Model Portfolio: Bullish (Long signal = 6/27)
Technical Read: Spot gold prices broke out of range bound trading channel (approx. 3 weeks) at the end of the week. This is very positive for the yellow metal and signals higher prices are ahead. I would like to see the breakout to be more pronounced in future trading. Gold continues to benefit from limited conviction on the sell side due to the constructive news setup. The Mummy trading signals continue to be on the right side.
- Armed clashes in the Middle East are now a news staple with Iraq (ISIS offensive) and Israel/Gaza action now on the top of the list. An armed Israeli military incursion could be the next escalation. This is supportive for gold (uncertainty).
- The recent release of the Federal Reserve minute’s puts a rough time table for the central bank to phase out its controversial asset purchase program (subject to change) yielded a mixed story for the yellow metal. The Fed withdrawal could be potentially deflationary (bearish) but the coming uncertainty of whether they will do it could be supportive (bullish). I believe Yellen was chosen because she was the candidate perceived to be the least likely to change the Fed accommodative stance. For now this is a neutral for gold.
- Shares of Banco Espirito Santo tumbled as they missed debt repayments on some short-term instruments. This was a contributing factor for jittery global equity market trading this week. Portugal is a small country and the concept of a shaky European banking system is not exactly new ground. The key will be if this event leads to a spreading of stability concerns. This is mildly bullish.
GH Garrett – Veteran Commodity Watcher