Ira Epstein's Gold Report

What a day yesterday was in terms of Federal Reserve Policy.

At yesterday’s press conference Fed Chair Yellen reversed course nearly 180 degrees. When the Fed raised interest rates in December 2015 the Fed Plot showed the Fed thinking 4 interest rates were likely in 2016. Ms. Yellen lowered that number to 2 in the question and answer period in yesterday’s press conference.

She made it clear that the Fed is very aware of the fragility in our economy that of our trade partners and our trade partners, partners. The world is intertwined and as such, Ms. Yellen is showing that the Fed does take into account what goes on in the world. This too is something of a change in terms of her admittance of such.

Obviously some like me continue to question why the Fed moved in December to raise interest rates. Whether you think they did the right thing or not, their doing so leaves the Fed with a bullet in their gun’s chamber should the situation warrant lower interest rates down the road.

The big change is that the Fed is now willing to take action to provide a climate for inflation to grab hold and overshoot.  This is what you call a “Risk On” environment, as being seen the rally in stocks, commodities and drop in interest rates.

Ms. Yellen’s statements yesterday have to be giving European Central Bank (ECB) President Mario Draghi indigestion, as the Eurocurrency is soaring back to levels not seen in months. This will complicate problems not only for him but for the Japanese as the central banks in both these countries have gone to negative interest rates but seeing the Dollar fall against their currencies is not the impact they thought would be taking place.

Another key element that I think will help gold is the price of oil. It’s unlikely oil prices are going to crash from here down to the $20 or $15 level. Like when when gold was $1900 and people were calling for $2500, oil in the $26 range might have been its low. If so, an anchor do deflation around the “neck” of gold will be removed. Add to that the Fed’s actions to let inflation out on “holiday” should add to higher prices.

Seasonal Chart

Choose which of the formats you think gold is following.  If it’s neutral to bearish, lower prices historically speaking are in store. If the Fed’s sudden change of stance on interest rates and inflation is let to run as Ms. Yellen said, the bullish path in Green is the one that prices might follow. 

Daily Chart with Price Counts…published March 10 2016

The price on the Weekly Chart was at 1260.5 when I published the PriceCount Chart above. Today the Weekly Price is at 1265.2, up for the week about $6.40. If this move is going to extend, the next upside PriceCount could carry inot the $1415 level.

It will take a lot to change this PriceCount as it will requce a move back down and close under 1260 given the count formation.

Conclusion

I’m in the camp that’s learned to “never fight the Fed”.

If you are like me, you realize that yesterday was a “watershed” event, one whereby the Federal Reserve has altered its monetary policy. The Fed no longer sees the strong economy they saw in December. They’ve come around to the marketplace’s point of view and see a more fragile economy that needs time without tighter money restrictions.

The Fed, if taken by what was said yesterday, is going to do all it can to not restrict inflation from moving higher.  Keep in mind all the stimulus that was enacted to create inflation that has failed to do so.

As I see it, when breaks occur off this current run, purchases are warranted.

Where to buy will be issued in my twice Daily Written Market Recommendations.

With this change in the Fed’s policy, its time to move to the bullish side of gold until something important changes. A lower Dollar will act as a prop as will higher crude oil prices.

Rising interest rates and a strong Dollar will deter gold from moving higher.

For the time being, $1247 looks to be a pivot from which gold will decide on what to next do. 

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