Although the gold market ended last week on a positive note, the bulls have their work cut out for them undoing the recent chart damage inflicted on the yellow metal in the aftermath of the surprising Donald Trump election victory in early November.

 

That being said, the precious metals are showing some signs of bottoming, and thus far the bears have not been able to push prices beyond the recent low prints.

 

Friday’s Employment Situation Report was not exactly stellar. The U.S. Department of Labor reported that non-farm payrolls saw 178,000 jobs created in November while the unemployment rate ticked lower to 4.6 percent.

 

October jobs data was revised lower, while September jobs data was revised higher. Of particular note is the downtick in the unemployment rate. While at first glance this figure seems encouraging, it can also be misleading. A decline in the participation rate was reportedly the driver behind the lower rate, not faster job growth.

 

All things being equal, this latest jobs report will likely keep the Fed on track for an interest rate hike at its next meeting later this month.

 

Investors may now turn their attention to the pace of future rate hikes from the central bank.

 

Markets are now pricing in two additional interest rate hikes in 2017, a forecast that could change rapidly if the data stream shows further strength. For the time being, however, the data stream continues to show some mixed signals, and the Fed is likely to stick with a very gradual approach as it looks to normalize monetary policy.

 

Key markets that can have a direct effect on the gold market including stocks, treasuries and the dollar index have all seen strong moves in the last three weeks. Those moves could, however, be coming to an end, at least in the short-term.

 

Some analysts have been suggesting that the equity rally has been overblown, and that a pullback in stocks is becoming more likely. Likewise, some believe that the sharp move lower in treasuries has also been overextended, and that a reversal is likely.

 

Markets have been moving on the notion of stronger economic growth driven by tax cuts and increased government spending. Interest rates have been moving based on the idea that Trump is more of a hawk than a dove, and that his plans are likely to fuel inflation.

 

At this point, all of this could be considered conjecture, and sentiment among investors has the potential to change quickly if some of the key policies recently discussed are not able to be implemented.

 

Investors will also not likely forget that much of the world remains engaged in ultra-low rate policies and quantitative easing. Even if the U.S. economy gains further steam, the global economy may remain sluggish and see weak growth for some time to come.

 

Gold may already be in the process of forming a meaningful bottom, and some analysts have already suggested significantly higher gold prices by the end of the year. Of course, much remains to be seen, but long-term investors are likely to remain focused on the potential benefits of gold ownership and come to the conclusion that many of the reasons for buying gold in recent years still exist today.

 

Those same investors could then potentially view current gold prices as a substantial bargain, and increasing demand could send the yellow metal higher once again. 

The gold market ended last week near key support at the $1200 level, and thus far the gold bulls have not been able to really stop the bleeding. The market may potentially find some chart support just below $1200 in the $1196-$1198 area, although a decisive breach below this level could potentially see a fresh leg lower in price.

 

Looking at gold as a long-term investment (the view we believe should be taken), the market may potentially provide some significant buying opportunities at current levels or if prices decline further.

 

It is important to keep in mind that markets have been moving since the U.S. Presidential election based on the notion of significant changes in economic and possibly even monetary policies. None of these changes has, however, been put into practice yet, and some of them may be very challenging to implement.

 

Although the idea of increased government spending and lower taxes sounds great on the surface, some analysts have suggested that putting such a plan into action may be extremely difficult. Of course, precisely how Mr. Trump plans on accomplishing such objectives also remains quite unclear, as little if any specifics have been divulged at this point.

 

Some might consider recent market action euphoric, and some analysts have already been discussing the possibility of the stock rally and treasury sell off being overblown.

 

Time will tell…

 

The rally in the U.S. Dollar Index is a whole nother story. The greenback has been on a tear higher, moving up as investors consider the potential ramifications of a Trump Presidency including protectionism, significant changes in trade, higher interest rates and more.

 

The dollar recently broke out above the upper end of its recent multi-year trading range, and is currently trading at levels not seen since the early 2000s.

 

It seems for all practical purposes that the dollar will continue to move towards parity with the euro, while also gaining against some other key currencies. The question is: Is the recent run higher in the dollar sustainable?  The dollar may continue to move higher until more clarity is seen on Trump’s economic plans, and if some of these key plans currently being discussed are not able to be implemented, the dollar could potentially see a major reversal.

 

For the time being, however, it is difficult to imagine a major rally in gold or precious metals if the dollar continues its recent ascent.

 

Interest rates are another key theme that investors will be paying close attention to. Trump is considered by some to be far more hawkish, and investors seem to be speculating on a faster pace of rate increases. Fed Funds futures currently point to about a 90 percent chance the central bank will tighten in December, although this hike appears to have been fully discounted by markets at this point.

 

In fact, with the recent bond sell off, rates have risen sharply in the last several sessions, and it would seem that a lot of the heavy lifting has already been done for the Fed.

 

Some analysts still expect the overall pace of additional rate hikes to remain slow and incremental, as the Fed will likely want to avoid smothering the economic embers currently burning.

 

For now, gold and silver may potentially remain on the defensive. That being said, however, markets have a funny way of sucking as many investors into one side of a trade as possible before turning sharply the other way. The more bearish sentiment becomes surrounding gold and silver, the better the likelihood that these metals have found a significant bottom. 

Tick tock tick tock tick tock…  The clock is quickly winding down to the U.S. Presidential election, and right now it appears to be a dead heat. Republican candidate and businessman Donald Trump has closed the gap between himself and Democratic candidate Hillary Clinton, with at least one pole recently putting Trump ahead in the race.

 

The bottom line? This thing could go either way right now…

 

Markets have remained relatively calm and subdued ahead of the highly anticipated election, although nerves may become considerably more frayed in the coming days. Investors may potentially seek refuge in perceived safe haven assets early next week, and gold and silver could potentially attract significant buying interest.

 

Some analysts have suggested that the Presidential vote could be akin to the Brexit vote seen back in June. Following the U.K.’s decision to leave the European Union, markets were hit hard, with equities as well as commercial commodities being heavily sold off.

 

The world, however, did not end.

 

Markets proceeded to bounce back, with stocks rebounding strongly and achieving new all-time highs in the process. Commodities recovered as well, and within a few weeks it was almost as if nothing had happened at all.

 

Will this election provide a similar scenario?

 

Possibly, but there are some major differences. A Trump victory could bring with it a significant amount of uncertainty as some analysts have questioned his policies and cited a lack of detail on how he plans to accomplish some of his goals.

 

On the other hand, a Clinton victory brings with it its own set of uncertainties, such as whether or not the email server issues that have been the topic of so much discussion are finally put to bed.

 

What if Clinton wins, but the election results are disputed? Then what?

 

Although many articles in financial media have discussed the idea of sharply higher gold if Trump does in fact pull off a victory, we believe that a strong case can be made for gold to go sharply higher regardless of who wins the race.

 

It seems like a long time ago now that investors were strictly focused on the Fed and the potential timing of the next interest rate hike. Friday’s U.S.  jobs data was considered to be another indication that the Fed will hike in December.

 

Now that the timing of the next rate hike appears to be a foregone conclusion, investors will begin to turn their attention elsewhere. Stocks have appeared much shakier in recent action, and some analysts have been calling a top in equities. Weaker crude oil seen in recent days could potentially exacerbate any stock weakness.

 

The dollar index may also remain at the forefront of investor attention. A stronger greenback has likely been a significant factor in gold’s lack of sustainable upside in recent weeks, although the dollar has been showing some signs of fatigue.

 

Gold will once again try to maintain trade above the $1300 per ounce level with a close above that on Friday. Investor anxiety over the election and its results as well as potentially weaker stocks and a weaker dollar could provide the gold bulls with enough ammunition to take prices to higher, yet sustainable levels. 

After seeing some significant downside in recent action, the gold market is trying to find some stable footing once again. The gold bulls showed some signs of life this past week as prices staged an upside breakout from recent sideways action, however, the follow through on that breakout has not been much to write home about thus far.

 

Unless a solid push higher in prices is seen this week, the gold market may once again find itself on the defensive.

 

The gold market finds itself in a peculiar place currently, having several issues potentially working for and against it. Although the notion of higher interest rates has weighed on gold in recent weeks, the idea of extremely slow and incremental hikes in the Fed Funds rate could still be considered bullish for the yellow metal. Not only that, but some of the recent data released is less than stellar, prompting some analysts to speculate that the Fed will in fact not raise rates in December and will remain on hold until sometime next year.

 

Higher global equity markets have also likely weighed on gold. The broad market S&P 500 remains not far from recent all-time highs, yet has been unable to make a new high for some time now. In fact, the longer the market remains close to previous highs without any attempts at a fresh high, the more potentially volatile price action may get if the market starts to break down.

 

Perhaps the biggest factor weighing on gold in recent weeks has been the strength seen in the U.S. dollar. The greenback has been on the rise and is currently trading at levels not seen since last March. Looking at the larger timeframe, the dollar index is approaching the 100 level, and along with it the top of a five year trading range.

 

The combination of possibly higher rates and a sinking Great British Pound are likely the primary drivers of current dollar upside, and the greenback could have further room to run. An upside breakout of the recent five year trading range could potentially see the dollar move significantly higher, and could potentially fuel selling in gold, silver and other dollar-denominated commodities.

 

Of course, all of these potentially bearish issues for gold could turn on a dime. With a very busy string of economic data coming up this week, things could get interesting.

 

Investors will get the latest readings on several key pieces of economic information this week including Consumer Confidence, New Home Sales, GDP, Weekly Jobless Claims, PMI Manufacturing Index, Durable Goods Orders and more.

 

All of these key data points have the potential to be market-moving, and any significant misses in this data could potentially fuel fresh speculation on the likelihood of a December interest rate hike. Such speculation could have a large impact on equity, interest rate and currency markets.

 

Gold has been lacking any fresh bullish catalyst for some time now. That being said, however, it seems that several factors could be coming into play in the near future that could potentially drive gold sharply higher. If gold is not able to sustain a rally from current levels, we would expect another wave of selling to push prices lower-and represent an excellent buying opportunity for the long-term investor. 

 Gold and silver have been hit hard in recent trade. The question is: Will the bulls be able to stop the bleeding or is there more downside in store?

 

Gold started the week well above the $1300 level, in fact, gold at one point on Monday was trading for over $1320 per ounce. Silver, on the other hand, started the week off trading well above the $19 per ounce level. Then the selling began…

 

Gold and silver were hit hard on Tuesday, with gold falling by over $40 per ounce and silver shedding more than a dollar per ounce. The question is why.

 

Some analysts suggested that some “big player” fund activity may have been to blame, while others even suggested that embattled Deutsche Bank could have something to do with it.

 

The most plausible explanation, in our view, is that some large selling did take place amidst a lack of any fresh bullish inputs.

 

Gold and silver had not been able to carve out new fresh highs in recent months, and the uncertainty surrounding interest rates in the U.S. appears to be abating. The Fed has made it fairly clear that it intends to-and wants to-raise interest rates before the end of the year.

 

This has caused some bumps in the stock market but nothing of any significance yet. Higher crude oil prices have added some bullish sentiment to the equity market, helping to counteract any negativity over a December rate hike.

 

Bond and note prices have been falling as interest rates have been on the rise. The dollar index has also been moving higher as Brexit starts to become more of a harsh reality and the idea of higher U.S. rates takes hold.

 

More Brexit news is likely to become a center of focus for global investors, and investors will continue to watch the data stream in the U.S. Although difficult to imagine at this point, the Fed could still decide to hold off on a 2016 rate hike. It would likely take a major string of very poor economic data or perhaps some type of negative global economic headlines. Extremely unlikely, but still possible.

 

This week, investors will be watching the latest readings on MBA Mortgage Applications, Weekly Jobless Claims, PPI, Retail Sales, Consumer Sentiment and more. There will also be several Fed officials involved in various speaking engagements throughout the week.

 

Gold and precious metals are currently lacking any fresh bullish inputs, and unless some type of catalyst is seen, the metals could potentially remain under pressure. This catalyst could possibly be further negative news about Deutsche Bank, a larger breakdown in equity markets or any more dovish commentary from the Fed or stimulative action by other central banks.

 

Significant declines in “paper” gold or silver can represent fantastic buying opportunities in physical gold or silver. For now, we are of the opinion that sub-$18 per ounce silver represents an excellent value and great buy for the long-term investor. We would also expect gold to be bought at current levels, and for physical buyers to become more and more aggressive if prices decline further.