In the alert that you received from us earlier today we emphasized that GLD's extremely low volume is likely to be followed by a sharp move. The move turned out to be to the upside, as the USD Index moved below its strong support line. The underlying fundamental factor is the lower-than-expected amount of jobs that were created in September. Quoting today's Oil Trading Alert:
"The U.S. jobs data for September was delayed from Oct. 4 by a partial U.S. government shutdown caused by wrangling in Washington over fiscal matters including the debt ceiling. Please note that analysts polled by Reuters expect nonfarm payrolls to have increased by 180,000 in September after a rise of 169,000 jobs in August, with the jobless rate steady at 7.3 percent. Therefore, a reading anywhere in the 160,000 to 190,000 range would probably be fairly neutral with respect to near-term U.S. dollar direction. Any signs of weakness may reinforce expectations that the Fed would hold off from scaling back its stimulus this year, pressuring the greenback. However, if it is a strong number it would suggest that the shutdown may have had only a limited impact and any strength in the jobs data could be used as an excuse to buy the dollar."
News about only 148,000 jobs adding was negative for the USD Index and positive for gold - markets seem to be focusing on the increasing probability of a continuation of the money-printing programs and on the scenario where these programs would be kept intact for longer.
The resulting strength in the precious metals sector invalidates the bearish outlook that was in place before today's rally and consequently we no longer suggest keeping any short positions in the precious metals sector. At this time, the situation is unclear. The medium-term outlook remains bearish in our view and we think that the final bottom for this decline in the sector is not yet in. At the same time it is no longer likely that we will see the decline right away. Consequently, we are not betting on lower precious metals prices at this time, but will likely re-enter such position in the coming weeks, days or even hours. Please note that the next cyclical turning point for the USD Index is quite close, so we might see an end of this decline in the US dollar even this week.
We might suggest re-opening speculative positions later today, based on where gold, silver and mining stocks close today's session. We'll send you another Market Alert if that is the case.
To summarize:
Trading capital: No positions.
Long-term capital: Half position in gold, silver, platinum and mining stocks.
As always, we'll keep you - our subscribers - updated should our views on the market change. We will continue to send out Market Alerts on a daily basis (except when Premium Updates are posted) at least until the end of October, 2013 and we will send additional Market Alerts whenever appropriate.
As a reminder, Market Alerts are posted before or on each trading day (we usually post them before the opening bell, but we don't promise doing that each day). If there's anything urgent, we will send you an additional small alert before posting the main one.
Thank you.
Sincerely,
Przemyslaw Radomski, CFA
