Alright, Janet Yellen has testified and Gold sold off more and is trading below $1300 with a low of $1293 thus far. The US Dollar did strengthen today mostly against the Euro with the European currency trading down near 13560. As I have stated previously I do not see any sustained rallies in the US dollar unless the markets are given a specific time when the first rate hike will be. That did not happen today and one main thing I took away from Janet Yellen today was she could not rule out the possibility of more QE in the future. She was asked point blank, when the Tapering is complete this coming October, will QE be gone forever or is it possible that the Fed may have to revert to it again in the future? I am sorry that I am not quoting this but I have been very busy today and am pressed for time before the Chinese data comes out shortly. I would not put something out there if it could not be verified, I listened to the whole testimony. You are going to have to take my word for it for now. I know my word is my bond but here I did a little digging.
Sen. Dean Heller (R., Nev.) just raised the specter of QE4.
Will QE3 be the end of quantitative easing? Or will the Fed go back at it again some day?
“Is this now the new normal?” Mr. Heller asked. “Or would you commit to saying that quantitative easing has come and gone?”
Ms. Yellen declined to make any such commitment.
“It really depends on what the economy does,” she said. “I wouldn’t take it off the table forever as a tool the Federal Reserve might need, some day, in some circumstances to use again.”
“But my hope is we’re on a path of recovery and monetary policy will over time normalize,” she added.
I have said it before on this blog, I think the Fed is so wrong on this economy and that at some point in the future they will have to do more QE to keep the United States economy from really crashing. Above is the US dollar, first we need to see a move above 8060 to give this rally any credence. I look at the markets and I listened to Ms. Yellen today and I just say thank you for better trading opportunities. Maybe the Euro goes a little lower towards 135 for now but I do not see much more downside than that, unless the European banking crisis really gets kicked into full gear. Let's watch 13560 first and then 13500 to see if the Euro will stay supported.
Real quick, take a look at Gold and most importantly the downside levels, being that we did break below $1300 today. If 1280 does not hold, the next level will be 1240 and yes if that breaks I would not be surprised one bit if we get one more final plunge below the double bottom near 1180. No I am not predicting this, I am just making you aware of it being possible. After all have you seen OIL and all the grain markets, they have fallen hard as of late with the grains being at the lowest prices not seen in over 4 years! No inflation to worry about at the moment and stocks seem to be the only game in town, why does anyone need to own Gold? The sentiment is just not with Gold currently! Be careful. Here is the big picture, please click on the chart below.
What could change sentiment in Gold right now? A collapse in the US dollar, a collapse in the stock market, escalating events in the Middle East, guess what, all three are possible and could happen at any time! That is why we need to pay close attention to everything that is going on around us. Tomorrow will be a huge day with Janet Yellen round 2 and we will be digesting GDP and retail sales along with industrial production out of China. Let's see where the markets are tomorrow.
Thanks for reading
TraderMartin
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