083014 – No follow through, but no bottom.

Model Portfolio: Short Signal (7/31)

CTM140830

Technical Read:  Spot gold managed a drifting rally this week but there was not much gusto (especially just ahead of a three-day weekend). The breakdown from the upward trending channel is the last technical event of significance.  Current readings are still bearish. I would note that (at least for the mummy site) this trade is getting long in the tooth. I hope to generate some type of signal this week.  If Labor Day passes without much excitement, I would think selling would reappear.

Backdrop:

  • This week (Friday actually), British Prime Minister David Cameron announced an increase in the country’s terrorist threat level to “severe” (the second highest level). One would think that would be good for gold, but the GLD fund actually closed down for the day. Maybe yellow metal watchers were calmed by Obama’s news conference comments that seemed much less urgent.
  • According to Eurostat, consumer prices rose just .3 year to year. The number was in the expected range but none the less at a five-year low.  My read on this is Europe is losing the race against the specter of deflation.  If decreasing prices gain the upper hand, we could end up with a depression.  This would be deadly for the highly fine-tuned economies of the West. And gold prices too.
  • I am just pilling on. I saw reports that Eurozone PMI (purchasing managers index) ticked down in August. July unemployment for the region came in at a pasty 11.5%.

GH Garrett – Veteran Commodity Watcher

082314 Follow through ahead?

Model Portfolio: Short Signal (7/31)

CTM082304

Technical Read:  Spot gold dropped through the recent upward trading channel. This combined with the penetration of the July 31st pivot point is bearish action for the yellow metal.  The question is will the breakdown continue?

Backdrop:

  • The US Dollar index broke out to the upside. This is bearish for gold.
  • Leading geo-political events (Gaza, Ukraine and ISIS expansion) are still active but the unrest is largely factored in the market.  At this point, some new accelerant needs to be added to bounce gold higher. Bearish for gold.
  • This week’s Janet Yellen comments from the annual Federal Reserve conference at Jackson Hole were highly anticipated by market participants trying to gauge the future path interest rates. However, the remarks seemed designed to give the Central Bank plenty of latitude in keeping the asset purchase program in place. Interest rates drifted lower in the wake of the event. Bearish for gold.

GH Garrett – Veteran Commodity Watcher

081614 Whew!

Model Portfolio: Short Signal (7/31)

CTM081614

 

Technical Read:  Spot gold dropped through the recent 6 day trading range but rallied back into the channel by the end of the day. However, GLD (which has a longer US trading day) was not able to regain its footing. Friday’s trading indicates that gold is becoming susceptible to down drafts.

Backdrop:

  • The US Dollar index was soft on Friday as well but showed relative strength versus gold. This is bearish for gold.
  • The latest chapter in the unfolding Ukraine story now revolves around a caravan of supply trucks Russia is trying to insert into the Ukraine. This is less scary than some of the previous stories. Bearish for gold.
  • The US Commerce Department reported that retail sales flat lined in July (June readings were not very strong either). Remember, if a so-so economy meets a Fed getting ready to exit (to some degree) the central bank’s asset purchase program – Could a round of deflation be far behind (the interest rate market is buying this)? Bearish for gold.

GH Garrett – Veteran Commodity Watcher

080514 – Lower Highs

Model Portfolio Status: Short signal (7/31).

CTM080514

Technical Read:  Spot gold continues to be unable to regain the $1300 level (the most recent attempt to stage a rally was today). Currently, the weakness is more of a “drip-drip” affair not a powerful decline. From a technical analysis stand point, a turn-around does not seem at hand.

Ambiance Backdrop:

  • Stocks fell back today, with the S&P 500 putting in its lowest close in 2 months. Economic data has generally been supportive (unemployment ticked down to 6.2% in July and consumer sentiment at 81.8), but the looming consideration of the Fed exiting its asset purchase program is going to be a specter in the future. Can the financial markets weather the rise in interest rates? The question is going to revolve around deflation. Will it come knocking? If deflation does materialize gold will not be unscathed.
  • The geopolitical back drop is still supportive. Unrest in the Middle East and the Ukraine gives gold sellers a pause but the associated strength in the dollar (the US Dollar Index has climbed steadily since June) has partially negated this.
  • 10 Year Note rates appear to be base building at higher levels than the lows of May. If interest rates manage to rally, this will not be favorable for gold.

GH Garrett – Veteran Commodity Watcher (8/05/14)