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Takeaway: Dollar Down, Rates Down = #StrongGold

Gold tested and confirmed its BEARISH to BULLISH TREND reversal, and we sent out the buy signal today in GLD (10:28 a.m. at $124.00) to our real-time alerts subscribers for a trade into the FOMC announcement tomorrow afternoon. We will continue to manage this exposure with a BULLISH intermediate-term TREND bias. Stay tuned for updates on this trade.

GLD Risk Management Levels:

  • BUY TRADE = $119.51
  • SELL TRADE = $127.34
  • BUY TREND (BULLISH) = $118.69

BUYING GOLD INTO FOMC - Levels Chart

With the continued deterioration in U.S. economic data, we believe there is a probability Yellen’s language will be interpreted by the market as more dovish than her previous path as she attempts fight the pain of global deflation within the fed framework.  

One of the last Q4 data points, A durable goods orders print this morning, showed a large sequential deceleration of -3.4% in December. The number was slightly positive on a year-over-year basis, the general TREND since we moved into QUAD#4 reeks #deflation, which we fully expect to be a big talking point tomorrow.

BUYING GOLD INTO FOMC - chart2 durable goods

Yellen will anchor on 1) deflationary headwinds and 2) the recent deterioration in the labor market in tomorrow’s speech.

A more dovish policy path could be perpetuated with a GDP miss on Friday (which we model as more likely than not with a very difficult Q4 comp on a year-over-year basis). Under this scenario pressure on the dollar should bode well against a long gold position for a TRADE. Please reach out with any questions.

Ben Ryan

Analyst