During his much expected speech in Jackson Hole, the Fed Chairman, Bernanke, did not rule out another wave of stimulus actions by the Federal Reserve Bank. These news were enough to push stock markets upward and the Dollar downward. Stimulus means flooding the market with additional liquidity. QE3 seems to be a definite option following the speech of the Fed Chairman.
While gold has run up to $1,900 at the beginning of last week, a calmer and more relaxed financial environment has led to a correction of about $200.00. This significant market reaction could well be a first hint that investors are not ready to unconditionally support the recent rise of precious metals much longer. An extended period of consolidation or a significant correction could follow during the next few weeks and months. Although Gold closed the week again above $1,800 we consider a third price wave down the more likely scenario until the previous high is taken out. The psychological $2,000 mark may still be the market's main objective, however a new long position at these price levels could realistically not be supported.
Last week also brought an unwinding of typcial risk aversion trades primarily in the Euro/Swissie cross. A significant Swiss Franc high versus the Euro could have be established. A continuation of this corrective movement may finally push the Euro back towards or above 1,5 versus the Dollar. Few weeks ago we already mentioned that the technical chart set-up definitely supports a Euro move up.
Next Monday, Labor Day will mark the end of summer vacation time. We wish you all a few more relaxed sun and vacation days!
Enjoy an important last August trading week and don't forget September 2 will bring the important Nonfarm payrolls numbers.
Yours sincerely,
Gerhard
Montag, 29. August 2011
Sonntag, 21. August 2011
GOLD
1,850 Dollars - gold has reached another record high and silver started another ascend above 40 dollars late last week. While seasonal pattern support new highs in late summer, the rise of gold has accelerated in recent weeks reflecting the extremely nervous innvestment climate. Political indecisiveness on one hand and a stock market which shows distinct signs of a double - or at least another major - top, taking into account the highs of late 2007, makes the immediate investment future an uncertain one.
Although not producing any interest on its capital precious metals are seen by an increasing number of investors as stable value. Unfortunately, the value of gold and silver is only relative as their value is quoted mainly in dollars. As we all know, the dollar is on a long term decline which could be seen as a crash.
Exuberance may be the right assessment when we look at today's gold price. Where this price movement will end is anybody's best guess. Considering that the decline of the stock market may have just begun there is ample of upside. On the other hand, the recent acceleration may be a first sign that major highs are in the making.
Last week we were again confronted with new crisis talk: Greece is not going to hit its own budgetary goals, world wide recession is an option during the next few months. Those are all ingredients for further risk aversion trades. At least gold and silver should profit from those news over the coming days. My best guess right now is a gold price test at or close to 2,000 and a retest of the recent silver high.
Have a nice trading week!
Gerhard
Although not producing any interest on its capital precious metals are seen by an increasing number of investors as stable value. Unfortunately, the value of gold and silver is only relative as their value is quoted mainly in dollars. As we all know, the dollar is on a long term decline which could be seen as a crash.
Exuberance may be the right assessment when we look at today's gold price. Where this price movement will end is anybody's best guess. Considering that the decline of the stock market may have just begun there is ample of upside. On the other hand, the recent acceleration may be a first sign that major highs are in the making.
Last week we were again confronted with new crisis talk: Greece is not going to hit its own budgetary goals, world wide recession is an option during the next few months. Those are all ingredients for further risk aversion trades. At least gold and silver should profit from those news over the coming days. My best guess right now is a gold price test at or close to 2,000 and a retest of the recent silver high.
Have a nice trading week!
Gerhard
Mittwoch, 17. August 2011
EUROPEAN SOLUTIONS
'While European political leaders discuss the future of public funding and come up with new and innovative ideas of how to get the recurring crisis scenarios under control, America is somehow satisfied with its recently reached debt ceiling agreement.' This could be the conclusion markets have reached.
As a result, the dollar remains under pressure, risk aversion trades are being unwound, stocks recover slowly from the uncertainty of the economic environment, and gold continues its rise undeterred.
Interestingly, the longer term Euro charts are bracing for a bullish brake-out. Certainly, such a break-out could fail at any time, however technical charts leave almost no option to a bull move at this point of time. While such a move could be driven by the unwinding of extreme cross-rate prices, we continue to see the dollar under pressure.
Overall, the markets still focus on the daily economic and political news, at the same time consolidating recent extreme price movements. Gold tells us the story - the crisis scenarios are still there and real solutions have not been found nor have they been implemented. What is next? The question remains. Increasingly negative economic data releases in recent days make any positive forecasts seem unrealistic, therefore we are looking at consolidating price movements during the next few days.
Have fun during the final few trading days of this short week.
Yours sincerely,
Gerhard
As a result, the dollar remains under pressure, risk aversion trades are being unwound, stocks recover slowly from the uncertainty of the economic environment, and gold continues its rise undeterred.
Interestingly, the longer term Euro charts are bracing for a bullish brake-out. Certainly, such a break-out could fail at any time, however technical charts leave almost no option to a bull move at this point of time. While such a move could be driven by the unwinding of extreme cross-rate prices, we continue to see the dollar under pressure.
Overall, the markets still focus on the daily economic and political news, at the same time consolidating recent extreme price movements. Gold tells us the story - the crisis scenarios are still there and real solutions have not been found nor have they been implemented. What is next? The question remains. Increasingly negative economic data releases in recent days make any positive forecasts seem unrealistic, therefore we are looking at consolidating price movements during the next few days.
Have fun during the final few trading days of this short week.
Yours sincerely,
Gerhard
Montag, 8. August 2011
DOUBLE AA+ THE US DOWNGRADE
Friday's markets had just closed when Standard & Poor's announced the first US rating adjustment ever. A wave of disbelief hit the political establishment around the world. However, after several rating downgrades of European nations during the recent credit crisis the US downgrade was just a matter of time. Either rating agencies use the same approach towards all nations or their ratings would become noncredible.
While the markets have reacted towards all news of recent days immediately and with a vengeance, the reaction to this downgrade seems rather muted during the early European trading hours. 'Sell the rumours - buy the facts' - an old trader's wisdom seems to become reality.
While Europe is not only battling significant financial problems of individual states, it is also fighting its own inability to come up with coherent financial and economic European policy standards covering all EU nations. At the same time the US is in a crisis of values. The deep political divisions between Democrats and Republicans made it impossible to solve a credit crunch until the last minute because of pure political pickering.
Extreme political positioning, extreme financial reactions, however no immediate solutions. This could be a good description of today's situation. As a result we have just seen a surge of gold above the 1,700 Dollars mark - another all-time-high. Swissie, Yen and Silver - the other recent risk-aversion-products have remained within their range. As already indicated last week, while a significant trend change could be in the cards, a consolidation of the bearish dollar and precious metal prices is more likely than further and immediate price collapses.
In the medium term, however, political and financial leaders will need to dedicate all their attention towards the worldwide bond crisis in order to prohibit the collapse of our system.
Have a great trading week!
Gerhard
While the markets have reacted towards all news of recent days immediately and with a vengeance, the reaction to this downgrade seems rather muted during the early European trading hours. 'Sell the rumours - buy the facts' - an old trader's wisdom seems to become reality.
While Europe is not only battling significant financial problems of individual states, it is also fighting its own inability to come up with coherent financial and economic European policy standards covering all EU nations. At the same time the US is in a crisis of values. The deep political divisions between Democrats and Republicans made it impossible to solve a credit crunch until the last minute because of pure political pickering.
Extreme political positioning, extreme financial reactions, however no immediate solutions. This could be a good description of today's situation. As a result we have just seen a surge of gold above the 1,700 Dollars mark - another all-time-high. Swissie, Yen and Silver - the other recent risk-aversion-products have remained within their range. As already indicated last week, while a significant trend change could be in the cards, a consolidation of the bearish dollar and precious metal prices is more likely than further and immediate price collapses.
In the medium term, however, political and financial leaders will need to dedicate all their attention towards the worldwide bond crisis in order to prohibit the collapse of our system.
Have a great trading week!
Gerhard
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