by Bill Downey     Price Analysis of Gold and Silver
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Technical Analysis Trading Gold, Trading Silver/ analysis By Bill Downey providing key turning points & charts for investors and speculators in Precious Metals Trading, and Precious Metals Markets

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Gold weak as FOMC approaches

14 Dec 2015 12:43 PM | Bill Downey (Administrator)

Key Events In The Coming "Fed's First Hike In 9 Years" Week


Submitted by Tyler Durden on 12/14/2015 09:22


While this may well be the most important week for capital markets in the past 9 years, when the Fed is widely expected to hike rates on Wednesday, precisely 7 years to the day since it cut rates to zero, the week sets off with a quiet start today with just the Euro area industrial production reading due out this morning and nothing expected out of the US this afternoon.

The focus on Tuesday morning will be in the UK where we get the November CPI/RPI/PPI docket. Euro area employment data and the German ZEW survey are also expected. Over in the US tomorrow afternoon, the November CPI print is the main focus (headline expected at 0.0% mom, core +0.2% mom), while average weekly earnings, empire manufacturing and the NAHB housing market index are also due.

Wednesday is PMI day where we’ll get the December flash manufacturing, services and composite numbers for the Euro area, Germany and France. UK employment data is also due, along with the final reading for Euro area CPI. Over in the US on Wednesday the November housing starts and building permits data is due, along with industrial and manufacturing production, flash manufacturing PMI and also capacity utilization. The main focus will be the conclusion of the two-day FOMC meeting and Yellen press conference.

Here is DB's quick summary of Wednesday' main event:

This time last year we were convinced that the Fed wouldn't raise rates in 2015. We'll it looks like we'll be proved 15 days wrong. However with all that's going on in the world and with global nominal growth so low, it's hard for us to imagine they'll get very far in their hiking cycle. We suspect that the terminal funds rate will be lower than the market expects and certainly lower than the Fed expect. Assuming they do hike and that the US HY story doesn't escalate quickly and stop them in their tracks the main story will be how dovish they make the hike. It's hard to think they'll be hawkish given the current global uncertainty and the carnage in the $1.3tr US HY market.

And here is BofA:

Like the markets, we expect the Fed to raise interest rates by 25bp in December. We doubt the Fed will be able to satisfy expectations for a "dovish hike," however: the market has priced in just over two rate hikes next year and a much lower terminal rate. The FOMC is likely to stress a gradual pace of rate hikes and there may be dovish dissent. Yet we do not expect a significant decline in the dot plot or explicit forward guidance; the Fed will remain data dependent. Markets may selloff modestly on the announcement, but it should not trigger a sharp tightening of financial conditions.

Unless, of course, as even Hilsenrath hinted, the Fed is merely hiking just so it has the green light to ease shortly thereafter, either back to ZIRP or to NIRP alongside even more QE.

Early Thursday morning starts in Japan with the November trade numbers. That’s before we get the German IFO survey data and UK retail sales. In the US initial jobless claims, conference board’s leading index and the Philly Fed business outlook are all due. Closing out the week on Friday in Asia will be the latest China property price data and MNI business indicator reading along with the BoJ monetary policy decision.

There’s nothing of note in the European session on Friday while in the US we’ll get the flash services and composite PMI’s, along with the Kansas City Fed manufacturing activity index. Fedspeak wise we’re due to hear from Lacker on Friday evening.

Source: DB and BofA




Short Term Gold

The bottom line on short term gold is that we must close above 1085-1088 in order to see higher prices.   Resistance on the chart is at the blue moving average at 1076.  As you can see gold has NOT BEEN ABLE to overcome this key resistance.  There's also additional resistance just above the average at the midway trend line.  In summary, if we don't close above 1085-1088, then the downside potential for gold to year end remains a possibility.   



Gold Cycles

The other factor that is a concern is the gold cycles.   While inversions do happen 30% of the time,  that leaves the odds of this one going lower by 70% on the red cycle.  Part of the issue is that gold is now in the long term window (Oct 2015 - June 2016) to provide the final lows in gold and when that occurs, there will be a lot of volatility and as we saw on the week of August 17th (when the stock market big drop occurred) these cycles will have events that will occur and we can't expect the cycles to work at each occasion.   The good news is that the cycles do give us a very good indicator on the short term moves as to when peaks and bottoms occur.   Since it is a natural cycle, it will not disappear soon.    The next cycle is due December 25th (Plus or minus 72 hours).  The bottom line is that odds are beginning to favor lower prices into year end.  The FOMC interest rate decision will be this Wednesday.   Be prepared.




Technical Analysis :: Gold & Silver

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