Big Picture Update: Gold, Silver, Dollar and Bonds …

Dear Member,

Effective immediately, each week I will supplement your membership in Gold and Silver Trader with a weekly “macro-view” of the most important markets: Gold, silver, the dollar, and depending upon the action, either the stock or bond markets.

This way, you will have a synopsis of the main fundamentals at work, my interpretation of them, and more importantly in my book, the bigger picture technical and chart patterns.

I plan on releasing these weekly updates each Tuesday, but the actual timing may vary from week to week.

Importantly, the content of these big picture updates are not to be construed as trading ideas, or as timing for entries and exits of positions. They are merely for your benefit, a bigger picture summary.

All trading recommendations will continue to be released in regular issues.

Each and every week, check your inbox for my big picture update via a subject line such as the one above: “Big Picture Update: Gold, Silver, Dollar and Bonds …”.

The actual subject line may vary a tad, depending upon what markets are featured.

That said, here’s this week’s big picture update:

GOLD

Fundamentals: Continued uncertainty over the crisis in Syria and whether the U.S. will use force against the regime is now the major force for gold.

Traders and investors will be looking for any statement by the White House and other world leaders that could indicate furthering a strike.

Also, fears of the Fed reducing or completely abandoning tapering its bond purchases gripped the markets on the release of a weaker-than-expected August non-farm payrolls number last Friday morning. Traders rushed into the yellow metal expecting continued accommodation to support the economy given the lackluster jobs report. The rally, however, did not stick.

Strikes in South Africa have also lent support to gold in the near term, but even that is fading now.

Technicals: There is fairly strong technical support at the $1,350 to $1,360 levels in gold. Resistance now lies at the $1,412 area, followed by the $1,425 – $1,435 levels.

A weekly close above the $1,434 level should indicate further upside in gold to test the May high at the $1,480 – $1,490 level which is also where we see the 200-day moving average.

Nevertheless, as reported and shown previously, my cycle work shows a decline heading into the end of the month. To confirm it, we need to see gold close below the $1,350 – $1,354 level.

SILVER

Fundamentals: As with gold, the crisis in Syria is the main factor buffeting the silver market.

Silver traders and investors are also looking at the next Fed policy meeting on September 17 as whether to continue the bullish case.

Other important events to watch out for this month are the German elections (September 22) and any news regarding the replacement of Bernanke as Fed Chairman at the end of the year.

Fund inflows into the silver ETF, SLV, saw a net inflow in August of $88.2 million with the gold ETF, GLD, experiencing net fund outflows

of $227 million.

Technicals: Silver met with some selling pressure at the April highs in the $24.80 – $25.00 region in the past week leading to prices correcting. I am now watching the $22.68 and $21.68 levels for technical support.

I have a major bearish reversal at $21.69. A close below that level should set in motion a decline to test — or even break — the June low at $18.21.

THE U.S. DOLLAR

Fundamentals: Weaker-than-expected jobs report figures coming out last week has kept a lid on any further rally in the dollar.

Traders took this as an opportunity to offload any exposure as any continued accommodation from the Fed will be seen to hurt the dollar.

Also looming on this market is the prospect of failed debt ceiling negotiations due to begin later this month. Given the prospects of another war in the Middle East, any idea of the U.S. government improving its fiscal discipline is put into question and reflecting the weakness seen in the dollar.

Keep in mind that even with some near term issues for the dollar, the greenback is still the best of a bad lot. I remain bullish the dollar short and intermediate-term.

Technicals: The dollar has failed at least temporarily to hold above the 50-day moving average on a closing basis; however, the 200-day moving average has so far held any sell-offs into that area within the past three months.

Keep in mind that the dollar is still within its longer-term uptrend channel and shows no signs of breaking down technically. A close above 82.97 in the U.S. Dollar Index should set the stage for the next leg up in the dollar.

THE U.S. 30 YEAR BOND

Fundamentals: Short-term, the mildly disappointing August employment news was enough to put a bid under plunging bond prices. On the other hand, prospects of war in the Middle East and debt ceiling issues are keeping buyers away from this market, reinforcing the fact that the 32-year bull market in bonds has ended, leading to a lengthy period of rising interest rates.

Technicals: Bearish traders have been able to keep the price below the 50-day moving average since May. And with the longer-term 200-day moving average turning down since March, bulls will need a miracle to reverse the new downtrend in bonds.

Indicators are showing bearishness, including the Moving Average Convergence-Divergence (MACD) indicator that is about to form a bearish crossover as shown in this chart. The Relative Strength Index (RSI) is also reflecting this weak market showing oversold readings since May and has not yet been able to rise above the 50 level.

Yields are beginning to break out above the long-term down trend line from the all-time highs back in 1980, confirming the trend should continue up for yields for many years to come.

Stay tuned and best wishes,

Larry