals, which would traditionally be the beneficiaries of a sinking dollar, are looking to come out roughly flat. Once again, recovery in the metals from softness earlier in the week was foiled by a Friday rally in the dollar. But the real damage started on Tuesday's economic data.


Though metals are global markets, New York trading over recent months has kept metals moving mostly higher, along with stocks, on economic strength. But now a persistent trend toward higher interest rates in key foreign economies, combined with tighter regulation in China and growing inventories at exchanges, has prevented metals from taking advantage of the otherwise beneficial environment. Consumer price inflation didn't slow consumer spending, and this had traders buying again on Friday. The rumblings of geopolitical turmoil from Russia to Saudi Arabia didn't hurt either, but the dollar's rebound severely limited the upside potential.

After this week's economic data, the stage is just about set for the May 9th Fed meeting. Resilient consumers keep the economy growing, however slightly, and signs of slower inflation are starting to appear. Remember last month the Fed didn't entirely shift to a neutral bias, but did leave the back door open for an accommodation if the data deteriorates significantly, which it has not yet done. Still, fed funds futures remain priced for a 100% chance of a 0.25 cut by the end of the year and bond yields refuse to rise to the level of the overnight rate. This update has already addressed the effect of rate cuts on precious metals in previous. But since last fall, we've also described the goldilocks economy as one in a tight range where the Fed could keep rates steady work exclusively through its open market activities.

Curiously, and way under the mainstream radar, the Fed took a different direction in its open market activities this week and actually started removing money from total bank deposits through reverses. The move could reflect less demand for money, but in this case is probably more of a preemptive measure to goose up bond yields and make the dollar more attractive. It's also an anti-inflationary step and if this trend develops, it would be profoundly bearish for metals, especially if in lieu of a change in interest rates.

So, after a protracted decline, last week's strength was probably not the end of the decline for the dollar, but this consolidation period is probably not over yet either. Weakness in the yen has continued to foster liquidity, limiting downside, and making metal a potentially profitable alternative if the current favor for stocks unwinds. Warning signs, nonetheless, are multiplying.

For the time being, though, the path upward has been reopened for gold and silver to drift higher towards a retest of the recent highs, which will provide significant resistance. Just as many speculative traders go long, the threat is that a failure from the $700 area would either appear to be a double top or be labeled a corrective move up before a new impulsive wave down.


Chart by Dominick

At the very least, readers of this update were alerted to the downside risk in recent weeks. Members at TTC not only caught the top, they were alerted to buy the exact bottom of the recent weakness. The first signal to start looking for a long was when the move from highs earlier this month equaled the decline off the February highs. The chart below shows the exact buy signal and subsequent confirmation from the 5min trend cycle chart, which pegged to the top of it's oscillator as price moved lower. The coming weeks are certain to be choppy, but, by playing the trends, sharp traders can squeeze profits out of a flat month or down month.

Next week's data doesn't offer much in the way of encouraging prospects for the metals, at least in the early part of the week, assuming the numbers come in as expected. Monday's core PCI will probably continue the trend of relatively benign inflation data. Not until Thursdays' productivity report is there a significant chance of domestic economics driving a rally in metals, and this only if the numbers are inflationary enough to spike investor interest in metals.

Despite the media circus surrounding Dow 13000, better investors know to take the number lightly. Given the steady rate of M2 growth and the now unknown rate of growth in what would be M3, stock valuations would have to rise just to retain the same level of relative value. But, as the chart below illustrates, in terms of gold, the indices aren't keeping up the pace and are actually far from record highs.

Of course that's exactly why American stocks have looked so tantalizing lately, particularly to holders of foreign currency, who have a lot more buying power now that the dollar has broken south. Metals, on the other hand, are still finishing up a consolidation period after a nice, long run against all major currencies. As long as stock valuations are so favorable, a breakout to new highs in the metals seems unlikely.

by Joe Nicholson (oroborean)

www.tradingthecharts.com


© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in