Gold seeks footing!
The Gold market may get it’s boost if there is no accord going into a potential default! The US Dollar would lose value and the Treasuries would be worth less if the premier currency and its debt instruments defaulted. Gold would then take on a flight to quality role. Last Friday, it had an incredible selloff about 8:40 AM CST. About 800,000 ounces of Gold into the London fix or Comex exchange so it was rumored. The size of the order halted trading. Typically the large fund managers scale orders into the market more gradually.
The December Gold has been pressured by one event after another leaving even the most persistent Gold bug without confidence in the metal. Even the current government shutdown has traders thinking that it will not last, lacking the need for a safe-haven vehicle. Bullion holdings in the ETF’s have decreased by 27 % this year.
India has raised its Gold import tax three different occasions to stimulate purchases within India and decrease any foreign products coming into India. They have reduced imports by about 80 %. The potential Fed “tapering” is an inevitable end to the quantitative easing that bolstered Gold over the last few years. Any bounces in the Gold may be sold as the sentiment remains bearish both technically and fundamentally for Gold. The physical demand from Asia remains slack. The US Mint sold 13,000 ounces of the Gold Eagle coins in September. China’s central bank is talking about allowing more firms to import/export Gold with looser restrictions on the sales. Gold typically may trade inversely to the US Dollar. The US Dollar and the Gold have both been pressured as of late. One is likely to pop, but it is dependent on whether the tapering begins sooner or later and whether the shutdown may last longer than analysts anticipate. If the shutdown were to last, it may decrease growth to effect the GDP. It would inevitably hurt the labor sector as well. The reaction by the Fed could potentially resume or increase the quantitative easing. This would be a case scenario for Gold bulls. The World Bank President warned that we are just days away from global economic disaster. Nations that keep assets in US debt instruments and other vehicles feel that the US has an obligation to act with a fiduciary responsibility to the global economy. As of July China owned about $1.28 trillion in US Treasuries and Japan had about $1.0 trillion invested as well. If the debt limit is raised, it will be the 18th within the last 20 years.
As we draw to the October 17th deadline when the US government may allegedly run out of funds to operate, the budget talks have totally shadowed any economic data and/or earnings reports. US House Speaker Boehner told reporters today that he is trying to find a way to move forward. The House and the Senate plans may both fund the US government through January 15th 2014 and suspend the debt limit until February 7th 2014. The House proposal includes a couple of changes to the 2010 health-care law. Many may see the Republicans at fault over the Affordable Care Act which many do not fully understand. To oversimplify, it is the nationalization of health care which is socialism to a degree. Pains have been taken over the years to keep socialism subdued in the US even as there have been movements in the democracy that America is. We have sustained three quantitative easing plans to boost the economy and the earnings are better than average. US House Speaker Boehner offered a good faith extension for the debt ceiling. This plan extends the time to deal with the debt limit until November 22nd. US President Obama is still saying that he will negotiate on the fiscal and health care issues only after the shutdown ends and the debt limit is increased. US House Speaker Boehner allowed the extension with no conditions attached. He had initially said that he would not allow a default of the US government and so far his word is true. His goal is to keep the national debt at manageable levels which is for the benefit of future generations to come. The Affordable Care Act has been in existence since 2010, but the Republicans have not been able to reduce the expansive program. China, in the meantime has come out with a statement that “it was about time the world was “de-Americanized”! China has urged the US to resolve the issues to protect the debt instrument/investments of our foreign interest. This market has been through the fiscal cliff, the sequestration, the shutdown and perhaps the debt ceiling still climbing to new highs. The strength is there to keep going if the government can arrive at an accord. Since October 1st about 800,000 federal workers have been furloughed. The consumer is not spending. The damage may be done in the consumer confidence and in the eyes of the global community. A nation divided is a nation that may be considered weak in the eyes of the global community. Even if the US does not default, there is a possibility of a downgrade. August of 2011, the US markets suffered the downgrade. The US suffered the loss of the AAA credit rating while the market lost points. The government may volley for their health-care or resist moves toward socialism, but at the market’s expense. This would be the opportunity for the Gold bug. The worse the US economy, the better for Gold. Gold has been overlooked as a safe-haven as of late but in this scenario, it may be difficult not to look at Gold.
The ICSC-Goldman Store Sales for the week of October 12th was -0.7 % while the previous reading was -0.1 %. The Empire State Manufacturing Survey of General Business Conditions Index Level for October was 1.52 while the previous reading was 6.29. The Redbook Store Sales for the week of October 12th was 3.2 % while the previous reading was 3.3 %. The delayed Unemployment report is forecast at 184,000 while the previous reading was 169,000. The Unemployment Rate is forecast to remain unchanged at 7.3 %. The Average Hourly Earnings is forecast at 0.2 % unchanged. The Average workweek is forecast at 34.5 hours unchanged. The Private Payrolls is forecast at 184,000 while the previous reading was 152,000. Wednesday, we look forward to the Consumer Price Index for September but it is delayed while the previous reading was 0.1 %. The CPI excluding food and energy is delayed also while the previous reading was 0.1%. The Housing Market Index for October is forecast unchanged at 58. Thursday, the Initial Jobless Claims is forecast at 330,000 while the previous reading was 374,000. The Housing Starts for September are forecast at 0.913 million but the report will be delayed due to the shutdown. The previous reading was 0.891 million. The Housing Permits for September are forecast at 0.935 million but the report will be delayed due to the shutdown. The previous reading was 0.918 million. The Industrial Production is forecast at 0.4 % unchanged, but the report will be delayed due to the shutdown. The Capacity Utilization Rate is forecast at 78.1 % but the report will be delayed due to the shutdown. The previous reading was 77.8 %. The Manufacturing is forecast at 0.3 % but the report will be delayed due to the shutdown. The previous reading was 0.7 %. The Philadelphia Fed Survey is forecast at 15.0 while the previous reading was 22.3. Friday, the Leading indicators is forecast at 0.6 % while the previous reading was 0.7 %.
The CME Group Inc, now owns the Comex and has raised the Gold margins to $8,800.00 per 100 troy ounce contract.
For a Gold uptrend:
Conflict would increase with future threats to safety of the American people.Inflation would have to accelerate. The economy would have to worsen.The Fed would continue or increase the easing and become ultra-accommodative.The ECB would increase their monetary stimulus.
For the moment, the bears have the technical advantage. Gold is an emotional market that could change very quickly. While the factors all seem quite bearish for the moment, we remained focused and alert for any changes on the chart to occur. It may be sentiment that will drive the Gold market at times so it is good to know the strength of the market and the demand. The volume curves are conditions to be aware of. As of late there were rumors of large sellers of the Gold. The market cycles come around even if no one looks for them. A trader may simply stop looking at a market giving up on a potential setup when it may simply be delayed.
View Gold chart at: http://www.futuresknowledge.com/wp-content/uploads/2013/10/EGCZ13-Daily_10152013_070355pm-600x412.png
The December Gold remains in a range with a bearish bias until breaching $1332.0 0. Most traders may be looking for another dip. Tomorrow, we anticipate a slight bounce and then perhaps a lower trade. The range may be $1325.00 to $1225.00. The safe-haven properties are being overlooked on this market at least for now! Without continued quantitative easing and a potential default, the next downside target may be $1120.00.
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