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Ira Epstein's Gold Report


 -- Published: Thursday, 4 June 2015 | Print  | Disqus 

Gold

The financial markets were jolted today by a surprise “urging” by the IMF Fund to the US Federal Reserve Board to not increase interest rates this year. Basically Ms. Lagarde is asking the Fed to consider holding back on raising US interest rates as doing so too early in the IMF’s opinion carries more risk than being behind the curve.

Ms. Lagarde’s concerns seem to be centered on the impact a US rate hike would have no emerging markets and the QE moves the Eurozone is making. Rather than potentially derail them good the European Central Banks quantitative easing program is having, the IMF would like to get it more time to embed. Raising interest rates in the US won’t help that.

Subscribers to my twice daily updates know that I just wrote about my take on the impact the strong US Dollar is having on the US economy. I am not convinced that the weather and port strikes in the first quarter where the two main culprits behind the 1st quarter slowdown in the US economy. The rise in the value of the Dollar against the basket of currencies in the Dollar Index is just as if not more important. While I am not an economist, I am a pragmatist. As such, I don’t see seeing our currency shoot up so much that it shuts down years of getting the US economy back onto a stable path of growth should be done without taking into account what 6-8% sudden moves in it does to our economy.

Now you have the IMF thinking along similar terms.

You should ask what these means to gold prices. It’s not bullish given that the IMF just joined the party in saying there’s no inflation and fighting an enemy that’s not there (getting ahead of the curve) in this particular case can do more damage than good.

Add to this no rally in gold off of the Greek credit issue, no reaction to Russia amassing troops and arms buildup again on the Ukrainian boarder and no inflation and you walk away with a bearish view of gold going forward.

Seasonal Chart

In terms of seasonality, June doesn’t present a very much historically. There are no specific “buy or sell” dates according the studies done by Moore Research Center, Inc. that have a winning ratio over 80% over the past 15-years.  In fact July doesn’t either, which means the summer months move off of factors that are not highly seasonal at this time of year.

This is a double edged knife. It doesn’t offer bull or bears seasonal inferences to work from. This means in my opinion that the daily information is going to play a more important role than things analysts count on from a seasonal point of view.

Daily Chart

As far as I’m concerned, chart action is clearly bearish.

Prices this morning broke below a key support level of $1180 and also through the first Price Count downside objective of 1178.9.  The odds of getting down to the second objective of 1161.0 have obviously increased and are now in those that are bearish gun sights.

You’ll notice the  on the chart.

The circles the high of 1204.7. Under the current chart formation, this is the number that should not be taken out if the down thrust is not going to interrupted. This number may change as the chart formation changes, but it ties into the idea of lower lows and lower highs, the definition of a downtrend.

Conclusion

Other than short covering props that show up from time to time due to technical reasons, not fundamental ones, Gold has had the rug pulled out from under it.

For those of you that watch the GLD ETF, you’ll notice the continuing decline in ownership of physical gold that the GDL EFT represents. In a time when investors are almost desperately searching for return, owning gold which pays no return has fallen sharply out of favor.

Think of the timing of events. China, while still growing, is doing so at the slowest rate in a decade. The Eurozone is trying to jump start its member’s economies and prevent them from sinking into deflation. Japan is showing signs of coming out of over a decade of deflation, but certainly isn’t seeing inflation. It’s ending deflation.

Than there’s the US. We’re doing better than all. Are we inflating? No, we’re not. Are we seeing a pick up in employment? Yes. Is inflation an issue today? No, it isn’t.

Russia is trying to scare the Eurozone by amasssing troops on the Ukrainian boarder. It’s also vastly increasing it’s military budget as is China. Is that enough to cause you to buy gold now? It shouldn’t be. Russia is about to see the Eurozone vote to keep sanctions against it in place.  Massing troops on the Ukrainian boarder almost guarantee that.

Hearing the IMF formally say the US Dollar is overvalued today might have been taken by die hard gold bulls that gold should rally, given that gold is priced in Dollars. However, another way to look at this is that what the IMF might really be saying is that the US is doing well enough to begin raising interest rates, which would likely increase the value of the Dollar against its peers, which isn’t bullish gold.

Tomorrow’s jobs data might be good, good enough to get everyone’s attention and create a mess for the Fed

In the meantime, Greece announced at near 1:00 PM CDT today that it isn’t making the debt payment due tomorrow to the IMF, which it’s  likely using to pressure creditors into understanding that the proposals made to Greece don’t go far enough and there will be a price to pay if in Greece’s opinion the creditors don’t make more concessions.

Given all this and no rally in gold, gold likely has more downside ahead of it.

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Disclaimer: This publication is strictly the opinion of its writer and is intended solely for informative purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade in any commodities or securities herein named. Information is taken from sources believed to be reliable, but is in no way guaranteed. Chart data is courtesy of Linn IraCharts. No guarantee of any kind is implied or possible where projections of future conditions are attempted. Futures and Options on Futures trading involve risk. In no event should the content of this market letter be construed as an express or implied promise, guarantee or implication by or from The Ira Epstein Division of Linn & Associates, LLC or Linn & Associates, LLC  that you will profit or that losses can or will be limited in any manner whatsoever. No such promises, guarantees or implications are given. Past results are not indicative of future performance.


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 -- Published: Thursday, 4 June 2015 | E-Mail  | Print  | Source: GoldSeek.com

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