{"id":35945,"date":"2016-10-01T15:39:23","date_gmt":"2016-10-01T22:39:23","guid":{"rendered":"http:\/\/drduru.com\/onetwentytwo\/?p=35945"},"modified":"2016-10-01T15:39:23","modified_gmt":"2016-10-01T22:39:23","slug":"markets-not-buying-september-hike-but-gold-still-topping","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2016\/10\/01\/markets-not-buying-september-hike-but-gold-still-topping\/","title":{"rendered":"The Market’s Not Buying A September Hike But Gold Is Still Topping"},"content":{"rendered":"

(This is an excerpt from an article I originally published on Seeking Alpha on August 28, 2016. Click here to read the entire piece<\/a>.)<\/strong><\/p>\n

Going into the Jackson Hole Economic Policy Symposium<\/a>, various “Fed heads” were interviewed about the prospects for the next rate hike. The chorus in the days and weeks before Jackson Hole seemed to lean into a September hike. Here is at least a sampling of relevant quotes since the Fed’s July 26-27 meeting. {snip}<\/p>\n

Federal Reserve Chair Janet Yellen appeared to confirm the heightened likelihood of a September hike and was further reinforced, or at least not contradicted, by CNBC interviews afterward with Fischer and Bullard.<\/p>\n

{snip}<\/p>\n

Anecdotally, it appears the conventional media interpretation of the sum of all this Fed-speak points to putting a September rate hike in play. Yet, as is often the case, financial markets disagree. In fact, a rate hike in September looks extremely unlikely although much more likely than at the beginning of August. {snip}<\/p>\n


\n
\"Market<\/a>
Market expectations for the next rate hike have risen in August: A December rate hike looks almost like a lock now.<\/figcaption><\/figure>
\nSource: CME Group FedWatch Tool<\/a><\/strong>
\n<\/center><\/p>\n

The market is about as close to certain as it can get about the next rate hike coming in December. {snip}<\/p>\n


\n
\"The<\/a>
The U.S. dollar index (DXY0) surged back into 50DMA resistance.<\/figcaption><\/figure>
\nSource: FreeStockCharts.com<\/a><\/strong>
\n<\/center><\/p>\n

As the dollar firmed and rallied, precious metals wavered. {snip}<\/p>\n


\n
\"SPDR<\/a>
SPDR Gold Shares (GLD) surges above its 50DMA before breaking down again. It’s looking more and more like a top for GLD.<\/figcaption><\/figure>
\nSource: FreeStockCharts.com<\/a><\/strong>
\n<\/center><\/p>\n

From a technical standpoint, this time is a bit different in that the setup is more bearish even as support from the post-Brexit gap up has yet to crack. {snip} The Fed’s own forecasts for future rates warns us of the potential volatility in expectations. Per Yellen<\/a>:<\/p>\n

{snip}<\/p>\n

This juncture is important for GLD because gold remains a crowded trade from the perspective of speculative positions. {snip}<\/p>\n


\n
\"Speculators<\/a>
Speculators are extremely bullish on gold.<\/figcaption><\/figure>
\nSource: Oanda’s CFTC’s Commitments of Traders<\/a><\/strong>
\n<\/center><\/p>\n

My test for gold sentiment using Google search trends suffered a setback of sorts. {snip}<\/p>\n


\n
\"Gold<\/a>
Gold sentiment has yet to reach another extreme, at least using the more restrictive “buy gold” search term.<\/figcaption><\/figure>
\nSource: Google Trends<\/a>
\n<\/center><\/p>\n

The trading implications for GLD remain the same for me: per my strategy, I am holding my long-term core position and abstaining from trading (long) around my position.<\/p>\n

Silver (SLV) is a different story. I decided to try a hedged bet ahead of Jackson Hole in anticipation of a big move up or down by mid-September. {snip}<\/p>\n


\n
\"The<\/a>
The iShares Silver Trust (SLV) seems to have confirmed its double-top, 50DMA breakdown with Friday’s failed rally.<\/figcaption><\/figure>
\nSource: FreeStockCharts.com<\/a><\/strong>
\n
\n
\"As<\/a>
As with gold, speculators are extremely bullish on silver. However, net longs have pulled back slightly every week since the multi-year high in late July.<\/figcaption><\/figure>
\nSource: Oanda’s CFTC’s Commitments of Traders<\/a><\/strong>
\n<\/center><\/p>\n

As the chart above shows, the short-term technical picture for SLV more mixed than that of GLD. {snip}<\/p>\n


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