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Ira Epstein's Gold Report

 -- Published: Thursday, 16 July 2015 | Print  | Disqus 

Iran and the P5 +1 agree to terms of a nuclear treaty

Greece capitulates and agrees to take a new deal yet to be approved by the troika

 Greece’s creditors will start meeting this weekend to see if Eurozone Parliaments approve the new deal

We’re yet to see if the IMF joins the new Greek bailout

Janet Yellen tells Congress she wants to raise interest rates in 2015.


Iran has made a deal or should I say a deal proposal that will now set off a major lobby battle in Washington. Upon the announcement of the deal, the President stated any changes would invoke a Presidential veto. That means that lobbyists need to work to keep all the Republican votes in Congress against the treaty while convincing approximately 17 or so Democrats to not support the President for a veto override. These numbers are an approximate on my part but you get the point. We’re likely in for two months or so of battle in Congress over this issue.

I put together key points of what I think have been agreed to. Here they are:

  • The deal reduces the number of Iranian centrifuges by two-thirds, places bans on enrichment at key facilities while limiting uranium research and development to the Natanz facility.
  • The deal permits Iran to keep 5,060 first-generation centrifuges at the enrichment facility in Natanz
  • The deal caps uranium enrichment at 3.67 percent and limits the stockpile to 300 kg, all for 15 years.
  • Iran will be required to ship spent fuel out of the country forever, as well as allow inspectors from the IAEA inspectors certain access in perpetuity.
  • Heightened inspections, which include the tracking of uranium mining, monitoring of centrifuges, production of centrifuges and storage of centrifuges will last for up to 20-years
  • Iran's uranium stockpile will also be reduced by 98% to 300kg (660lbs) for 15 years.
  • Iran must keep its level of uranium enrichment at 3.67%.
  • The underground enrichment facility in Fordo will be turned into a research center focusing on nuclear physics
  • Iran will be prohibited over the course of 15 years from bring fissile material of any kind into Fordo
  • Of the 2,800 centrifuges currently installed at Fordo, only 1,044 will remain
  • Iran will redesign the reactor near Arak so that it cannot produce any weapons-grade plutonium
  • Iran will also not be permitted to build additional heavy-water reactors or accumulate heavy water for 15 years
  • Iran agreed on additional monitoring measures, including surveillance and inspection for 25 years of uranium mines and raw uranium production lines
  • Iran agreed to implement the Additional Protocol to their IAEA Safeguards Agreement, which will allow inspectors to access any site they deem suspicious
  • IAEA inspectors will be able to request visits to military sites, but these visits have to go through procedures which could be denied. If allowed, they could take up to 24-days to implement
  • Iran will not see sanctions lifted against Iran until the IAEA confirms that Iran has followed through with its end of the JCPOA
  • Should Iran violate any aspect of the treaty, UN sanctions will automatically "snap back" into place for 10 years, with the possibility of a five-year extension
  • An eight-member Joint Commission comprising representatives of the P5+1 nations, the EU and Iran will be established to monitor Iranian compliance
  • Disputes the commission can't get resolved will be referred to the UN Security Council for further action
  • Iran agreed to the continuation of the UN arms embargo for up to five years, which could end earlier if the IAEA becomes satisfied that Iran's nuclear program is entirely peaceful
  • A UN ban on the import of ballistic missile technology could also remain in place for up to eight years
  • Iran promised to not carry out any future activity that is likely to be related to the development of nuclear weapons, such as the development of a missile warhead, computerized planning of a nuclear explosion, tests on exploding neutrons or nuclear fuses and detonators
  • $700m (£450m) of Iran's frozen assets will be released to Iran every month

Critics will argue that the deal preserves Iran’s ability to produce as much nuclear fuel as it wishes after year 15 of the agreement, and allows it to conduct research on advanced centrifuges after the eighth year.  There’s also going to be serious debate about the up to 24-day period to gain access to Iranian facilities, but in the end, it all comes down to how many votes Congress can muster against an assured Presidential veto.

Then there’s Greece. As we now know Greece’s parliament accepted the troika’s (Greece’s creditors) terms. The bad news is that no matter what’s done, without debt forgiveness, all that the deal is kick the can down the road, hoping that as some time in the future things get better for Greece. Given the weight Greece will carry around its neck for years to come, it’s going to be generations before the final result is known unless things blow up early on.

Greece won’t be out of the news for another week or so as there still remains the issue of guaranteeing that the United Kingdom that won’t be liable for Greek debt issues to the Eurozone or other lenders of Greek debt. This is not likely to be an issue. What will be an issue is getting approval from Germany’s parliament and that of other’s such as the Netherlands remains an issue.

Germany’s and the Netherland’s parliaments are going to see sharp divisions within them concerning throwing “good “funds after “bad” as these loans if approved, increase their exposure to Greek debt, an issue both parliaments will do battle over. In the end, Germany as the Eurozone’s largest economy, guarantees the largest share of loans made to Greece.

After these votes, there’s the IMF to deal with, as the IMF does not think Greece can financially survive without either forgiveness of debt or extension of debt to possibly double the length of some of it to 60-years and along with a forgiveness period that possibly includes no principal or interest payments for a substantial period of time.

At the end of the day, I think you should assume that a deal will ultimately be made, but expect many bumps in the road to get there.  Assuming I’m right on this, two of gold’s price props will have been removed, which is not bullish gold.

The next event gold will turn its attention to is China, but I’ll leave that for another Gold Report.

Seasonal Chart


As you can see from the above chart, the market is in the time frame where it has in the past, in terms of the 30, 15 and 5 year seasonal time frames made a low according to Moore Research Center, Inc.

I see no reason yet to be a buyer or for that matter, cover shorts if you are short. As you’ll see below, none of the charts are  showing signs of bottoming, so given the impact of world event’s it’s clear that if  a low is going to show, it’s being pushed back. There are secondary lows often made July 30th to August 5th, so if you’re bearish as I am, you keep those possibilities in mind.

Weekly Chart

Wedge Pattern:  I define the above chart as being in a downtrend with a Falling Wedge Pattern. This pattern is generally a bullish one as it often resolves itself by breaking out up and over the Downtrend Line.  The pattern would be broken if prices materially break through the Support Line that has been being formed since November 2014.

What this chart points out is that a move down to the 1126 area in the August Contract, or 1113.7 on the December Gold chart below would simply negate this chart pattern.

On the other hand, seeing the pattern show up when the Seasonal Chart often turns up is clearly a warning sign if and that’s “if” the price breaks out and closes over the 1185-1190 price zone.

Daily Gold Chart

Price Counts often go to their 3rd count, which in the case of the December Gold Futures Contract is 1113.7. It was 1126.0 in the August Gold but I think that within the next week or so most traders will be trading the December contract given that first notice day is August 1st.

There are times when a 4th Price Count is hit. If this were to take place, that comes in at 1055.9. Given the bearishness in place, don’t off handedly throw this Price Count out. It can take place given the complete lack of bullish price props:

·         Removal of Iranian threat

·         Likely settlement of Greek finances

·         Eurozone maintaining its QE program

·         No inflation

·         US Fed stating it’s looking to begin a slow process of raising interest rates

US Dollar Index Chart

In my last Gold Report, I displayed the still bearish chart formation at work at that time in the Dollar Index. Since than, the Dollar Index has rallied and with that rally a new set of Price Counts took place today. I sent out the Chart of the Day to all subscribers to it early this morning.

Given the bullishness in the Dollar Index, gold once again faces an old foe,  rising Dollar. A rising Dollar causes gold to be more expensive in foreign currency terms, which is often bearish gold. It’s not always that way, especially in times of inflation, but that’s clearly not an issue right now. Nor are world issues which drive investors to safe haven’s like gold. Therefore, in terms of US Dollars is without a bull story.


Keep in mind that Janet Yellen told Congress this week that she is of the mind to raise US interest rates if external factors and US data warrants doing so.

What I have not mentioned above is what happens if some Eurozone Parliaments decide to not accept funding of Greek debt. That could throw everything into turmoil, which would likely create a sudden pop in gold prices as the whole Greek deal might unravel. This could also happen if the IMF were to decide the terms of the deal make no sense and threaten to or actually pull out of the troika.  The odds of both favor a deal being made, but there’s a better than “no way” chance this could occur. Therefore, what happens over the next few days in the Germany, the Netherlands and with the IMF are very important.

Assuming all goes well, I wrote in my June 29th Gold Report that the “third” Price Count of gold called for a move down towards the  1126 price level in the August contract. While that target hasn’t yet been hit, prices have indeed fallen to a new low since that report was written on June 29th.

As discussed above, other than a possible technical chart picture change, which would likely take place if the Falling Wedge Pattern were broken and prices suddenly started following the Seasonal Chart Pattern which is higher into year-end, gold remains bearish.

I see no reason to change my call for lower prices unless prices get up and over the 1185-1190 level at this time. $1126 to $1113 remain possible downside third Price Count Objectives.

The trend remains down and could accelerate if the Slow Stochastic Study decides to become embedded, which could happen as early as tomorrow. I will cover that in my Twice Daily Update Reports.

Price Count Offer

If you haven’t had the opportunity to obtain our Price Count write up, please click here and include your name, mailing address and phone number. We’ll get this out to you and can also set you up for a Free Trial to Market Center where you can apply the study. Our staff will even setup a Join.Me Meeting to teach you how to apply and use the study in Market Center.

You can call us at 1-866 973 2077 or simply click here and include the information in the e-mail message. Be sure to include your phone number in the e-mail as we need it to setup your Free Trial to Market Center.

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 -- Published: Thursday, 16 July 2015 | E-Mail  | Print  | Source:

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