Weekly Gold Report (August 19th through August 23rd)
Market bulls were dealt a blow last week as stock traders began booking profit on long positions in expectation of a FED taper in their bond purchase program. The selling pushed the stock indexes lower throughout the week until the Dow suffered its largest weekly drop in over a year. Similarly, the US Bond Markets fell under pressure as traders continued to try to anticipate the FED’s next decision regarding Quantitative Easing and Interest Rates.
While the upcoming week is short on economic data from the United States, traders will be looking forward to PMI figures from China and Germany. We will also have an opportunity to review the minutes from the last FOMC Meeting, which should provide decent market movement. Lastly, we will hear from a few FED Members later in the week as they convene for their annual Jackson Hole Symposium.
I anticipate the FED speak will be nothing short of confusing, which has been par for the course over the last several months. When one member is hawkish today, another member is dovish the following day. It makes sense to perpetuate this style of reporting because if every FED member agreed on the scale and timeline of QE, the major financial markets would experience massive directional moves, and a one sided trade. And until the FED actually feels comfortable enough to raise Interest Rates, we should expect this type of reporting and inconsistent FED speak.
The Precious Metals markets seemed to benefit the most from the profit taking selloff from last week. Gold was up 4.60% on the week and Silver was up significantly more. It was obvious that Hedge Funds added to their net long positions in both Precious Metals and speculators also seemed to be along for the rally. It will be interesting to see if the rally continues into this week’s Precious Metals trade. I will be watching the stock markets as my indicator for Metals. If stocks continue to feel pressure this week, I would have to assume that the profit from stocks will continue to spill over into the Metals. If the stocks begin to see some relief from last weeks drop, then I would assume Gold and Silver will consolidate and possibly retrace some of the rally from the prior week.
Gold Futures in the December contract are holding between the 20day and 100day simple moving averages (arrows #1 and #2). Until we hear from the FED members later in the week, I would not be surprised to see Gold Futures continue to consolidate between $1325 and $1375. With the light volume in markets across the board, it is easier for large funds to drive markets with large lot orders, so traders should always be prepared for volatility. But I doubt we will see much until the FED minutes are released later in the week.
Good luck this week. If you would like to speak with me about anything mentioned above or about trading in the futures markets, please feel free to call or email me directly. I can be reached via email at firstname.lastname@example.org or by phone at (888) 272-6926.
Thank you for your interest,
Senior Market Strategist
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