Gold prices have been on the defensive for some time now, although the gold bulls are showing some signs of life recently. The price of gold retested its swing lows in the $1183 area during the night session recently before popping higher throughout the session. While no one can not say with any certainty if a bottom is in fact in place, this is noteworthy for a few reasons:
Stocks and the dollar will likely continue to be the primary drivers of gold. Should stocks continue to weaken and exhibit increasing volatility, then gold could potentially benefit. Either way, the gold market had gotten oversold and will possibly need to overcome that oversold condition before another leg lower if that proves to be the case. In the meantime, we could potentially see a sharp rally in gold that could take gold prices higher by $100 or more in the near term. The gold bulls have a lot of work to do to overcome the technical damage that has been inflicted on the yellow metal, and gold will likely remain a seller’s market until the bulls are able to prove otherwise.
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There are many potential reasons to own gold. Some of these reasons can make sense and seem very reasonable, while others seem to be a lot more far-fetched. In this post, I wanted to kind of break down some simple reasons that in my opinion may be good reasons to buy gold, silver, or other precious metals. Again, these are my opinions but I think they represent a simple line of thinking that may be useful for those considering gold ownership or precious metals investments, or for those who have already started to buy gold. To me, there many potential reasons to own gold but here are what I feel are the simplest reasons to own gold:
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I strongly believe that we are heading into another financial crisis which could be even worse than the last. Baby boomers are aging and most do not have nearly enough saved for retirement. The National Institute on Retirement…
FOMC minutes show Fed to complete tapering by October. Rates to stay low for an extended period.
From Marketwatch.com: Fed plans To end bond purchases in October
Gold prices are moving higher today before the release of the latest FOMC minutes. Gold is up over $8 per ounce as of this post and is hovering just below the April highs. The April highs in the $1331 area appear to be some formidable resistance-and if the gold bulls cannot take out this level soon we could potentially see some liquidation by gold longs. Watch the gold market’s reaction to today’s FOMC minutes here:
It would seem that the summer doldrums of trading may already be upon us. The markets have been relatively quiet, and the news flow also even seems to have quieted down a bit. The release of the Fed minutes today will quite likely be the data highlight of the week. Fed Chairwoman Janet Yellen has previously reiterated the idea that the economy still requires the Fed’s assistance. While anything is possible, we would expect that today’s minutes will simply be more of the same. The Fed will likely continue to get out of the bond buying business while pledging to hold rates low for the foreseeable future. This could potentially be bullish for precious metals.
It is difficult to imagine gold and silver falling off dramatically from current levels given the current geopolitical landscape, however, anything is possible. The bulls are maintaining a slight technical advantage, however, we feel that the gold bulls must be able to extend prices to the upside out of the current trading range and do so in the very near future. Should the bulls be able to breach last week’s high on a closing basis at the $1333 level as well as the high reached on July 1 around the $1334.9 level, we could see gold rise sharply and do so quickly. This could potentially put the $1354 area in the bulls site. A breach above this level could see a test of the $1400 level in short order. On the flip side, gold may see near term support near Friday’s low of $1312 and then again at the $1300 level. A break below this level could potentially set the stage for a significant decline.
The gold market has been under bearish pressure once again lately. The market recently broke some key support in the $1280 area, and thus far has not recovered. The market has, however, thus far held smaller support in the $1240 area. The gold market simply appears to be lacking any real bullish catalyst right now that could help the metal begin to stage a meaningful rally. While this can certainly change quickly, it would seem that for now the path of least resistance in gold may continue to be lower. We could be in for another test of the $1200 level-and should this level give way the price of gold could potentially go significantly lower. Sub $1000 gold becomes a real possibility….
Let’s examine some of the current headwinds facing the gold market:
While there are certainly other factors at play right now, these are some of the biggies affecting bullion currently. The fact is that stocks continue to move higher into new all-time-highs territory, and the economy continues to show signs of improvement. The data stream has seen some rough patches but all things considered the trend seems to be toward ongoing improvement. Markets and investors are looking forward to Friday’s non-farm payrolls data at this point to try and gauge the strength of the labor market. The labor market has remained a cause for concern for investors, but a good number on Friday could potentially send stocks soaring and keep the pressure on gold and silver prices.
Gold prices initially were weaker following this morning’s non-farm payrolls data but eventually reversed course, caught a good bid, and moved sharply higher as gold shorts covered and bargain hunters entered the market. As of this post, gold has reclaimed the $1300 level, and has put in an outside day on the daily chart.
Non farm payrolls came in way above expectations with the Department of Labor reporting that the U.S. added 288,000 jobs in April while the unemployment rate ticked sharply lower to 6.3%. Consensus estimates were looking for an addition of 215,000 jobs and a slight down tick in the unemployment rate to 6.6%. Stocks were initially higher, then sold off, and are now higher once again albeit minimally. Gold came under pressure as the dollar index rose following the data, but both ended up reversing course as the morning wore on.
Gold held the support in the $1280 area, and it is likely that this led to a decent amount of short covering and also bargain hunting following NFP. Silver has also reclaimed the $19 level and appears to be moving higher on short covering and some fresh buying. If the gold bulls can keep prices higher for a close above the $1300 level today, it could fuel additional bullish momentum to begin next week.
Also likely fanning bullish flames in gold and silver today is the potential escalation in Ukraine. Ukraine is currently undertaking military action against pro-Russian separatists, and reports have indicated shots being fired. Markets have thus far largely discounted the ongoing crises in Ukraine, but one has to wonder at what point investors will get more anxious and go into risk-off mode.Until some type of permanent resolution is found in Ukraine, gold may have a bit of a floor underneath prices as investors remain somewhat skittish. Should violence increase, we could see an even stronger bid in precious metals as investors seek refuge from risk assets.
First resistance in gold may be seen at last week’s highs around $1306 and change. An upside breach of this level could potentially lead gold prices to the $1320 area in short order. Near term support in gold prices remains at the $1280 area.