MARKETS UPDATE and GOLD AND SILVER ALERT (10:45 pm EST)
My last blog (on Sunday night) in which I bemoaned the difficulty of trading financial markets that are being manipulated has turned out to be prophetic as today's precious metal prices dropped dramatically in part due to 1,500 gold future contracts being traded on Comex in one second early this morning (Wednesday) at 6:26 am EST. This triggered an immediate $10 drop in price and halted trading for 20 seconds. Mark O'Bryne, executive director at GoldCore stated today (as reported on MarketWatch.com) that, "Some entity appeared determined to get the gold prices lower and they succeeded - for now." He further stated, "Such trading action makes traders on the Comex very nervous to go long and prevents gold getting some momentum and animal spirits." After the $10 drop, gold prices were stable until later in the afternoon when the minutes of the Federal Reserve's recent October meeting were released to the press. These minutes reveal that even though the Fed voted 9 to1 on October 30 to continue its 85 billion-per-month asset purchase program (QE), there were much less market friendly ideas being proposed behind the scenes. At the meeting Fed officials were considering plans to reduce QE even before any further signs of improvement in the labor market, and some were suggesting that the decision to start tapering could come at "one of its next few meetings". These austere proposals are in direct contrast to the dovish fiscal tone Janet Yellen expressed just last week during her confirmation hearings, and this rattled both the broad stock market and the precious metals market today. Many investors correctly see the start of tapering as the government being fiscally responsible, and this can act as a depressing factor on gold prices as it makes gold less appealing as a hedge against inflation.
This one-two punch to the precious metals today (early morning trade manipulation and the afternoon revealing of austere chatter at the Fed meeting) sent prices tumbling and triggered more bearish technical signals. Directional momentum is now heavily bearish. Unfortunately this means we need to bail out of long positions with the idea of reentering when the cycle bottoms. Short-term signals indicate we may get a small bounce here into Thursday and Friday which would give a better exit point. Unless gold can work its way back up towards $1300 by Friday (possible if today's reaction to the Fed is temporary), we have to consider the precious metals as short-term bearish and will be bailing out of long positions tomorrow or Friday.
The broad stock market was also alarmed by the Fed's hawkish tone today, especially after the suggestion of more QE from Ms. Yellen just last week. The DOW dropped more than 100 points in the afternoon but then recovered a bit and closed with a loss of 66 points. It is too early to tell if this reaction to the Fed is going to be severe. If there is more news about the Fed seriously considering the tapering of QE soon, then we could get a substancial correction here. Otherwise, i think this correction will be shallow and brief. Still on the sidelines of this market.
My last blog (on Sunday night) in which I bemoaned the difficulty of trading financial markets that are being manipulated has turned out to be prophetic as today's precious metal prices dropped dramatically in part due to 1,500 gold future contracts being traded on Comex in one second early this morning (Wednesday) at 6:26 am EST. This triggered an immediate $10 drop in price and halted trading for 20 seconds. Mark O'Bryne, executive director at GoldCore stated today (as reported on MarketWatch.com) that, "Some entity appeared determined to get the gold prices lower and they succeeded - for now." He further stated, "Such trading action makes traders on the Comex very nervous to go long and prevents gold getting some momentum and animal spirits." After the $10 drop, gold prices were stable until later in the afternoon when the minutes of the Federal Reserve's recent October meeting were released to the press. These minutes reveal that even though the Fed voted 9 to1 on October 30 to continue its 85 billion-per-month asset purchase program (QE), there were much less market friendly ideas being proposed behind the scenes. At the meeting Fed officials were considering plans to reduce QE even before any further signs of improvement in the labor market, and some were suggesting that the decision to start tapering could come at "one of its next few meetings". These austere proposals are in direct contrast to the dovish fiscal tone Janet Yellen expressed just last week during her confirmation hearings, and this rattled both the broad stock market and the precious metals market today. Many investors correctly see the start of tapering as the government being fiscally responsible, and this can act as a depressing factor on gold prices as it makes gold less appealing as a hedge against inflation.
This one-two punch to the precious metals today (early morning trade manipulation and the afternoon revealing of austere chatter at the Fed meeting) sent prices tumbling and triggered more bearish technical signals. Directional momentum is now heavily bearish. Unfortunately this means we need to bail out of long positions with the idea of reentering when the cycle bottoms. Short-term signals indicate we may get a small bounce here into Thursday and Friday which would give a better exit point. Unless gold can work its way back up towards $1300 by Friday (possible if today's reaction to the Fed is temporary), we have to consider the precious metals as short-term bearish and will be bailing out of long positions tomorrow or Friday.
The broad stock market was also alarmed by the Fed's hawkish tone today, especially after the suggestion of more QE from Ms. Yellen just last week. The DOW dropped more than 100 points in the afternoon but then recovered a bit and closed with a loss of 66 points. It is too early to tell if this reaction to the Fed is going to be severe. If there is more news about the Fed seriously considering the tapering of QE soon, then we could get a substancial correction here. Otherwise, i think this correction will be shallow and brief. Still on the sidelines of this market.
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