Originally published by Chamber of Merchants
I’ll briefly comment on where I think we’re at as well as where I believe we’re going, leading up to January 2017.
I mentioned about 2 weeks ago, that the rebound in Gold will be aggressive. We are seeing a struggle that is keeping the U.S Dollar propped up on thin air and Gold is waiting for the Dollar to plunge before it’s next leap up. It has rallied since the dip at $1246, but the Dollar is held up high due to the current weakness in GBP/USD and EUR/USD.
The Initial Jobless Claims numbers from the worlds largest economy, the United States, came in below expectations. Not only were the numbers worse than expected, but the “Goldilocks” number from the previous report was revised up, meaning that more people lost their job in the last report than anticipated.
Similarly, the Continuing Jobless Claims number was worse than expected and again the prior report was revised to a worse number too.
All of this means that the economy in the USA is less and less likely to handle an interest rate rise and the Fed knows this. November is off the table.
The next 2 Months | Gold Price & Silver Price
I expect the Gold price to show significant gains leading up to November.
This is because there is a rate decision to be made on the 1st and 2nd November which is also keeping a lid on the Gold price. It’s obvious that there is no chance of a rate hike, but it looks like the market will need to see it to believe it.
So after that expected boost in the gold price and a drop in the U.S Dollar around the 2nd November 2016, I expect to see a serious rally for Gold leading into the election.
If Hillary Clinton becomes President:
If Hillary is elected President, then I expect to see a rally in the Dollar until 13th-14th December 2016, when the FOMC decides on interest rates. This would create an opportunity for Gold to retrace and refresh for the next leg up. If the Fed raises rates I expect a short-lived dip in Gold while the Dollar rallies. I then expect the markets to wobble and finally have a correction in the S&P 500 as well as the Nasdaq 100 a week or two after. Gold will be a safe haven just as it was last December/ January. I expect Gold to seriously rally since it may be a year until the next actual rate rise.
If they don’t raise rates in December then I expect the U.S Dollar to tank immediately with a spike in Gold running for weeks into 2017.
If Donald Trump becomes President:
I expect to see a temporary exodus of the U.S Dollar. Gold will spike sharply, but lose it’s momentum leading into the December rate hike meeting.
If they raise rates I expect a short-lived dip in Gold while the Dollar rallies. I then expect the markets to wobble and correct a week or two after. Gold will be a safe haven just as it was last December/ January.
If they don’t raise rates I expect the U.S Dollar to tank immediately with a spike in Gold running for weeks into 2017.
In yesterday’s post I mentioned that one can enjoy the bounce, but don’t celebrate it.
The reason for that statement:
If you celebrate every movement up in price, then you are more likely to be disappointed (emotional) when pullbacks occur. Excited cheering and anxious disappointment, may cause mental fatigue which will affect judgement and emotions.
Celebrate cash, not price movements.
Gold’s Break Out
Let me be clear: the market is very volatile right now.
Gold is hovering, waiting for an opportunity to reclaim its frequent flyers miles, while the U.S Dollar index is being tossed between 97.60 and 98.20
As you can see, just over a day the spread is around 12 dollars, while the price advances, it’s sure to keep out some poorly set stop losses along the way.
The Dollar is receiving boost after boost as the Euro and GBP decline.
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In the short term I can see some back and forth happening while we wait for the Euro and GBP to stabilise and rebound.
Yesterday’s Australian Employment numbers were concerning. The AUD/USD exchange is experiencing some pressure which is good for gold. This strengthens the foundation of the portfolio miners.
Conclusion
I’ve set out my thoughts with regard to the next 4 weeks, leading into the elections. I’ve also re-emphasized that the market is volatile. Currencies are working with, then against each other with very little notice.
I would not be surprised to see Gold pull back here and there, where I expect many nervous traders to jump ship.
(note: As I’m about to post, I can see gold just hit $1267 again…)
My thoughts are: My account dipped as low as –40k a few days ago (check my tweets). That was a result of traders not knowing where the support for Gold was (or at least whether or not it was going to bounce there.) Now however, it appears that Gold has bounced off the Fibinacci level. If gold has finally completed this nightmare dip, then the miners in the portfolio should not be reaching the lows from the dip again.
Be patient. A Merchant does not become restless with time.. Remember, if there is no trade to be made, don’t force it. For myself, I’ll be holding for a while with no mental pressure for exiting my transactions yet. Taking a small profit, may result in losing the rally. I wrote more about that in Sabotage.
Check out some perspective charts here. I’ll be posting more tomorrow.
See you around the ASX
| the Merchant