What Is The New Norm In The Stock Market When It Seems Normal No Longer Exists?

Yet when we look at the stock market charts they continue to go up.  We have bad jobs data – the markets respond and go up.  We have poor CPI – the markets go up.  The housing data misses – the markets go up.  It is like bouncing off Teflon.  What used to cause rifts in the markets now cause the opposite.  In this upside-down world, this has become the norm.

Since March 18, 2020 until now we have had the following gains:

  • S&P – 71% increase
  • NASDAQ – 97% increase
  • Russell – 90% increase
  • Dow – 64% increase
  • Silver – 120% increase
  • Gold – 50% increase
  • BitCoin – 385% (was as high as 767%)

So, we ask how in the heck is this happening?  How can it be that the markets respond in a positive way to the bad economic news?  The continued slow economic recovery.  The largest debt this world has ever seen.  What on this earth is fueling all this?  It took me a while to figure it out, but it is simple.

In short, these markets like the bad news because it forces quantitative easing and keeps interest rates down.  This is akin to the FED hitting the gas on the economy while driving on a sheet of ice.  Most would expect the Fed to proceed with caution but instead, they are going for broke.

So, every time we see bad numbers the markets respond positively, and bad news is good news.  We have seen this since the breakdown of the markets in March of 2020 and it has continued.  The problem is that we are creating another bubble and when that finally bursts, we are going to have to move fast and furious.  Nobody knows when that will be – next week, next month, or a year from now.  All we can do as traders is to be cautious and execute trades that have defined risk.

Take a look at the most recent recession in 2020 – where we saw the VIX climb as high as 85. At that price, the market is expecting extreme risk. Ultimately, the VIX is the industry standard to help traders and investors have a standardized view of market risk through implied volatility.

The VIX is useful because it can give us a hint at what the market is expecting since it is an example of implied volatility. Typically, IV is derived using an options pricing model, such as the Black–Scholes. Using these models, the theoretical value of an option can help guide us to the measurement of implied volatility at a particular point in time.

Traders and investors can use IV to find attractive options trades to hedge, enter or exit a position, or to speculate on a future outcome in the market.

HISTORICAL VOLATILITY

While the VIX is a measure of implied volatility, there are many historical measures of volatility that can be useful. One common example is the beta coefficient. This is a historical calculation measured by taking the returns associated with a security and comparing that the price action of the market over the same time period. A security with a beta less than 1 implies that the security is theoretically less volatile than the market as a whole. A security with a beta greater than 1 would be more volatile than the market.

For those that want to have a full picture of the risk of a security, the beta coefficient can help separate market risk with individual security risk. These types of measures can help you diversify properly with respect to your individual risk tolerance.

A historical volatility calculation like beta gives you a basic understanding of what the price of a security has done in the past. While past performance is not indicative of future results, historical volatility calculations can be used to help measure risk and ultimately help determine if a security is right for you.

THE VOLATILITY OF THE VOLATILITY – VVIX

To further confuse new traders there is such a thing called the volatility of the volatility or AKA the VIX of the VIX (VVIX).  No this is not an exercise on doublespeak if you are a subscriber you would have seen me talk about this before.  The VVIX is simply a measure of the change of volatility in the VIX volatility index.

The VVIX is the VIX of the VIX like the VIX is the VIX of stocks.  Ok if you are not thoroughly confused by now then congrats because this stuff can get pretty confusing.  Another way to put it is, the VVIX measures how rapidly S&P 500 volatility changes, and is thus a measure of the volatility of the index.  Investors can use the VVIX and its derivatives to hedge against volatility swings on changes in the VIX options market. You can hedge the hedge!

WHY YOU SHOULDN’T BE AFRAID OF VOLATILITY

All told, volatility is just a measurement that can give you insight into the potential risk of a security. It’s important to remember that actual volatility is almost always less than implied volatility. No measure of risk is going to be totally accurate, anything can happen in the financial markets. Even so, volatility measurements can offer a clear view of the risk the market expects.

If you want to learn more about how to trade options, about how to take all factors of options pricing into consideration, and about how to account for volatility in your options trading, please look into our Options Trading Signals.  We send trade alerts out weekly and do daily updates on our positions as to why we got in and out along with the factors to our strategies.  We trade proprietary strategies you will not find anywhere else.  Our goal is to make the market work for us and not try to work the market like everyone else.

We are also offering a live course tomorrow, Saturday, June 19th at 10:00 am with Neil Szczepanski, our Options Trading Specialist! Learning the basics of options trading is the foundation required for more advanced consistent income trading strategies.

You owe it to yourself to have the best tools and subject matter experts on had to ensure you are set up for ultimate success.  Don’t trade with one hand behind your back. Rather, expedite your learning curve with the Options Trading newsletter service.

Have a wonderful weekend!

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Founder & Chief Market Strategist
www.TheTechnicalTraders.com

 

The Weekly Wrap – A Hawkish FED Delivers for the Dollar Bulls

The Stats

It was a busier week on the economic calendar, in the week ending 18th June.

A total of 61 stats were monitored, which was up from 45 stats in the week prior.

Of the 61 stats, 25 came in ahead forecasts, with 26 economic indicators coming up short of forecasts. There were 10 stats that were in line with forecasts in the week.

Looking at the numbers, 26 of the stats reflected an upward trend from previous figures. Of the remaining 35 stats, 26 reflected a deterioration from previous.

For the Greenback, the FOMC policy decision and projections were the key drivers. In the week ending 18th June, the Dollar Spot Index rallied by 2.32% to 92.225. In the previous week, the Dollar had risen by 0.46% to 90.5550.

Out of the U.S

It was a busy start to the week.

Retail sales and wholesale inflation figures drew plenty of attention on Tuesday.

It was a mixed set of numbers, however.

While wholesale inflationary pressures picked up in May, retail sales hit reverse in May.

Industrial production and NY Empire State manufacturing numbers also delivered mixed results on the day.

While industrial production rose further in May, the NY Empire State Manufacturing Index fell from 24.3 to 17.4 in June.

In the 2nd half of the week, jobless claims and Philly FED Manufacturing PMI numbers were in focus.

In June, the Philly FED Manufacturing PMI fell from 31.5 to 30.7 versus a forecasted 31.0.

While the headline index declined, the employment sub-index was on the rise. The sub-index increased from 19.3 to 30.7.

Jobless claims figures disappointed, however.

In the week ending 11th June, initial jobless claims rose from 375k to 412k. Economists had forecast a decline to 359k.

While the stats did draw attention, the FOMC monetary policy decision, press conference, and economic projections were the key drivers in the week.

A more hawkish than expected outlook on the economy and interest rates led to a Dollar rally.

In the equity markets, the NASDAQ slipped by 0.28%, with the Dow and the S&P500 saw falling by 3.45 % and by 1.91% respectively.

Out of the UK

It was a busier week, with employment, inflation, and retail sales in focus.

The stats were skewed to the positive mid-week.

In April, the unemployment rate slipped from 4.8% to 4.7%, with claimant counts falling by 92.6k in May. In April, claimant counts had fallen by 55.8k.

On Wednesday, inflation figures also pointed to a pickup in inflationary pressures. The UK’s annual rate of inflation accelerated from 1.5% to 2.1%, taking inflation beyond the BoE’s objective.

At the end of the week, retail sales figures disappointed, however, ahead of the coming week’s BoE monetary policy decision.

In May, retail sales fell by 1.4%, with core retail sales sliding by 2.1%. Economist had forecast increases of 1.6% and 1.5% respectively.

Adding further downward pressure on the Pound was a continued rise in the Delta variant of the coronavirus.

In the week, the Pound slid by 2.45% to end the week at $1.3810. In the week prior, the Pound had fallen by 0.35% to $1.4107.

The FTSE100 ended the week down by 1.63%, reversing a 0.92% rise from the previous week.

Out of the Eurozone

It was a quieter week.

Industrial production, trade data, and wage growth figures for the Eurozone were in focus.

It was a mixed set of numbers for the EUR.

While industrial production rose by more than expected in April, the Eurozone’s trade surplus narrowed markedly, with wage growth also slowing significantly in the 1st quarter.

The stats had a relatively muted impact on the EUR, however, with the markets focused on the FED in the week.

Late in the week, finalized inflation and wholesale inflation figures for the Eurozone and Germany also failed to materially move the dial.

In May, the annual rate of inflation accelerated from 1.6% to 2.0%, which was in line with prelim numbers. Consumer prices increased by 0.3% in the month of May, which was also in line with prelim figures. In April, consumer prices had risen by 0.6%.

In Germany, the annual rate of wholesale inflation jumped from 5.2% to 7.2% in May. Month-on-month, the producer price index rose by 1.5%, following a 0.8% increase in April.

For the week, the EUR slid by 2.50% to $1.1863. In the week prior, the EUR had fallen by 0.48% to $1.2108.

The CAC40 ended the week down by 0.48%, with the DAX30 and the EuroStoxx600 falling by 1.56% and by 1.19% respectively.

For the Loonie

It was a quiet week. Manufacturing sales figures for April disappointed on Monday. Sales fell by 2.1%, partially reversing a 3.5% jump from March.

Mid-week, inflation figures were skewed to the positive, however. Canada’s annual core rate of inflation accelerated from 2.3% to 2.8% in May.

In the month of May, both core consumer prices and consumer prices were also on the rise.

Other stats in the week included housing sector data and wholesale sales figures that had a muted impact on the Loonie.

In the week ending 18th June, the Loonie slumped by 3.15% to C$1.2465. In the week prior, the Loonie had fallen by 0.61% to C$1.2158.

Elsewhere

It was a particularly bearish week for the Aussie Dollar and the Kiwi Dollar.

In the week ending 18th June, the Aussie Dollar tumbled by 3.36% to $0.7479, with the Kiwi Dollar sliding by 3.85% to $0.6936.

For the Aussie Dollar

It was a quiet week. Employment figures for May were the key stats of the week.

The numbers were positive, with full employment jumping by 97.5k in May, supporting a 115.2k rise in employment.

In spite of a 0.3 percentage point increase in the participation rate, the unemployment rate fell from 5.5% to 5.1%.

While the stats were skewed to the positive, the RBA meeting minutes from Tuesday pressured the Aussie.

The Board stood by its outlook on monetary policy and a likely hold cash rates until 2024 at the earliest.

Following the FOMC’s hawkish outlook on monetary policy, monetary policy divergence sank the Aussie.

For the Kiwi Dollar

It was a relatively quiet week.

GDP numbers for the 1st quarter provided the Kiwi Dollar with much-needed support at the end of the week.

In the 1st quarter, New Zealands’s economy expanded by 1.6%, recovering from a 1.0% contraction from the 4th quarter of last year. Economists had forecast more modest growth of just 0.5%.

The stats were not enough to shift sentiment towards RBNZ monetary policy, however.

For the Japanese Yen

It was a busier week.

Early in the week, finalized industrial production figures for April impressed. In April, industrial production increased by 2.9%, coming in ahead of a prelim 2.5%. Production had rise by 1.7% in March.

Mid-week, trade data failed to meet forecasts, however.

Exports were up by 49.6% in May, year-on-year, falling short of a forecasted 51.3% jump.

Japan’s trade balance slid from a ¥253.1bn surplus to a ¥187.1bn deficit.

In spite of the fall Japan’s trade balance into a deficit, there were marked increases in exports to the U.S, China, and to Western Europe.

At the end of the week, inflation figures for May failed to move the dial. This was in spite of a pickup in inflationary pressure. The annual rate of core inflation accelerated from -0.1% to 0.1% in May.

On the monetary policy front, the BoJ was also in action at the end of the week. There were no major surprises, however.

The Japanese Yen fell by 0.63% to ¥110.210 against the U.S Dollar. In the week prior, the Yen had fallen by 0.13% to ¥109.66.

Out of China

Industrial production, fixed asset investment, and retail sales figures for May were in focus mid-week.

Once more the stats were skewed to the negative, with weaker year-on-year growth than forecasted and than seen in the month prior.

Industrial production was up by 8.8 in May, which was down from a 9.8% increase in April.

Retail sales was up 12.4%, which was down from 17.7% in April, with fixed asset investments up 15.4%. Fixed asset investments had been up by 19.9% year-on-year in April.

In the week ending 18th June, the Chinese Yuan fell by 0.90% to CNY6.4531. In the week prior, the Yuan had fallen by 0.05% to CNY6.3988.

The CSI300 and the Hang Seng ended the week down by 2.34% and by 0.14% respectively.

The Federal Reserve Starts the Clock at this Month’s FOMC Meeting

For the first time since the onset of the global pandemic, which began in March 2020, the Federal Reserve began dramatic steps to keep the economy from crashing and then create an accommodative monetary environment for the economy to recover once the vaccine rollout began. However, during the last year and a half, the Federal Reserve has remained extremely nebulous as to when they would begin to unwind the current rate of interest which is set near zero, as well as their asset purchasing program of $120 billion per month of mortgage-backed securities and U.S. debt instruments.

When questioned during former FOMC meetings as to their timeline to begin to taper or raise interest rates they answered that it was data-dependent and it is not time to even begin discussing rolling back the current monetary policy. That all changed this week when the FOMC meeting convened and released its statement. It conveyed a different tone and started the clock with a rough timeline as to when they will increase rates (with two rate hikes set for 2023). They also acknowledged that they have begun to talk about talking about tapering.

This sent into motion a virtual meltdown in the financial markets, including the Dow, as well as the commodity markets, with the precious metal markets being hit extremely hard. None of the precious metals were immune to the selloff with gold, silver, platinum, and palladium all losing serious ground in the last three days of trading. Palladium, for example, has given up $339 in the last two days of trading and with today’s decline of $47.70, is currently fixed at $2,464.50. That is an 11.964% drop in two days of trading.

Gold futures basis the most active April 2021 Comex contract traded to a high on Wednesday of $1,865, and after factoring in today’s $10 decline is currently fixed at $1764.40 over $100 of losses accumulated in the last three days of trading. While dollar strength had a definitive influence on gold going lower, it was selling pressure from market participants that had the greatest impact on this week’s losses.

gold june 18

For the third consecutive day, the U.S. dollar index has gained tremendous value and is now fixed at 92.32. The dollar has gained almost 2% (1.97%) in the last three trading days, and a year-to-date gain of roughly 2.2% accounts for almost all of this year’s dollar strength.

USDX june 18

The key to this dynamic change was that for the first time since the beginning of the pandemic, the Federal Reserve announced a nebulous timetable, but a timetable nonetheless, in essence, starting the countdown or clock to when the Federal Reserve begins to roll back components of its very dovish and accommodative monetary policy.

Increased selling pressure was added today when voting Fed member James Bullard, President of the St. Louis Federal Bank, said he expects the central banks to raise their benchmark Fed’s funds rate in 2022. In an interview with CNBC today, James Bullard said that it was “natural for the fed to tilt hawkish at its meeting earlier this week given recent strong inflation readings.”

Although when the Fed will begin to roll back some of their aggressive monetary stances is still not crystal-clear the first steps to developing transparency and notifying the public. They have started the clock announcing their intent to roll back the current accommodative interest rates and quantitative easing and filled in possible timelines being considered. This month’s FOMC meeting was unlike any other FOMC meeting over the last year and ½, and like it or not, the Federal Reserve clarified a rough timeline for the first time since the pandemic began over a year ago.

For those who want more information, please use this link.

Wishing you, as always, good trading and good health,

Gary S. Wagner

 

Fed-Fuelled Dollar Rises as Bears Make for Exits

The dollar index, which tracks the greenback against six major currencies, was up 0.37% at 92.213, its highest since mid-April. That puts the index on pace for a weekly gain of nearly 2%, its best weekly jump in about 14 months.

The jolt to foreign exchanges was triggered on Wednesday by Fed forecasts showing 13 of the 18-person policy board saw rates rising in 2023, versus only six previously, with the median board member tipping two hikes in 2023.

Investors’ risk appetite took another hit after St. Louis Federal Reserve President James Bullard said on Friday that the U.S. central bank’s shift this week toward a faster tightening of monetary policy was a “natural” response to economic growth and particularly inflation moving quicker than expected as the country reopens from the coronavirus pandemic.

“I think this is a direct echo of the 2013 taper tantrum. You are seeing a perceived shift in the Fed’s reaction function driving investors into the safety of the U.S. dollar,” said Karl Schamotta, chief market strategist at Cambridge Global Payments in Toronto.

With investors pricing in a sooner-than-expected tapering of extraordinary U.S. monetary stimulus, the euro and the yen have come under selling pressure over the last few trading sessions.

“Essentially, the entire world was short the dollar going into this, everyone from speculative traders to corporates to investors,” Schamotta said.

“You are seeing a wholesale unwind here,” he said.

The unwind of sizeable bearish bets against the dollar is expected to provide support for the greenback in coming days, investors said.

Goldman Sachs Asset Management’s head of currency, Arnab Nilim, who had been short the U.S. currency headed into the June Fed meeting, told Reuters he has reduced the position and expects the U.S. dollar to perform well, especially against the low-yielding currencies.

With a dovish European Central Bank seemingly far behind the Fed in the monetary policy cycle, traders will be reluctant to buy euros against dollars.

“The U.S. central bank is one step ahead and as a result USD is likely to remain well supported against the EUR,” Commerzbank strategists said in their daily note.

With equity markets hurting, the Australian dollar – seen as a proxy for risk appetite – was down 0.68% at 0.74995, its lowest since December 2020..

Sterling extended its fall against the U.S. dollar on Friday, dropping below $1.39, hurt by the Fed’s hawkish surprise and an unexpected fall in Britain’s retail sales.

The risk-off move hit crypto currencies as well, with bitcoin failing to get a lift from the news that Spanish bank BBVA would open a bitcoin trading service to all private banking clients in Switzerland. Bitcoin was down 7.0% at $35,451.09.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Julien Ponthus and Tom Westbrook; Editing by Catherine Evans, Andrea Ricci and Jonathan Oatis)

 

Investors Brace for Annual Russell Index Rebalancing with Pandemic Imprint

On the last Friday every June, FTSE Russell refreshes the components in its range of indexes, such as the Russell 2000 index of small-cap stocks and Russell 1000 index of large-cap names. Together they make up the Russell 3000 index. There are also style indexes such as the Russell 1000 growth and Russell 2000 value.

It is often the heaviest trading volume day of the year, as investors and fund managers scramble to buy or sell shares to dozens or even hundreds of companies to reflect changes in indexes. Many this year will be watching “meme stocks” like GameStop or AMC Entertainment whose value soared. Companies that went public through mergers with a Specialty Purpose Acquisition Company (SPAC) will also be on the radar.

As of the end of 2020, about $10.6 trillion in investor assets was benchmarked to Russell’s U.S. indexes, according to FTSE Russell.

While FTSE Russell has occasionally tweaked its rules for inclusion in its indexes, such as allowing companies with multiple share classes to remain in or be permitted for inclusion, this year’s reconstitution has no methodology changes.

“Our policy team obviously regularly talks to the market participants and our committees and there were no new rules identified that were needed,” said Catherine Yoshimoto, FTSE Russell Director of Product Management.

Market capitalization for the Russell 3000 index vaulted from $31.4 trillion in 2020 to $47.7 trillion as of Russell’s “rank day” on May 7, 2021.

Stock market volatility took the index on a wild ride in the past two years. In early 2020, stocks sold off when the pandemic hit but then rebounded late in the first quarter to remain about flat from the previous year. This year the market cap for the index surged as stocks have rebounded along with vaccine distribution and a reduction in pandemic-induced lockdowns.

“It’s more assets, more appreciation, you’ve got some stocks that have gotten bigger weight changes so they are going to see more trading volume because there is jumping around, so this is a bigger trade this year than it has been in previous years” said Steve DeSanctis, equity strategist at Jefferies in New York.

The market cap breakpoint Russell uses to determine inclusion in the large-cap Russell 1000 or the small cap 2000 also increased to $5.2 billion in 2021 from $3 billion in 2020.

Perhaps no group of stocks exemplified the pandemic trading environment more than the so-called “meme stocks” such as GameStop and AMC Entertainment.

Shares for those companies had languished and even been shorted by many institutional investors due to poor fundamentals. They took off like a rocket as retail investors using commission-free trading services looked for places to invest government stimulus checks.

The market cap of AMC, for instance, stood at $4.3 billion on the May 7 rank day, but has surged to over $30 billion by June 17, well above the top end of the market cap band for the Russell 2000 index of $7.3 billion set by Russell.

GameStop is expected to graduate to the Russell 1000 large cap index. Managers who have chosen not to own those stocks prefer they stay within the index so as not to disrupt their performance versus the benchmark.

“Where those stocks move will dictate a lot of active manager’s relative performance over the following six, eight or 10 months after the rebalancing,” said Keith Buchanan, senior portfolio manager at Globalt in Atlanta.

“I would rather have AMC in the benchmark because obviously since I don’t own it I think it is overvalued.” Therefore, if AMC falls, his investments would look better against the benchmark.

Goldman Sachs expects 255 additions to the Russell 3000 and 295 deletions, and expects 57 stocks will enter the Russell 1000, including 34 currently in the Russell 2000. Goldman anticipated a total of 279 stock will enter the small cap index, comprised of 232 new components and 47 being knocked down from the large cap index.

A big portion of expected adds will be companies that went public through a merger with a SPAC. Jefferies’ DeSanctis estimates over 25% of additions to the Russell 3000 are SPAC companies.

“It is the year of the SPAC, the year of the meme stock – and here they are having ramifications on real money,” said Ross Mayfield, investment strategist at Baird in Louisville, Kentucky.

During the event every year, volume surges near the close, often resulting in the biggest trading volume day of the year. The Nasdaq and New York Stock Exchange have contingency plans for the event.

KBW analyst Melissa Roberts expects the bulk of passive fund trading related to the reconstitution will occur in the last 15 minutes or so of the session and estimates the net trade will total nearly $75 billion.

“Let’s face it, for the New York Stock Exchange – Russell reconstitution, from a trading standpoint, is the greatest show on earth, that’s where it all comes down,” said Gordon Charlop, a managing director at Rosenblatt Securities in New York.

For a look at all of today’s economic events, check out our economic calendar.

(Reporting by Chuck Mikolajczak; Editing by Alden Bentley and David Gregorio)

 

Gold Weekly Price Forecast – Gold Markets Get Hamered for the Week

Gold markets have had a very rough week as the Federal Reserve has suggested that typing could be coming much quicker than anticipated, as the market reacted very poorly with the US dollar strengthening. The US dollar is like kryptonite for the gold market when it spikes the way it has, as we have seen gold drop below $1800. At this point in time, we are approaching a significant uptrend line, and therefore it is very likely that we are going to see more support in this general vicinity.

Gold Price Predictions Video 21.06.21

However, if we break down below this uptrend line, it is very possible that we could go looking towards the $1700 level and the “double bottom” that sits just below there. Breaking down below that opens up the floodgates for much lower gold prices, opening up the possibility of a move all the way down to the $1500 level rather quickly. If the US dollar continues to strengthen in general, that could very well end up being what happens. I believe at this point, the next week or two will be the most important ones to watch. If we can find some type of stability, then we could keep up the uptrend, but it is obvious to me that the buyers are most certainly in a lot of trouble at this point.

Ultimately, I do think that eventually there will be a great time to buy gold, but right now I just do not see it. At the very least, I would be very interested in what happens over the next two weeks or so, because I believe it will dictate what happens for the next six months.

For a look at all of today’s economic events, check out our economic calendar.

Gold Price Prediction – Prices Whipsaw and Fail to Gain Traction

Gold prices consolidated attempting to move higher but unable to gain any traction and closing near the open at the session’s lows. The price action with a doji day finish and a long upper wick shows a rejection of higher prices. The U.S. 10-year yield continued to move lower, but the 2-year remains firm. The dollar index rallied sharply and finished the week up nearly 2% which paved the way for lower gold prices.

[fx-broker slug=fxtm]

Technical analysis

Gold prices were nearly unchanged but the failure to rise should be seen as a negative. Prices are poised to test the November 2020 lows of 1,764, and then the weekly upward sloping trend line that comes in near 1,730. Resistance is seen near the 50-day moving average at 1,830.  Short-term momentum is negative as the fast stochastic generated a crossover sell signal. Prices are oversold. The current reading on the fast stochastic is 3, below the oversold trigger level of 20 which could foreshadow a correction. The RSI is also oversold printing a reading of 28, below the oversold trigger level of 30 which could foreshadow a correction. Medium-term momentum has turned negative as the MACD (moving average convergence divergence) as the MACD (moving average convergence divergence) index generated a crossover sell signal. The MACD histogram is printing in negative territory with a declining trajectory which points to lower prices.

Bullard See Rate Hike in 2022

CNBC is reporting that St. Louis Federal Reserve President James Bullard told the media outlet that he sees an initial interest rate increase in late-2022 as inflation picks up faster than previous forecasts had anticipated. Bullard at several points described the Fed’s moves this week as “hawkish,” or in favor of tighter monetary policy than what has prevailed since the onset of the Covid-19 pandemic.

Wall Street Smart Money Is Accumulating Physical Silver Ahead Of New Basel III Regulations And Price Explosion To $44 An Ounce

Recently, Gold and Silver have somewhat stalled after a fairly solid upside price trend in April and May 2021.  Looking at the longer-term Weekly Silver chart, we believe Silver is ready to pounce with a big move higher.

The second half of 2021 will welcome BASEL III (likely) and a renewed focus by the US Federal Reserve (and Global Central banks) working to contain inflationary aspects of the recovering global economy while also attempting to support continued growth objectives.  I believe precious metals, in particular – Silver, have shown a very unique “Accumulation Phase” over the past 12+ months that may lead to a big upside breakout rally when it breaches the $28.50 level.

SILVER WAITING FOR THE OPPORTUNE MOMENT TO POUNCE – ARE YOU READY?

This Weekly Silver Futures chart highlights the On Balance Volume Accumulation Phase as well as our price cycle analysis suggesting Silver is stalling just below resistance near $28.50.  My team and I believe the new upward cycle phase, in addition to the massive Accumulation taking place, suggests that Silver is currently lying in wait – ready to pounce on a big upward price trend once the $28.50 level is breached.

ADL MODEL SUGGESTS $40 TO $44 UPSIDE TARGET IS REAL

Our proprietary Adaptive Dynamic Learning (ADL) Price Modeling system suggests a continued bullish price trend is likely on the Monthly Silver chart, shown below, and that a peak is likely near $40 to $44 near December 2021.  This bullish price dynamic is based on the ADL’s ability to map out unique price and technical setups in the past, then align those unique price DNA markers with current price setups.

What may happen over the course of the next few weeks is that Silver may continue to attempt to consolidate below $28.50 as the markets react to the FOMC announcements and other market facets.  Once the markets digest the real factors related to inflationary concerns, what the US Fed and Global Central Banks need to do is to address these concerns, and the future expectations related to forward monetary policies and expectations. Personally, I believe Silver will move above $28.50 sometime in July (or shortly afterward) and begin to move dramatically higher – targeting $40 or higher.

My team and I believe the end of 2021 and nearly all of the next 2 to 3+ years will be full of incredibly big price trends for traders to take advantage of.  This setup in Silver suggests we are only starting a multi-year bullish price rally phase in precious metals (very similar to the 2003 to 2007 rally in Gold/Silver).  If you have followed precious metals long enough, you understand the biggest moves in Gold and Silver happened after the 2006~07 stock market peak.

That means that we are just starting to see an incredible opportunity in the US stock market and precious metals related to volatility, trends and price rotations. Now is the time you should start preparing for what is to come and learn how to take advantage of these incredible opportunities.

Want to know how our BAN strategy is identifying and ranking various sectors and ETFs for the best possible opportunities for future profits? Please take a minute to learn about my BAN Trader Pro newsletter service and how it can help you identify and trade better sector setups.  My team and I have built this strategy to help us identify the strongest and best trade setups in any market sector.  Every day, we deliver these setups to our subscribers along with the BAN Trader Pro system trades.  You owe it to yourself to see how simple it is to trade 30% to 40% of the time to generate incredible results.

Have a great Friday!

For a look at all of today’s economic events, check out our economic calendar.

Chris Vermeulen
Chief Market Strategist
www.TheTechnicalTraders.com

 

Gold Price Forecast – Gold Markets Continue to See Downward Pressure

Gold markets have tried to rally a bit during the trading session on Friday, but then gave back the gains to show quite a bit of negativity yet again. Ultimately, gold does not look healthy, and I think we are going to continue dropping towards the $1750 level. Quite frankly if we could not hold on to any type of recovery, this tells me that there is simply no demand. I think at this point, it is very likely that the market will break down below there and perhaps go looking towards the double bottom at this rate.

Gold Price Predictions Video 21.06.21

There is a double bottom just below the $1700 level, and if that gives way it could really start to send this market into a tailspin. I do not necessarily think that happens, but at the US dollar continues to strengthen, that could very well be what ends up being the endgame. On the other hand, the US dollar finally comes down, we could see this market turn right back around so it is going to be very important watch the US Dollar Index.

As far as buying is concerned, if we can break above the $1800 level it is a sign that perhaps will go looking towards the gap above to fill it as we see quite often in the futures markets. One thing is for sure though, this is a very negative looking market all of the sudden, and it certainly looks as if the selling pressure is going to be very difficult to overcome based upon the massive gap and the relentless pressure that we have seen multiple times over the last several days.

For a look at all of today’s economic events, check out our economic calendar.

FOMC Sees Two Rate Hikes in 2023. Gold Didn’t Like It!

On Wednesday (June 16, 2021), the FOMC has published its newest statement on monetary policy . The statement was barely changed. The main alteration is that the Fed has ceased saying that “the pandemic is causing tremendous human and economic hardship across the United States and around the world”. Furthermore, with the CPI annual rate jumping to 5% in May, the US central bank acknowledged that inflation is not any longer “running persistently below this longer-run goal”. Hence, both modifications are slightly hawkish , as the Fed noticed an improvement in the epidemiological situation, as well as higher inflation. Bad news for gold.

However, the statement was only slightly changed, so the investors focused more on the accompanying dot-plot and Powell’s press conference instead. According to the fresh economic projections , the Fed forecasts higher GDP growth and higher inflation this year, as the table below shows.

As one can see, the FOMC expects that the GDP will soar 7% in 2021, compared to a 6.5% rise expected in March. They also assume that the pace of economic growth will be slightly higher in 2023. Meanwhile, the Fed officials believe now that the PCE inflation (core PCE) will jump to 3.4% (3%) this year , compared to 2.4% (2.2%) seen in March. They also forecast a slightly lower unemployment rate in 2022.

But the most impactful change occurred in the expected path of the federal funds rate . The FOMC members now forecast that the US policy rate will be 0.6% at the end of 2023, an important upward change from 0.1% projected in March. In other words, the US central bankers believe that two interest rate hikes will be appropriate in 2023 . It means that they started to think about tapering, which is fundamentally negative for gold prices.

Indeed, Powell said during his post-meeting press conference that we can “think of this meeting that we had as the talking about talking about meeting [at which the Fed will start tapering], if you like”.

Implications for Gold

What does the recent FOMC meeting imply for the gold market? Well, the Fed struck again. As a result, the price of gold plunged. As the chart below shows, the London P.M. Fix slid from about $1,865 on Tuesday to $1779 on Thursday.

The reason is simple : the fresh dot-plot shows that a majority of the Fed officials currently forecasts two quarter-point rate hikes in 2023 . 13 of 18 FOMC members see some interest rate increases in 2023 compared to just 7 members in March. Moreover, 7 participants now predict some upward moves next year. These changes lifted market expectations of future interest rates . In consequence, the bond yields increased, which raised the opportunity costs of holding non-yielding bullion . Furthermore, the more hawkish stance of the Fed strengthened the US dollar, creating downward pressure on gold prices. In other words, the new economic outlook revealed some hawks among the FOMC members and that there might be less tolerance toward higher inflation than previously thought.

However, the bullish case for gold is not over yet . After all, the Fed maintained its very accommodative monetary policy, and it will not hike interest rates this year and probably not also in 2022. Additionally, the dot-plot is not the official projection of the future path of the federal funds rate, so it should be taken with a grain of salt. A lot may happen by 2023. Also, the Fed leadership seems to be more dovish than many of the regional Fed presidents.

Last of all, Powell repeated that inflation is merely transitory. But why hike interest rates if inflation is merely transitory and federal debt is ballooning? Hence, it might be the case that the Fed is testing the markets. High inflation is still with us, and it may be more lasting than the Fed believes. Even with two interest rate hikes, the real interest rates should stay negative.

Having said that, the hawkish Fed’s statement and hawkish economic projections are fundamentally negative for the yellow metal in the medium term . The chances of a replay of 2013 have increased. It seems that gold may struggle without an inflationary turmoil, stagflation , the dovish counter-strike at the Fed, or a debt crisis .

If you enjoyed today’s free gold report , we invite you to check out our premium services. We provide much more detailed fundamental analyses of the gold market in our monthly Gold Market Overview reports and we provide daily Gold & Silver Trading Alerts with clear buy and sell signals. In order to enjoy our gold analyses in their full scope, we invite you to subscribe today . If you’re not ready to subscribe yet though and are not on our gold mailing list yet, we urge you to sign up. It’s free and if you don’t like it, you can easily unsubscribe. Sign up today!

For a look at all of today’s economic events, check out our economic calendar.

Arkadiusz Sieron, PhD
Sunshine Profits: Effective Investment through Diligence & Care

 

Gold: The Fed Wreaked Havoc on the Precious Metals

However, we should stay alert to any possible changes, as no market moves in a straight line. Tread carefully.

On a side note, while I didn’t check it myself (well, it’s impossible to read every article out there), based on the correspondence I’m receiving, it appears I’ve been the only one of the more popular authors to be actually bearish on gold before the start of this week. Please keep that in mind, along with me saying that yesterday’s decline is just the beginning, even though a short-term correction might start soon. Having that in mind, let’s discuss what the Fed did (and what it didn’t do) in greater detail.

Look What You Did

With the U.S. Federal Reserve’s (FED) reverse-repo nightmare frightening the liquidity out of the system, I highlighted on Jun. 17 that the FED raised the interest rate on excess reserves (IOER) from 0.10% to 0.15%.

I wrote:

The FED hopes that by offering a higher interest rate that it will deter counterparties from participating in the reverse repo transactions. However, whether it will or whether it won’t is not important. The headline is that the FED is draining liquidity from the system and increasing the IOER is another sign that the U.S. federal funds rate could soon seek higher ground.

Please see below:

To explain, the red line above tracks the U.S. federal funds rate, while the green line above tracks the IOER. If you analyze the behavior, you can see that the two have a rather close connection. And while we don’t expect the FED to raise interest rates anytime soon, officials’ words, actions and the macroeconomic data signal that the taper is likely coming in September.

And in an ironic twist, while the question of whether it will or whether it won’t seemed reasonable at the time, the tsunami of reverse repurchase agreements on Jun. 17 signal that 0.15% just isn’t going to cut it. Case in point: while the FED hoped that the five-basis-point olive branch would calm institutions’ nerves, a record $756 billion in excess liquidly was shipped to the FED on Jun. 17 . For context, it was nearly $235 billion more than the daily amount recorded on Jun. 16.

Please see below:

To explain the significance, I wrote previously:

A reverse repurchase agreement (repo) occurs when an institution offloads cash to the FED in exchange for a Treasury security (on an overnight or short-term basis). And with U.S. financial institutions currently flooded with excess liquidity, they’re shipping cash to the FED at an alarming rate.

The green line above tracks the daily reverse repo transactions executed by the FED, while the red line above tracks the U.S. federal funds rate. Moreover, notice what happened the last time reverse repos moved above 400 billion? If you focus your attention on the red line, you can see that after the $400 billion level was breached in December 2015, the FED’s rate-hike cycle began. Thus, with current inflation dwarfing 2015 levels and U.S. banks practically throwing cash at the FED, is this time really different?

Furthermore, I noted on Jun. 17 that the FED’s latest ‘dot plot’ was a hawkish shift that market participants were not expecting.

I wrote:

The perceived probability of a rate hike by the end of 2022 sunk to a 2021 low on Jun. 12. However, after the FED’s material about-face on Jun. 16, I’m sure these positions have been recalibrated.

Please see below:

And as if the chart above had been inverted, the perceived probability of a rate hike by the end of 2022 has now surged to more than 90%.

The Death Toll of June 17th

In addition, while I’ve been warning for months that the bond market’s fury would eventually upend the PMs, not only has the FED’s inflationary misstep rattled the financial markets, but the U.S. 30-year fixed-rate mortgage (FRM) jumped to 3.25% on Jun. 17.

Please see below:

Source: Mortgage News Daily

Furthermore, please read what Matthew Graham, COO of Mortgage News Daily, had to say:

“Markets were somewhat surprised by the Fed’s rate hike outlook. Granted, the Fed Funds Rate (the thing the Fed would actually be hiking) doesn’t control mortgage rates, but the outlook speaks to how quickly the Fed would need to dial back its bond buying programs (aka “tapering”). Those programs definitely help keep rates low. The sooner the Fed begins tapering, the sooner mortgage rates will see some upward pressure .”

To that point, with tapering prophecies officially morphing from the minority into the consensus, the PMs weren’t the only commodities sent to slaughter on Jun. 17. For example, the S&P Goldman Sachs Commodity Index (S&P GSCI) plunged by 2.37% as the inflationary unwind spread. For context, the S&P GSCI contains 24 commodities from all sectors: six energy products, five industrial metals, eight agricultural products, three livestock products and two precious metals.

Exacerbating the selling pressure, China’s National Food and Strategic Reserves Administration announced on Jun. 17 that it would release its copper, aluminum and zinc supplies “in the near future” in a bid to contain the inflationary surge that’s plaguing the region. As a result, if the psychological forces that led to the surge in cost-push inflation come undone, the USD Index could move from the outhouse to the penthouse.

To explain, I wrote on Apr. 27:

Why is the behavior of the S&P GSCI so important? Well, if you analyze the chart below, you can see that the S&P GSCI’s pain is often the USD Index’s gain.

To explain, the red line above tracks the USD Index, while the green line above tracks the inverted S&P GSCI. For context, inverted means that the S&P GSCI’s scale is flipped upside down and that a rising green line represents a falling S&P GSCI, while a falling green line represents a rising S&P GSCI. More importantly, though, since 2010, it’s been a near splitting image.

Inflation Is Still There

In the meantime, though, inflationary pressures are far from contained. And while the S&P GSCI’s plight would be a boon for the USD Index, the greenback still has plenty of other bullets in its chamber. Case in point: with the FED poised to taper in September and investors underpricing the relative outperformance of the U.S. economy, VANDA Research’s latest FX Outlook signals that over-optimism abroad could lead to a material re-rating over the summer.

Please see below:

To explain, the chart on the right depicts investors’ expectations of economic strength across various regions. If you analyze the second (CAD) and the third (GBP) bars from the right, you can see that positioning is more optimistic than the economic growth that’s likely to materialize. Conversely, if you analyze the first bar (USD) from the left, you can see that positioning is more pessimistic than the economic growth that’s likely to materialize. As a result, with U.S. GDP growth poised to outperform the U.K., Canada, and the Eurozone, an upward re-rating of the USD Index could intensify the PMs selling pressure over the medium term.

On top of that, while the inflation story is far from over (and will pressure the FED to taper in September), the Philadelphia FED released its Manufacturing Business Outlook Survey on Jun. 17. And while manufacturing activity dipped in June, “the diffusion index for future general activity increased 17 points from its May reading, reaching 69.2, its highest level in nearly 30 years .”

In addition, “the employment index increased 11 points, recovering its losses from last month,” and “the future employment index rose 2 points … [as] over 59 percent of the firms expect to increase employment in their manufacturing plants over the next six months, compared with only 5% that anticipates employment declines.” For context, employment is extremely important because a strengthening U.S. labor market will likely put the final nail in QE’s coffin.

But saving the best for last:

“The prices paid diffusion index rose for the second consecutive month, 4 points to 80.7, its highest reading since June 1979 . The percentage of firms reporting increases in input prices (82 percent) was higher than the percentage reporting decreases (1 percent). The current prices received index rose for the fourth consecutive month, moving up 9 points to 49.7, its highest reading since October 1980 .”

Please see below:

Source: Philadelphia FED

Investment Clock Is Ticking

Also, signaling that QE is living on borrowed time, Bank of America’s ‘Investment Clock’ is ticking toward a bear flattener in the second half of 2021. For context, the term implies that short-term interest rates will rise at a faster pace than long-term interest rates and result in a ‘flattening’ of the U.S. yield curve.

Please see below:

To explain, the circular reference above depicts the appropriate positioning during various stages of the economic cycle. If you focus your attention on the red box, you can see that BofA forecasts higher interest rates and lower earnings per share (EPS) for S&P 500 companies during the back half of the year.

As further evidence, not only is the FED’s faucet likely to creak in the coming months, but fiscal stimulus may be nearing the dry season as well.

Please see below:

To explain, the blue bars above track the U.S. budget deficit as a percentage of the GDP. If you analyze the red circle on the right side of the chart, you can see that coronavirus-induced spending was only superseded by World War Two. Moreover, with the law of gravity implying that ‘what goes up must come down,’ the forthcoming infrastructure package could be investors’ final fiscal withdrawal.

The Housing Market

Last but not least, while the S&P 500 has remained relatively upbeat in recent days, weakness in the U.S. housing market could shift the narrative over the medium term.

Please see below:

To explain, the red line above tracks the S&P 500, while the green line above tracks U.S. private building permits (released on Jun. 16). If you analyze the arrows, you can see that the former nearly always rolls over in advance of the latter . For context, the S&P 500 initially peaked before building permits in 2018 and alongside in 2015. However, in 2018, when the S&P 500 recovered and continued its ascent – while building permits did not – the U.S. equity benchmark suffered a roughly 20% drawdown. Thus, if you analyze the right side of the chart, you can see that building permits peaked in January and have declined significantly. And if history is any indication, the S&P 500 will eventually follow suit.

In conclusion, the PMs imploded on Jun. 17, as taper trepidation and the USD Index’s sharp re-rating dropped the guillotine on the metals. And with the FED’s latest ‘dot plot’ akin to bullet holes in the PMs, the walking wounded is still far from a recovery. With inflation surging and the FED likely to become even more hawkish in the coming months, the cycle has materially shifted from the goldilocks environment that the metals once enjoyed. And with the two-day price action likely the opening act of a much larger play, the PMs could be waiting months for another round of applause.

Thank you for reading our free analysis today. Please note that the above is just a small fraction of today’s all-encompassing Gold & Silver Trading Alert. The latter includes multiple premium details such as the targets for gold and mining stocks that could be reached in the next few weeks. If you’d like to read those premium details, we have good news for you. As soon as you sign up for our free gold newsletter, you’ll get a free 7-day no-obligation trial access to our premium Gold & Silver Trading Alerts. It’s really free – sign up today.

For a look at all of today’s economic events, check out our economic calendar.

Przemyslaw Radomski, CFA
Founder, Editor-in-chief
Sunshine Profits: Effective Investment through Diligence & Care

* * * * *

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits’ associates only. As such, it may prove wrong and be subject to change without notice. Opinions and analyses are based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are deemed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski’s, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Silver Price Daily Forecast – Silver Tries To Rebound After Yesterday’s Strong Sell-Off

Support At $25.80 Stays Strong

Silver  received support at $25.80 and is trying to rebound while the U.S. dollar is gaining ground against a broad basket of currencies.

The U.S. Dollar Index has recently managed to get above the resistance at 92.15 and made an attempt to settle above the next resistance level at 92.30. If the U.S. Dollar Index settles above 92.30, it will head towards the resistance at 92.50 which will be bearish for silver and gold price today.

It should be noted that silver has managed to ignore dollar’s strength thank to declining Treasury yields, but the continuation of dollar’s upside move will likely put some pressure on precious metals.

Meanwhile, gold did not manage to get back above the resistance at $1800 and declined towards the support at $1775. If gold manages to settle below this level, it will head towards the support at $1750 which will be bearish for silver.

Gold/silver ratio failed to settle above the resistance at 68.70 and remains in the range between the support at the 50 EMA at 67.85 and the resistance at 68.70. If gold/silver ratio gets above 68.70, it will gain additional upside momentum which will be bearish for silver.

Technical Analysis

silver june 18 2021

Silver has recently made an attempt to settle above the resistance at $26.30 but lost momentum and pulled back towards $26.00. The nearest support level for silver is located at $25.80. If silver declines below this level, it will head towards the next support at $25.50.

A successful test of the support at $25.50 will open the way to the test of the support at $25.30. If silver gets below this level, it will head towards the next support which is located at $25.00.

On the upside, silver needs to settle above the resistance at $26.30 to have a chance to gain upside momentum in the near term. The next resistance level is located at $26.65. If silver manages to settle above this level, it will head towards the resistance at $27.00.

For a look at all of today’s economic events, check out our economic calendar.

Price of Gold Fundamental Daily Forecast – Fundamentals Bearish but Showing Signs of Attempted Consolidation

Gold futures are trading higher, but well off the high of the session with the price action being influenced by Treasury yields and the U.S. Dollar. The early strength is likely being fueled by aggressive counter-trend value buying with the market currently testing a key 50% to 61.8% retracement zone.

Position-squaring ahead of the weekend could also be providing some support. Nonetheless, the fundamentals remain bearish, which supports the notion that the choppy trade is being fueled mostly by positions adjustments.

At 12:43 GMT, August Comex gold is trading $1779.40, up $4.60 or +0.26%. This is down from an intraday high of $1797.90.

With technical factors providing guidance today, our chart work shows traders are attempting to consolidate inside the key retracement zone. Overcoming $1798.80 will indicate the selling is getting weaker or the short-covering stronger. A continuation of the down trend under $1770.40 will indicate the selling pressure is getting stronger.

Gold may be trying to consolidate on Friday, but it’s still in a position to post one of its worst weekly losses in months.

While gold is being pressured, the U.S. Dollar is headed for its best week in nearly nine months on Friday, with rival currencies struggling to shake the pressure exerted by the Federal Reserve’s hawkish shift in tone. The stronger greenback is helping to dampen foreign demand for dollar-denominated gold.

It’s actually a combination of a rising Treasury yields and U.S. Dollar that are pressuring gold futures with investors pricing in a sooner-than-expected tapering of extraordinary U.S. monetary stimulus.

On Wednesday, the Federal Reserve signaled it would be considering whether to taper its asset purchase program meeting by meeting and brought forward projections for the first post-pandemic interest rate hikes into 2023.

Daily Forecast

The direction of the gold market on Friday will be determined by trader reaction to the technical retracement zone at $1798.80 to $1770.40. Short-covering could increase on a sustained move over $1798.80, while continued pressure under $1770.40 will indicate the selling pressure is getting stronger.

Oversold conditions could also trigger a rebound rally with analysts from Goldman Sachs saying, “In a now familiar pattern, the recent gold move has outpaced both the move in the dollar and in real rates, indicating it is due for an upward price reversal in coming weeks.

We’ll know if they’re right if aggressive counter-trend buyers can overcome $1798.80 with conviction.

For a look at all of today’s economic events, check out our economic calendar.

Stocks Decline As Traders Remain Worried About Rate Hikes

Fed’s Bullard Believes That Fed Will Hike Rates In 2022

S&P 500 futures are down by 1% in premarket trading after Fed’s Jim Bullard stated that the Fed may start raising rates at the end of 2022.

Treasury yields have recently started to rebound after yesterday’s pullback, but they stay well below highs that were reached after Fed meeting.

Meanwhile, U.S. dollar continues to gain ground against a broad basket of currencies, and it looks that it’s a major short squeeze. Stronger dollar is bearish for dollar-denominated stocks, so dollar’s recent move adds to the pressure.

However, it remains to be seen whether the market is ready for a material pullback. Yesterday’s attempt to gain downside momentum was quickly bought, highlighting the strength of the current bullish trend in the market.

Precious Metals Try To Rebound Despite Stronger Dollar

Gold has recently made an attempt to settle back above the resistance at $1800 but lost momentum and pulled back towards $1775. Silver also tried to gain more ground, but its upside move was stopped at $26.50.

It is not clear whether gold and silver will be able to move higher in case the U.S. dollar continues its upside move. Most likely, some traders would like to take positions in precious metals after the strong pullback, but it remains to be seen whether this support will be sufficient enough to push gold and silver to higher levels.

Meanwhile, gold mining stocks are gaining some ground in premarket trading after a brutal sell-off on Thursday.

WTI Declines Towards The $70 Level

WTI oil is currently trying to get to the test of the $70 level as the recent sell-off in commodity markets pushed oil traders to take some profits after the strong rally.

If WTI oil manages to settle below the $70 level, it will gain additional downside momentum which will be bearish for oil-related stocks. I’d note that oil segment suffered a serious sell-off during yesterday’s trading session, and shares of oil majors like Exxon Mobil or BP are under significant pressure in premarket trading.

For a look at all of today’s economic events, check out our economic calendar.

Is Bitcoin An Investable Asset Class? Goldman Sachs Analysts Are Divided Over This

Bitcoin has gained massive adoption over the past year, with traditional banks and institutional investors entering the market in droves. However, there is still an ongoing debate about Bitcoin’s position as an asset class. This has caused a difference in opinion amongst Goldman Sachs analysts.

Goldman Sachs analysts can’t decide on Bitcoin’s position

Goldman Sachs has been changing its views regarding Bitcoin for a while now. Some of the bank analysts don’t see it as an investable asset class, while the others do. This latest development comes despite the bank expanding its presence in the cryptocurrency market.

Wall Street investment bank Goldman Sachs published a report titled “Digital Assets: Beauty Is Not in the Eye of the Beholder.” In the report, the bank analysts said the leading cryptocurrency is not a long-term store of value or an investable asset class. The views from this report contradict Goldman Sachs’ May 21 report titled “Crypto: A New Asset Class?” In this report, Matthew McDermot, global head of digital assets at Goldman Sachs, classified Bitcoin as an investable asset class after its performance over the years.

The investment bank has changed its decisions on Bitcoin numerous times over the past few years. Last year, the Bitcoin published a presentation detailing reasons why it thinks Bitcoin is not an investable asset class.

In this latest report, the Goldman Sachs analysts said they wanted to play it safe regarding Bitcoin. They didn’t want to attach any positive or negative sentiment to the cryptocurrency. The report said, “We have refrained from repeating the positive and negative hype that surrounds this ecosystem because we do not want clients to be seesawed, even swayed by a cacophony of assertions, many of them unsubstantiated.”

Bitcoin’s price has historically gone up

Despite the argument regarding Bitcoin and its status as an asset class, its price has gone up since it was first launched in 2009. The surge in Bitcoin’s value comes despite intermittent bear markets such as the one experienced in 2018 and 2019.

BTC/USD chart. Source: FXEMPIRE

At the time of this report, Bitcoin’s (BTC) price is down by 3.6% over the past 24 hours, and it is trading below the $40k mark again. Bitcoin has struggled to surpass the $40k mark in recent weeks, and it is still nearly 40% down from its all-time high price of $65,000.

Daily Gold News: Friday, June 18 – Gold’s Rebound Following $100 Decline

The gold futures contract lost 2.05% on Thursday, as it extended its Wednesday’s decline following the FOMC Statement release. On June 1 gold price was the highest since early January. In April the market has bounced from the support level marked by March 8 local low of $1,663.30. Since then it has been advancing. This morning gold is trading closer to $1,800 price level after bouncing from Thursday’s low of $1,767.90, as we can see on the daily chart (the chart includes today’s intraday data):

Today gold is 1.0% higher. What about the other precious metals? Silver is 1.9% higher, platinum is 1.5% higher and palladium is 2.0% higher today. So precious metals are higher this morning.

Yesterday’s Unemployment Claims release has been worse than expected at 412,000. Today we won’t get any new important economic data releases.

Where would the price of gold go following Wednesday’s FOMC Statement? We’ve compiled the data since January of 2017, a 51-month-long period of time that contains of thirty five FOMC releases. The first chart shows price paths 5 days before and 10 days after the FOMC release. We can see that the biggest 10-day advance after the FOMC day was +10.5% after March 15, 2020 release and the biggest decline was -7.2% after March 3, 2020 release. But we’ve had an increased volatility following coronavirus fear then.

The latest FOMC Statement release came out on April 28. Gold price was 2.8% higher 10 days after the release.

The following chart shows average gold price path before and after the FOMC releases for the past 35 releases. The market was usually declining ahead of the FOMC day. Then it was going up for a week-long period. We can see that on average, gold price was 0.64% higher 10 days after the FOMC Statement announcement.

Below you will find our Gold, Silver, and Mining Stocks economic news schedule for today:

Friday, June 18

  • 2:30 a.m. Japan – BOJ Press Conference

For a look at all of today’s economic events, check out our economic calendar.

Paul Rejczak
Stock Selection Strategist
Sunshine Profits: Analysis. Care. Profits.

* * * * *

Disclaimer

All essays, research and information found above represent analyses and opinions of Paul Rejczak and Sunshine Profits’ associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Paul Rejczak and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Rejczak is not a Registered Securities Advisor.

By reading Paul Rejczak’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Paul Rejczak, Sunshine Profits’ employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

 

Is This The Ultimate Time To ‘Buy The Dip’ In Silver?

Federal Reserve Chair Jerome Powell also very clearly stated that their forecast should be taken with “a significant grain of salt” during his press conference.

Basically, the markets have been distracted by the narrative of higher inflation and higher interest rates, but they seem to have completely ignored the fact that any potential hikes are at least two years away. A lot can happen in two years!

If you look at the bigger picture, fundamentally, nothing has really changed. The Fed has reiterated that it will keep its benchmark interest rate near zero until 2023. It will continue with its massive quantitative easing program, while allowing inflation to run hotter than usual, for some time yet.

And let’s not forget the whole ‘Infrastructure spending boom and Green Energy Revolution’, which is currently taking shape across the global economy.

That still presents a significant window of opportunity for Silver traders, over the next two years at least.

Silver is not only an excellent inflation hedge, but it’s also a key component in everything from electric vehicles, renewable energy to 5G technology. Based on our proprietary research, photovoltaic demand for silver could exceed 3000 tonnes in 2021, while the 5G rollout – which is only just beginning – will be a major driver of demand for years to come.

Goldman Sachs see silver prices rising to $33 an ounce in H2 2021, boosted both investment and industrial demand for the precious metal – and our research suggests similar.

In my opinion, Silver is still definitely the best trade right now and any substantial pullbacks should be viewed as buying opportunities.

Where are prices heading next? Watch The Commodity Report now, for my latest price forecasts and predictions:

For a look at all of today’s economic events, check out our economic calendar.

GOLD is Bearish Below 1790 Zone

1785 is where we could see the price rejecting. The structure is bearish with a possible retest of 1760 zone. If we see the D L3 zone hit we could see a move to the upside. 1790 should hold and that means bears will go stronger during the later US session. Watch for profit taking.

For a look at all of today’s economic events, check out our economic calendar.

Cheers and safe trading,

Nenad

 

Largest One-Day Drop This Year, Where Could Gold Trade to From Here?

Currently, gold futures basis, the most active August contract, is trading at $1770.90, a net decline of $90.50 or 4.85%.

This follows yesterday’s $43.80 decline, which occurred after the FOMC meeting had concluded, the Fed statement was released, and Chairman Jerome Powell held his press conference. There were two primary changes to the Federal Reserve’s mandate in regards to their current monetary policy. First, the “dot plot” revealed that voting members felt it was prudent to forecast two interest rate hikes in 2023 rather than one. But it was also that they began to “talk about talking about” tapering.

Yesterday’s substantial decline in gold prices was not a “one and done of event”. This major selloff was in response to the FOMC and Chairman Powell’s statements. The Federal Reserve left interest rates near zero and is forecasting to keep the current Fed’s funds rate until at least the end of 2022. They also signaled a possible timeline to begin tapering which is now believed to be as early as March of next year.

USDX chart 0

Concurrently the last two days resulted in a strongly fueled rally in the U.S. dollar. Considering that the dollar opened at 90.15 yesterday and closed at 91.92 today, gaining almost 2% (1.963%), today’s move accounts for almost the total year-to-date gains of the dollar index, which is 2.2%.

Dollar strength was certainly a contributing factor to gold’s sharp selloff over the last two days. Still, gold’s drop of almost 5% today demonstrates that selling pressure accounted for the vast majority of gold’s two-day price decline from $1860 to $1774.

chart 1

So where could gold trade from here? On a technical basis, the lows achieved today at $1767.30 came right to the 61.8% Fibonacci retracement of the rally, which began in April at $1680 up to the highs of May at $1918. If gold is to find support at this level, it will likely trade sideways at best. However, the next retracement level, the 78% Fibonacci retracement level occurs at $1730, which is also a likely point where gold could find support.

chart 2 long data set

Using a larger data set to create a Fibonacci retracement from the lows of March 2020 when gold was trading at $1450 and concluding at the record high of $2088, gold futures closed very near the 50% retracement of $1768.70. Below that price point is the 38.2% Fibonacci retracement at $1693.

Gold as a haven asset has lost some luster and could trade to the price points mentioned above. However, the industrial metals also sold off strongly over the last two days of trading. As a response to the Fed’s statement, copper might become oversold.

A time to look at copper, not yet, but how it differs from the haven group

While copper prices have also dropped sharply mostly as a direct result of efforts by China to dampen the current rally in commodities. In response, they have released copper from their state stockpiles after copper hit a 13 year high. According to Dow Jones Newswires, “As the world’s biggest buyer of a range of industrial commodities, China is using its market heft to try to quell the sharp rise in global metal prices over the past 12 months, including a 67% surge in copper, a bellwether for macroeconomic health. Economic stimulus measures and a broad resumption of global economic activity from pandemic lows have spurred a spree of buying in China and elsewhere.”

However, demand for copper as economies worldwide recover from the global recession will continue, and the shrinking supply will at some point pressure copper prices to move higher.

chart 3 copper june 17

Simply put copper demand will continue to grow and the supply to meet the demand will come slowly at best. According to Barron’s.com, “Catching up with copper demand, however, will prove to be a challenge. It takes roughly 10 years to build a new copper mine and years just to expand an existing one, so even if copper were at a whopping $10 a pound, a “meaningful supply response would not be possible in the near term,” Fine says. If copper demand persists or accelerates, it is “already too late” for the mining industry to meet that level of demand, he adds. A “meaningful shortfall” is assured unless demand collapses.”

The fundamentals will, at some point pressure copper back into a strong rally.

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Wishing you, as always, good trading and good health,

Gary S. Wagner

 

Gold Price Futures (GC) Technical Analysis – Trader Reaction to $1798.80 – $1770.40 Sets Near-Term Tone

Gold futures are down over 2% late Thursday as the U.S. Dollar gained ground after the U.S. Federal Reserve struck a hawkish tone on monetary strategy. A majority of 11 Fed officials on Wednesday projected at least two quarter-point rate hikes for 2023, although officials pledged to keep policy supportive for now to encourage a jobs recovery.

At 20:32 GMT, August Comex gold is trading $1774.25, down $38.25 or -2.11%.

Adding to gold’s headwinds, the U.S. central bank said it would consider whether it should taper its asset purchases at every subsequent policy meeting.

The market was also pressured by a strong U.S. Dollar, and the news that China would take steps to cool off rising prices.

Daily August Comex Gold

Daily Swing Chart Technical Analysis

The main trend is down according to the daily swing chart. A trade through the April 29 main bottom at $1756.80 will reaffirm the downtrend. This could trigger a further break into the April 13 main bottom at $1725.50.

A trade through $1906.90 will change the main trend to up. This is highly unlikely, but since the market is down seven sessions from its last main top, we have to start watching for a closing price reversal bottom. This won’t change the main trend to up, but if confirmed, it could trigger the start of a 2 to 3 day correction.

The main range is $1678.40 to $1919.20. The market is currently testing the lower or Fibonacci level of its retracement zone at $1770.40. The 50% level is up at $1798.80.

Short-Term Outlook

We’re going to be watching the price action and reading the order flow at $1770.40 over the short-term to determine if the buying is starting to become stronger than the selling at this level.

If $1770.40 fails as support then look for the selling to possibly extend into $1756.80. If this fails then look for a possible acceleration to the downside with the next target the April 13 main bottom at $1725.50.

Essentially, we’re going to be watching to see if the liquidation selling will continue, or if counter-trend value-seekers will step in to stop the price slide.

For a look at all of today’s economic events, check out our economic calendar.