Weekly Gold Report (October 7th through October 11th)
Week two of the US Government Shutdown has officially begun and it appears that we are no closer to a resolution than we were when last weeks business concluded. Despite the fact that there are a few noteworthy economic figures and speeches being brought to the markets this week, all eyes will continue to follow news from Washington throughout the next five trading days.
In an effort to not bore readers with the same information that headlines every financial publication each day, I will spare you the details of the US Governments sophomoric behavior over the debt ceiling and suggest that traders should expect this debate to continue to weigh on the markets. If the last five years have taught us anything about the US Government and the big decisions and deadlines, we should probably expect some form of compromise in the eleventh hour on October 17th. While it is certainly a possibility that a resolution could be struck in advance of that date, I would not bet the farm on it.
The week ahead has one very important report in the United States that all traders will be on the lookout for, which is the release of the FOMC Minutes on Wednesday afternoon. When the FED decided not taper their Bond Purchase Program (QE), global markets had some rebalancing to do. There was expectation that the FED would at least scale back a few percent, but that was not the case. In this week’s release of the minutes, traders will be on the lookout for any indication of what the FED based their decision on and this will help to forecast for any upcoming tapering.
While most of this week’s focus will be on the US Stock Indexes, I am most interested in seeing something out of the Precious Metals, namely Gold and Silver. While last week provided decent volatility in the early half, both Metals stabilized and are recovering toward the higher end of the range this week. It will be interesting to see if a flight-to safety bid underpins the Metals this week. If the government shutdown continues at least through Monday and Tuesday, I would expect US Stock Indexes to continue a gradual slide. Wednesday should provide some volatility after the FED Minutes, but if profit taking continues in the first two days of this week in stocks, I would like to see if that money is dumped into Metals.
So far this morning, the December Silver Futures are already testing resistance, while Gold is only a few points behind. The chart of December Gold points out the resistance trendline (arrow#1) that Gold is slowly approaching. If over the next few days, Gold can find a way to close above this point, prices should be headed toward $1350, which is the next key resistance. Closes above $1350 would be a bullish sign for this Futures Contract.
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Thank you for your interest,
Senior Market Strategist
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