CommoditiesTrader

Gold Leaps Higher As Worries Mount

COMEX:GC1!   GOLD FUTURES
Following the FOMC minutes on Wednesday, gold             has seen a massive two day move that brought the precious metal to five-week highs. Worries mount as market participants are beginning to realize that the Federal Reserve is stuck within a liquidity trap.

The minutes statement indicated that the Fed saw risks to near-term inflation (as the five-year breakeven rate hit five-year lows) and growth. The once “sure bet” on a September rate hike quickly dwindled, and the possibility of another round of quantitative easing is growing.

There has been a lack of attention to two key revelations within mainstream media:

The Bank of International Settlements (the central bank of central banks) and the St             . Louis Fed have come out publicly to express that quantitative easing has been the epitome of failure. Both institutions have stated that the massive balance sheet expansion and zero interest rate policy (ZIRP) has not added any growth to the real economy.

The BIS has even gone as far as to say that the world is defenseless against the next crisis, which many “Main Street” analysts believe is around the corner. In regards to a efficacy of ZIRP, the white paper publish by the St             . Louis Fed said:

“A Taylor-rule central banker may be convinced that lowering the central bank’s nominal interest rate target will increase inflation. This can lead to a situation in which the central banker becomes permanently trapped in ZIRP.

With the nominal interest rate at zero for a long period of time, inflation is low, and the central banker reasons that maintaining ZIRP will eventually increase the inflation rate. But this never happens and, as long as the central banker adheres to a sufficiently aggressive Taylor rule, ZIRP will continue forever, and the central bank will fall short of its inflation target indefinitely. This idea seems to fit nicely with the recent observed behavior of the world ís central banks.”

But, this is not just the Fed’s problem. Quantitative easing has been a failure in Japan and Europe. In a “defenseless” world and crisis looming, gold             stands to greatly benefit.

Price action for gold             is fueled by short-covering (near-term) because the dollar just base-jumped of the hopes and expectations of a Wall Street recovery. However, as Pandora’s box is opened, gold’s upside potential becomes great.

Resistance can be found at $1,162, which is slightly below the descending trend created in late January. If price action can close above these key levels, gold             will attempt to challenge the 200-day EMA near $1,182. The 50 percent Fib. retracement of January’s downtrend is at $1,189.

As long as the dollar remains soft, gold             will be relatively supported at these levels. Although, price taking can take place and healthy. The daily RSI is approaching 69, but the weekly and monthly RSI is below 45.

Moreover, the weekly chart is showing a bullish +/- DMI             crossover, suggesting a potential inflection point in the most hated asset on Wall Street.

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Very informative !
+2 Reply
CommoditiesTrader moorekapital
a year ago
Thank you. Gold has taken a hammering, but the fundamentals are strengthening. When perception turns, those that spent billions to push it lower will spend billions to push it higher.
+1 Reply
jangseohee
a year ago
QE4
+2 Reply
I'm contemplating a possible reversal here, also looking at nzdusd (and grade III milk futures).
+1 Reply
CommoditiesTrader IvanLabrie
a year ago
Possible.. However, I think the tide is turning. The whole reason gold was monkey hammered lower was on the perception that the Fed would normalize policy and that the country would continue to expand.

Wall Street is coming to the realization that the Fed is not in control, and it is unlikely that rates will ever normalize. Growth in the U.S. And abroad is horrendous. Atlanta Fed GDPnow is tracking a whopping 1.3% in Q3.

Not to say after this large move, profits won't be taken. However, the pound gold lower because the world is growing trade is over IMO
+1 Reply
harshas
a year ago
What is your prediction for xagusd & crudeoil for fed outcome, thanks
+1 Reply
CommoditiesTrader harshas
a year ago
It's really up to what is said and the potential path for monetary tightening. If The fed remains dovish, stocks will jump but longer term that should bode well for commodities and should cause the dollar to decline.
+1 Reply
jangseohee
a year ago
the only thing i am wrong is prediction QE4
but i knew that she wont hype the rate ^_^
+2 Reply
CommoditiesTrader jangseohee
a year ago
Ha. For sure. But it's funny how everyone got all hyped about it. I mean really, the Fed won't raise rate a mere quarter percent. If that doesn't tell you there's a house of cards nothing will!
+1 Reply
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