Wednesday, November 30, 2016

What's Happening With $Gold?

Ever since the election surprise of Donald Trump, two things have happened in the stock market. The Dow and S&P 500 have recorded record highs and the precious metals have been pushed to the sidelines along with Hillary.
Why, you ask? Good question because the Trump agenda appears to be extremely inflationary which is a hallmark selling point for metals. The recent price action is based on beliefs. Clues are revealed in Trump's choices for cabinet positions. Sadly, he is picking the same old same old. However, this could be an appeasement for the Republican congress.  As this pans out, there will be doubts about the vein of riches flowing from his administration. The market will pullback a bit. The metals will bounce, and yet, nothing concrete will be known. This is how I see it...
100 Days
The market will give Trump a honeymoon. During that span the market will reveal two quarters of earnings. After the big jump in GDP of 3.2% for the last quarter, I see another drop in the GDP in first quarter. This makes for a range bound market. In addition, the market expects the earnings recession to end. This has nothing to do with the election results. The market will also adjust to the measly quarter point hike by the Fed. We will also see the results with quota numbers from the OPEC meeting. I see no change and the oil glut grows. Black Friday and retail are dying. They will give way to Cyber Monday and internet purchases. For every piece of good news there will be a piece of bad news. This will reinforce the market in a range. Of course, there could always be a surprise like a geo-political event or anti-immigration in Europe or here. There is even a rumor that India will ban gold imports because they are a drain to India's economy. This won't happen because a gold ban would be a culture shock to that society and make Modi, a one-term prime minister. He probably will keep the rhetoric against gold and he could add a tax. This is a negative.
There is always something to worry about, but if anything, it could be the US pension plans in cities and states. By the first of May, yes May Day is the inflection point. It needs to be circled.
All this is conjecture. What price for the metals?
The metals are facing a serious technical challenge. Not only are the fiat people gunning for them, but gold and silver are staring at a "death cross." At present, both show a bearish flag/pennant pattern. The charts reveal this same pattern in individual stocks. This is not good. In addition, the two indexes are conflicted at best. Gold needs to rise to $1218 an ounce and silver needs to rise to $17.14 an ounce. With that said, I do see a near-term bounce.
held its support level and no new low was achieved. It needs to get back to 85 to break the downward pressure.
the gold bug index hit a new low which is dangerous. It needs to get back to 194 to break this downward pressure.
The direction of the metals and the market will be effected by the Ten-Year Treasury. The recent action in the 30-Year downturn held support before 147 and this is crucial for everything. After digesting all of the above, I see an inflection point and it points to the first of May. I have a name for this:
Emotional Pit Stop
How the new president reacts will determine his administration. If one studies cycles as I do, it won't matter what Trump does because the cards will deal him his hand of fate.