Gold Recovers Breaking The Cycle Of Lower Pricing

1. Gold Recovers Breaking the Cycle of
Lower Pricing Over the Last Three
Weeks

2. Points To Be Discussed Today:
• Gold Traded To A Lower High, A Lower Low,
And A Lower Close
• Gold Futures Had Only Fractional Gains
• The U.S. Dollar And U.S. Debt
• The Future Direction Of Gold
• Gold Markets Looking For Floor
• Gold Markets Running Into Exhaustion

3. Gold Traded To A Lower High, A
Lower Low, And A Lower Close
• Recent selling pressure in gold has been a
result of dollar strength and rising yields in
U.S. debt instruments.
• Looking at weekly charts, on Tuesday,
September 28, it appeared that gold could
close lower on the week marking the fourth
consecutive week that gold traded to a lower
high, a lower low, and a lower close when
compared to the open on Monday.

4. Gold Futures Had Only Fractional
Gains
• However, the dramatic and strong upside move in
gold futures yesterday of $34 changed the
dynamics of the week.
• Today gold futures had only fractional gains, but
even a fractional gain after the strong gains from
Thursday changed a weekly candlestick from red
(which is drawn if a stock or commodity closes
below the opening price) to a green candle
(which is drawn if a stock or commodity closes
above the opening price).

5. Gold Futures Had Only Fractional
Gains - I

6. Weekly Range Contain A Lower High
& Lower Low
• The weekly range did contain a lower high and
a lower low, but gold futures closed today
above the open on Monday.
• The question becomes whether or not this
week’s fractional gains can be labeled as a key
reversal (a pivot from bearish to bullish
market sentiment) or simply an upside
bounce, followed by more selling pressure.

7. The U.S. Dollar And U.S. Debt
• The rise in both the U.S. dollar and U.S. debt has
for a large part been predicated on the belief that
the Federal Reserve will begin to unwind (taper)
their monthly asset purchases of $120 billion
“soon”.
• Another factor on the radar of the investment
community is the potential crisis that would
result if Congress and Senate cannot pass
legislation to raise the debt ceiling before
October 18.

8. The U.S. Dollar And U.S. Debt - I
• Both the House and Senate approved a stopgap
measure to fund the government through
December.
• Still, they did not come up with any legislation to
address the current debt limit, which would
cause the United States to be unable to make
payments on its debt.
• Although there have been government
shutdowns in the past, the United States has
always made interest payments on the national
debt.

9. Secretary Yellen’s Testimony
• The Secretary of the Treasury Janet Yellen and
Fed Chairman Jerome Powell testified before
the House Financial Services Committee.
• As we spoke about in our opening letter
yesterday, during Secretary Yellen’s testimony,
she made a dire prediction if the United States
cannot meet its debt obligations.

10. The Debt Ceiling
• This will only occur if Washington is unable to
pass legislation to raise the debt ceiling.
• According to the Treasury Secretary, the
government would not be able to meet its
financial obligations if, by October 18, no
legislation is passed to raise the debt limit,
which is currently restricted at $28.4 trillion.

11. The Future Direction Of Gold
• The future direction of gold will be largely based
upon the future monetary policy of the Federal
Reserve.
• The Fed has invoked an extremely
accommodative after the pandemic began in
2020, resulting in a deep recession worldwide.
• As the economic recovery in the United States
strengthens, the Federal Reserve will begin to
unwind the dramatic steps it took to temper the
recession and aid in the economic recovery.

12. FOMC Meetings
• At some point, most likely beginning next year,
the Fed will begin to normalize interest rates
which they took to a ¼%.
• The recent projection of interest rates
released by the Federal Reserve in this
month’s FOMC meetings “dot plot” suggested
that this process of normalization taking
interest rates from near zero to 3% would be
implemented over the next three years.

13. The Federal Reserve’s Statement And
Jerome Powell’s Press Conference
• The Federal Reserve’s statement and Jerome
Powell’s press conference also revealed that they
would begin the process of tapering their asset
purchases as early as November of this year.
• Analysts and investors still do not know the pace
of the tapering process, although it is believed
that they would taper their purchase of U.S. debt
instruments and mortgage-backed securities with
monthly reductions, which would take roughly a
year until tapering resulted in no more asset
purchases.

14. The Bureau Of Economic Analysis
• Lastly, the Bureau of Economic Analysis today
released the PCE numbers for August.
• The report revealed that inflation continues to
grow, with the August numbers showing that the
PCE price index increased 0.4 percent, excluding
food and energy.
• The report made the following statements;
Personal income increased $35.5 billion (0.2
percent) in August, according to estimates
released today by the Bureau of Economic
Analysis.

15. Disposable Personal Income
• Disposable personal income (DPI) increased
$18.9 billion (0.1 percent) and personal
consumption expenditures (PCE) increased
$130.5 billion (0.8 percent).
• Real DPI decreased 0.3 percent in August, and
Real PCE increased 0.4 percent, concluding
that the PCE price index increased by 4.3%
from one year ago.

16. Gold Markets Looking For Floor
• Gold markets have fallen quite a bit during the
week, only to turn around and show signs of life
again.
• By doing so, we are forming a bit of a hammer for
the weekly candlestick.
• Gold markets have fallen a bit during the course
of the trading week, but then turned around to
recover.
• When they did, we ended up forming a bit of a
hammer which of course is a bullish sign.

17. Gold Markets Looking For Floor - I
• With this, it is very likely that we continue to see
the markets as being one that will move right
along with the US dollar, as there is a major
negative correlation between these two markets.
• If we break down below the bottom of the
candlestick though, it is very likely that we go
looking towards the $1680 level.
• That is an area that of course has been massive
in its meaning, so if we were to break down
below there, I think gold would collapse.

18. Gold Markets Running Into
Exhaustion
• Gold markets have gone back and forth during
the course of the trading session on Friday, as
we continue to see the US dollar for things
around.
• Gold markets went back and forth during the
course of the trading session on Friday, as it
looks like we are going to continue to respect
the $1765 level, as we have pulled back from
there.

19. Gold Markets Running Into
Exhaustion - I
• That being the case, it looks like we are running
out of momentum, and therefore it will be
interesting to see what happens next.
• If we break down below the bottom of the
candlestick for the trading session on Friday, then
it is likely that we go looking towards the lows
again.
• The size of the candlestick on Thursday was
rather impressive, but it is worth noting that this
is an area we have seen trouble at before.

20. Gold Recovers Breaking the Cycle of
Lower Pricing Over the Last Three
Weeks

21. Gold Recovers Breaking the Cycle of
Lower Pricing Over the Last Three
Weeks