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INTRA-DAY NEWSLETTER ~ April 8 2015
The Fomc minutes will be released today. Here are some notes;
The previous meeting was construed as Dovish and Gold and Silver responded to the upside and rallied from 1150 to 1220 and silver from 1525 to 1725. While the market spin tells us lower rates are better for metals, we are not in that camp. Not at this point in the cycle. If that was true how then do we explain a 42 month bear market in gold? Before you answer, interest rates moved higher from 1968 to 1981 and gold from 1968 to 1980 in its biggest bull market ever.
We believe that gold will return to a bull market once the initial shock of higher rates are absorbed into the market. Yes, gold will tank when the first rate increases come but it will be a bear trap on the medium term.
The fed is forecasting slow growth and being data dependent, they keep saying higher rates are coming but not yet.
The bottom line is regardless of whether there is hawkish or dovish language, the control boyz can still do what they want. Hawkish will spark a sell-off in gold, but as you know, markets can reverse this activity and move higher. SOMEONE will find an explanation as to why. And really, they can do what they want on DOVISH data as well. They can spike it back to 1220-1225 and it can turn down from there later this week.
As far as our view, we think that the FEDS do not want the US Dollar any higher and that threat is the biggest thing right now in the Global community. If that is the case, we think that even though they want to raise rates, the US dollar is keeping them at bay to do so.
On a bottom line basis, they don’t want to lose credibility but they don’t want a higher dollar. That suggests to me the minutes will have something for BOTH sides of the coin. They will say higher rates are coming, but they will also say that ITS LATER AND NOT NOW BECAUSE the economy is sluggish. Therefore, they will maintain the same story as we have been hearing. From there the control boyz will do what they need to clear the stops and will decide which way they take gold.
Lets go to the charts and check things out.
Gold short term
The support levels to watch are 1198-1202 then 1188-1194 and 1172-1182 with the latter being weekly support. It is possible that today will be the low for this week as its mid-week Wednesday. Resistance is the 1212-1215 area and 1219-1228. The 200 hour moving average at 1200 should/could find support before the FOMC at 1198-1202 and then we’ll have to see. They key here is we can't eliminate a move back to 1172-1182. Lets see what the control boyz decide after the FOMC.
Gold Cycles
Did we make a blue cycle low or a high on the chart ?
The problem we have at the moment in the forecast is we are not sure if the cycles are in an UP or DOWN phase until April 18th and until we close above 1229, we cannot confirm higher until we get that close. If that occurs we would favor 1245-1272 in April. On the downside, we can’t eliminate a move back to 1172-1182. Any close below 1163 would favor lower prices into the next short term cycle of April 18th (plus or minus 72 hours). The bottom line is gold can still go either way at the moment and we can make a case for either side. If we do get a pullback to 1172-1182 we feel that it would be the low for this week. That doesn't eliminate the other supports listed that are higher and we’re going to have to be patient. The last red cycle was an easy read and subscribers traded long gold at 1159 to 1204 and silver from 1580 to 1724 on a short term trade. This time around, the cycle has not tipped or revealed its hand yet.
Bottom line --- until price gets above that 1220-1225 area where resistance resides, we can’t eliminate the downside.
Silver
Silver has support in the 1635-1655 area and resistance at 1725-1750. There is minor resistance at the moment at 1692-1705 but its not a game changer. A pullback to that lower red channel line is possible and then we’ll see.
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