TaperCaper theory is only for fund-a-mental cases who play poker with cats. Talk about a royal flush, fuggetaboutit…
Yellen: The Economy May Be Weaker Than We Thought… “My colleagues and I may have misjudged the strength of the labor market,” Yellen announced on Tuesday, adding that they’d also misjudged “the degree to which longer-run inflation expectations are consistent with our inflation objective, or even the fundamental forces driving inflation.” Yellen also “noted that the labor market, which historically has been closely linked to inflation, may not be as tight as the low unemployment rate suggests… As we’ve noted here at mises.org before, the Fed has a habit of announcing big plans to scale back quantitative easing, and increasing the target rate — only to later backtrack or downplay the extent to which it will “normalize” monetary policy.” – Mises Institute, Sept. 28
Before we proceed to the end-of-month charts for gold and the dollar, here are a few recent, preciously cherry-picked headlines and videos to peruse during your weekend.
VIDEO: We’re Reaching Peak Gold – World Gold Council… “Concerns over peak production echoed similar comments at the conference, being held this year in Colorado Springs. David Harquail, CEO of Franco-Nevada Corp., said earlier Monday that the gold industry continues to be in an ex-growth phase where new mining projects are simply replacing older assets that are running out of ore. We’re not going to fall off a cliff in the near term, but in the same time it’s really hard to see how we’re going to produce enough gold to meet all this demand…” – Bloomberg, Sept. 25
“The idea that cryptocurrencies have diverted interest in gold is baloney, it’s just not true… Sure you can make money in bubbles any time but you have to (be able to) get out.” – Tocqueville Chairman John Hathaway, Sept. 20
Gold outperforms stock market so far this century – Business Standard India, Sept. 25
Stocks and Precious Metals Charts – Another Option Expiration Opera Buffa… “Today was another COMEX options expiration for gold and silver. And it went as expected” – JessesCafe, Sept. 26
Hedge fund Paulson & Co declares war on poor gold mining returns – Reuters, Sept. 26
India May Have a Spot Gold Exchange in 12 to 18 Months – Bloomberg, Sept. 28
Gold and cash reign as U.S. fund investors pare stocks: Lipper – Reuters, Sept. 28
Deutsche Bank in $190 mln currency-rigging settlement – Reuters, Sept. 29
Gold Matches S&P 500 Performance In First 3 Quarters; Up 12% 2017 YTD – GoldCore, Sept 29
Gold ETF Demand Surges As Price Suffers Worst Month Since November – Zero Hedge, Sept. 29
On to the charts…
As dramatic as the current pullback in the gold price may appear following the hedge funds’ momo play to $1,357, it is still $40 away from the 2011 Trendline, which is a line in the sand of sorts. We will see how October plays out for any consolidation. For additional commentary, I must defer to my Sept. 15 analysis, as not much has changed since.
Bullish: the gold weekly chart has successfully broken out of two in a trifecta of Inverse Head & Shoulders patterns. The last, and likely the most influential on price, has its Neckline at a confluence of the 38.2% Fibonacci $1,380 and a 50/200 EMA Golden Cross that is only $1 away. A Golden Cross on daily charts is great, but on the weekly, deeper pockets jump in for much longer sweet-spot price action to the upside. I cannot stress enough how important this crossroad is. In the meantime, the overhead 300 SMA is acting as resistance before the price can decisively take out that Neckline & Fibonacci level. The DMI-ADX set-up is now entering a positive Alligator Tongue pattern, along with rising volumes for the last two months. One potential negative is that the StochRSI is rolling over but has not broken down, which may indicate that a period of consolidation lies ahead before the price can attempt a decisive breakout of the confluence discussed above.
One significant difference is that the 50 EMA has crossed over the 200 EMA for a Golden Cross set-up. It’s not a decisive crossover by any stretch of the imagination, but it has crossed nonetheless. Keep your eyes on it.
The gold monthly remains in bullish mode as well.
As expected on the USD, there has been a pivot: a dead cat bounce off the 50% Fibonacci. The topside Trendline drawn down from April was breached to the upside, but the price closed below it. The overhead 200 EMA acted as resistance to any further upside this week. I must defer to my Sept. 15 notes.
Still bearish: as noted in my August 28th post, $91 to 91.36 for the USD appeared to be baked in the cake. Last week’s low was $91.13. There’s still room to fall for the dollar after a dead cat pivot. The lower trendline of the Broadening Top (aka a Megaphone pattern) is a likely target. If that price level is taken out decisively to the downside, watch out below, savvies.Title of our Thursday (9/28) rpt to subscribers: “Why the USD could see a tactical bounce (but don’t miss the forest for the trees)…” Luke Gromen, CFA @LukeGromen
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