A Waiting Game For Gold?

Model Gold Portfolio: Short Position, (signal= Oct 1)

CTM141011Technical Read: GLD managed to retake (plus a little) our sell signal levels, but still closed in the trading range (3 week or so) just below the 118 level. The four-day rally had a short-covering feel to it as if gold traders more interested in trimming their short positions instead of really going long. Momentum indications have pulled off their lows as well. We still have the short signal one but I am looking for this week’s trading to tip the hand of the gold market.

Backdrop:

  • Catalyst 1 – The Fed minutes reeked of the phrase “data-dependent”, which basically means the central bank is laying the intellectual groundwork for delaying tightening. This along with reductions in Fed growth forecasts is signaling market watchers to be on the alert for deflation. As a side note, the IMF cut its global growth forecasts as well. Deflation is a negative for gold in general but in the knee-jerk aftermath of a crisis, the yellow metal could jump. Watch for signs of a refuge play.
  • Catalyst 2 – The US dollar index went below the near-term 85.50 support level before closing the week back above it. In a crisis, the dollar is also likely to pick up a bid and this is negative for gold.
  • Catalyst 3 – The S&P 500 had sustained some wild daily gyrations recently but Friday’s close has put the widely-followed index at the approximate lows of August. If stocks catch a bid it would be mildly bearish for gold. The Mummy is still neutral on the S&P.
  • Bond Trading Signals. I am offering a similar Mummy process for Treasuries. See the “Bond Trading Signals” tab for more info.

GH Garrett – Veteran Commodity Watcher for ConquerTheMummy.com

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