Is Gold Set To Go Higher?

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The debt ceiling is an issue that refuses to go away.  Budgets remain at unprecedented levels and therefore the nation’s debt continues to climb precipitously.  As a result, U.S. government spending once again reached the debt ceiling.
Despite how poorly the U.S. political establishment (i.e. Congress and the President) has handled matters, regardless of whether they bungle the operation, handle it smoothly, or manage something in between, we remain certain that deficit spending will continue at its historic pace. Therefore, the debt will grow, and the debt ceiling will continue its inexorable rise.

And what happens when you continually raise the debt ceiling? Well, gold tends to rise.  Note the correlation between the rising debt ceiling over the last 23 years and the gold price depicted in the chart below.

The flash manufacturing PMI by HSBC suggested China's economy continued to improve. The reading rose to a 6-month high of 51.2 in September from 50.1 a month ago.

While the Fed failed to announce QE tapering in the September meeting, St Louis Fed President James Bullard said the Fed's decision last week was "a borderline decision" and October would be a "live meeting" because "it's possible you could get some data that change the complexion of the outlook and could make the committee be comfortable with a small taper in October".

The debt ceiling will be raised, U.S. debt will continue to climb and it will be funded by QE. As a result, gold demand will remain strong as people, institutions, and governments look to protect themselves from the aggressive devaluation of the world’s reserve currency (the US dollar).

 

 

 

Bank Of America (BAC): Taking A Position

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Entering Bank of America with 1/4 position @ $13.90. BAC 2013 eps $0.90 - 2014 $1.36 est with a forward p/e 10.22. Will add to position on further pullback.

Silver Wheaton (SLW)

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Silver Wheaton (SLW) finding support here around $24... let's re-enter with a half-position.
Silver Wheaton now trades at 17 times earnings, margins are holding above 55% SLW with low valuations and a metals market supported by growing demand in emerging Asia, as well as an efficiently run business model with low production costs. BUY

What Inflation?

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"Inflation is always and everywhere a monetary phenomenon." - Milton Friedman

Last Wednesday, the Federal Reserve announced 'No Tapering'.... needless to say most of us in the financial world were stunned. Read

The markets rallied off the news, ITZ quickly re-entered Silver Wheaton (SLW) for a quick trade. However, the enthusiasm waned on Friday, as many wondered...why? What did the Fed know that we didn't.

Given the Fed's loose monetary policy, many people assume that higher inflation is an inevitable consequence. The velocity of money is extremely low at present, wage increases are another factor, but that as well has been fairly low.
The 'Core' inflation -  excluding food and energy prices- as mentioned by the press, always leaves us asking why do they ignore those factors. Basically the 'core' eliminates volatility associated with those factors. Fed Statement

The U.S. economy has been performing well below its potential during the Obama presidency, due to the "output gap".  The current output gap is -5.8.

Warren Buffett noted that the markets were 'fairly valued' this week Read

Bottom line, for now inflation does not appear a threat to our economy, at least for a few years. The trend remains bullish for equities, ITZ suggests buying any pullbacks/corrections.

For past charts & post click here

Is Market Setting Up For A Pullback?

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Back in May of this year, ITZ posted the following charts. LINK

 It appears now we're nearing that point, is it today? Perhaps not...but we're in that period of Sept/Oct when it's more likely.

Bernanke's Surprise

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SURPRISE!

The U.S. Federal Reserve defied investor expectations on Wednesday by postponing the start of the wind down of its massive monetary stimulus, saying it wanted to wait for more evidence of solid economic growth.

At first... I was like...WHAT?

But immediately put some money into Silver Wheaton $SLW. TWITTER POST

Uncle Ben  refused to commit to begin reducing the bond purchases this year, and instead went out of his way to stress the program was "not on a preset course." In June he had said the Fed expected to cut back before year end. The Fed reiterated that it would not start to raise interest rates at least until unemployment falls to 6.5 percent, as long as inflation does not threaten to go above 2.5 percent. The U.S. jobless rate in August was 7.3 percent.

Bernanke had not only ITZ confused, but left a majority of traders flat footed. To make a long story short...the Fed Chairman basically kicked the can down the road for the next chairman...most likely Janet Yellen.

Below are some updated charts from the last few weeks:

Fed & Tapering May Not Necessarily Be Bad For Gold

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Gold investors fear that the scaling back of U.S. monetary stimulus will spark a surge in borrowing costs, making gold - which pays no dividend or interest - particularly sensitive to rising interest rates.

But, with emerging markets accounting for about three-quarters of gold demand yearly, higher U.S. interest rates may have less influence on gold prices than expected.

The price of gold has room to increase even if U.S. interest rates keep rising as an improving economy should boost demand. Between June2003 and May 2006, $GOLD posted a cumulative return of almost 100 percent  while the $TNX rose 200 basis points.

During periods of rising U.S. interest rates, gold's relative low volatility also makes it a desirable asset in an investment portfolio. According to a recent  World Gold Council trade group report, the price of gold has room to increase even if U.S. interest rates keep rising as an improving economy should boost demand by jewelers and manufacturers. REPORT

Gold & Silver Update 9/12/13

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Gold, silver and copper are getting hit today as ITZ noted on August 29th and on follow up post Sept 8th

ITZ is looking for the metals to continue lower as noted in charts below. Silver Wheaton (SLW) under $23.50 starts to look like a re-entry level.

Uncle Carl Adds To Apple Position

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Well, Apple sold off on the news...WOW big surprise... but they did disappoint on not coming out with a new 'must need' product. That along with no news of a China Mobile deal yet and it gapped lower to technical support levels. Uncle Carl did step in and added to his position READ 

Carl Icahn Video Link

Previous ITZ post on Apple from August 13th READ

Historically, Apple's share price in the last 10 product launches has sold off, but recovered one month later.

So what does one do here? We could see a test of the gap, or churn here maybe a bit more downside. But, in a few weeks we'll start seeing how preorders on the iphone5c look like and we have iOS7, plus we may still get word of a China Mobile deal.

This Airline Stock Looks Ready To Fly Higher

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A few weeks has gone by since the DOJ challenged AMR's  merger with U.S. Airways, but the news of Delta Air Lines  is set to join the Standard & Poor’s 500-stock index. $DAL saw new highs on huge volume today. CHART

ITZ is looking at Alaska Air $ALK, suggests entering a 1/4 position around $60 with a $58 stop.

UPDATED CHARTS: GOLD, SILVER & COPPER

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Precious metals finished the week on a strong note, as the latest reading on jobs kept the market guessing about the Federal Reserve’s quantitative easing programs.
The U.S. economy added fewer jobs than economists expected, and the unemployment rate ticked lower, largely as the result of job hunters dropping out of the labor force.
The share of working-age Americans who were employed or looking for work fell to 63.2%  last month, its lowest level since 1978, a time when fewer women were participating in the labor force.

 The Department of Labor reported Friday that the country’s employers expanded their payrolls by 169,000 jobs, below the consensus estimate of 175,000 new jobs, and unemployment dropped from 7.4% to 7.3%.

The dismal U.S. Non-Farm Payrolls report certainly dragged on the dollar, but the recent lull in job growth may do little to stop the Fed from tapering its asset-purchase program at the September 17-18 meeting as the central bank continues to highlight a more broad-based recovery

 Updated Charts to prior Heavy Metal(s) post on August 29th >> LINK

Pedal To The Metal: Car Sales Booming

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Last month's sales will top 16 million vehicles on a seasonally adjusted annualized basis, several automakers said, which would be the first time U.S. sales topped that level since November 2007. It also marks stronger sales than expected, with nearly all automakers on Wednesday reporting double-digit sales gains for the month.

Global automakers, in the midst of one of their best years ever, are poised to rake in even greater profits the rest of this decade, according to a new report.

As you can see from this chart, there is a LONG history of the unemployment rate (red line) moving in tandem with car sales. And that makes total sense. People don't buy cars if they don't have a job.

Auto Sales Data Link

 

 

The road to 2020 and beyond: What’s driving the global automotive industry?

The global automotive industry is about to enter a period of wide-ranging and transformative change, as sales continue to shift and environmental regulations tighten. The lesson: companies that want to have a successful, long-term future need to get key strategic decisions right in the next decade.

The growth, especially in China, is why automakers will need to move even more production to that country and emerging markets.
Urbanization and industrialization are driving the growth in China, and that will continue for many years. LINK