What a week of headline news feeds – fuggetaboutit! Gold’s seasonal strength, along with recent geopolitical and dismal economic indicators, appear to be lining up with the stars for a sustained rally through the fall. If we only could’ve been a fly on the wall at the White House and Federal Reserve war rooms over the last week. Despite any bravado or economic confidence displayed, the powers that be are likely sweating some silver bullets.
I’ll leave any gold and domestic political scandal-related headlines out of the following list. Technical analysis of gold and dollar charts are coming after the recap of the most pertinent headlines. “Pet Rock” fundamentals don’t seem to be influencing the current price as much as the geopolitical and economic landscape.
- “Locked and loaded” could mean the first use of the US missile shield – Washington Examiner
- Russia Doesn’t Accept a Nuclear Armed North Korea – Lavrov, Interfax
- Chinese Paper: China Will Stay Neutral If N. Korea Attacks Guam – KBS World Radio
- Trump, Xi Urge N. Korea to Stop Provocative Behavior – KBS World Radio
- Trump: “We Have A Military Option For Venezuela” – NBC News Video
Flashback from the past – like father, like son…
“Restaurant sales dropped again in July, dealing a blow to the industry… we were cautiously optimistic that the tide was turning a bit… Calculated on a two-year basis, sales in July 2017 were down -4.2% compared with July of 2015. Same-store traffic was -8.7% for that same period. These are the weakest two-year growth rates in over three years, additional evidence that the industry has not reversed the downward trend that began in early 2015.” – Black Box Intelligence
Federal Bank Regulator Drops a Bombshell as Corporate Media Snoozes… “Last Monday, Thomas Hoenig, the Vice Chairman of the Federal Deposit Insurance Corporation (FDIC), sent a stunning letter to the Chair and Ranking Member of the U.S. Senate Banking Committee… What the fearless Hoenig told the Senate Banking Committee was effectively this: the biggest Wall Street banks have been lying to the American people that overly stringent capital rules by their regulators are constraining their ability to lend to consumers and businesses. What’s really behind their inability to make more loans is the documented fact that the 10 largest banks in the country “will distribute, in aggregate, 99 percent of their net income on an annualized basis,” by paying out dividends to shareholders and buying back excessive amounts of their own stock.” – Wall Street On Parade
An Indicator of Peril; Recession – Michael Lebowitz, 720Global
- Look Out Manhattan – Chinese Foreign Real-Estate Spending Plunges 82% – ZeroHedge
- Fed’s Dudley: “Going to take some time for inflation to rise to 2%.” – Street Insider
- Fed’s Bullard: “The Fed’s inflation and growth misses add up… and undercut credibility.”- BloombergTV
- Fed’s Kashkari: “The CPI came in today… and again it came in low…We have the luxury of waiting to see what actually happens before we decide where to go with monetary policy.” – Street Insider
- We have a budget fight, a possible government shutdown and a shooting war with North Korea all happening at the same time. – Jim Rickards on Sky News Video
TaperCaper: Federal Reserve Balance Sheet – FRB
Sometimes, consistent technical chart analysis can seem monotonous to do or follow. Charting does require constant attention, particularly at times when there are resistance-support confluences taking place at significant price points. Even more so, when there is relevant news, fundamentals or not, that are trending at the same time. Fusion Analysis can provide a trader or investor with an extra edge. Also, chart patterns can be fickle as they morph into new formations over short and longer term time frames.
“Fusion Analysis and investing combines fundamental, technical and behavioral investing with no regard to traditional asset classes.” – Fusion Investing
If you’re new or missed some of my most recent writing and analyses, you can find them here, here, here, and here. On to the gold weekly chart as of Friday’s close…
Since the 2011 high to present day, two long-term Complex/Continuation Inverse Head & Shoulders patterns emerged. First, the entire time frame depicted in the chart by the downward sloping dashed line, and second, one that spans the entire right shoulder of the first, emphasized by solid black lines. It’s a very bullish set-up, with two different Necklines, as well as being their trendlines. For in-depth education on H&S patterns, I suggest you begin here, here, and here.
The most significant development over the past week was that price breached both Necklines to the upside, in addition to this week’s candlestick being a bullish engulfing (emphasized by the arrow in the close-up box). The breach must continue decisively for price to extend onward. More bullish technicals lurking in the background are the 50/200 Exponential Moving Averages, which are nearing a Golden Cross. Golden Crosses on the daily are great, but on the weekly, sidelined cash tends to jump in for longer-term sweet spot runs. Lastly, the 23.6% Fibonacci at $1,297, 38.2% at $1,249, and 50% at $1,210 have all been pigsties since early 2016. Not surprisingly, the price was held up at the $1,297 level this week.
On my July 21st article, I noted, “Analysis of gold: BULLISH, if no exogenous event interrupts near-term.” As it turned out, the exogenous event was a bullish one: war drums over North Korea.
Here is the USD weekly with annotations. It’s still BEARISH.
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