Welcome to CrushTheStreet.com's Weekly Market Wrapup!
Our top news story of the week is the prevailing bearish sentiment in the gold bullion market,
with the current range of valuation down 16-percent from its 52-week high, and with seemingly
few fundamental indicators that would be suggestive of a recovery.
The mainstream media has pounced on the latest round of negative outpouring towards the precious
metals complex, with Yahoo Finance running multiple articles and feature pieces, with
some implying that gold could eventually break below the $1,000 dollar barrier.
In an online financial news segment called "Talking Numbers," the host of the show, Brian
Sullivan of CNBC fame, noted that if gold were to close the year right where it is,
it would be staring at back-to-back annual losses, a technical circumstance that hasn't
occurred since 1997.
Frequent guest and founder of Chantico Global, Gina Sanchez, weighed in on the bandwagon
trade of the month, stating that gold was headed straight down as she sees sustainable
strength in the U.S. dollar, along with economic optimism and rising interest rates.
These factors combined with possible deflation in Europe and inflation in China would contribute
to bullion's demise.
Ari Wald, head of technical analysis at Oppenheimer and Company, stated that they were playing
for lower gold prices, taking concern with the fact that long-term support at $1,200
dollars failed to hold true.
Until gold can stabilize, he argued, there is downside risk to $1,000, although he suggests
that this may be the ultimate support level, noting that between the years 2007 and 2009,
this price point was strong resistance.
Under traditional technical analysis beliefs, prior levels of resistance serve as support
lines for future price action.
On the surface, the described events appear to be forming a perfect storm of bearishness
towards the bullion market.
However, some important counterbalancing evidence needs to be considered.
Fundamentally, the labor market is not nearly as healthy as advertised.
Between 2008 until the middle of this year, data from the ADP National Employment Report
showed a contextual imbalance, with heavy losses in construction and manufacturing only
being offset by a small increase in professional and business service jobs, a broad category
that also includes "temporary help services."
In other words, jobs that reflected the strength and prestige of the U.S. economy were replaced
with seasonal or unsteady work.
The failure to add substantive employment opportunities to the economy is also a failure
of Ben Bernanke's policy with regards to quantitative easing.
Since the labor market in the context of net productivity is actually negative, overall
demand is negative and thus, prices soon follow suit.
Eventually, if this trend continues, prices will become so depressed due to the lack of
real opportunities in the marketplace that aggressively inflationary policies will likely
be implemented.
This is because given the choice, policy makers prefer to bolster job growth and spread the
invisible tax of inflation across a wide net, as opposed to choking job growth in an effort
to lower prices for the currently employed.
While this doesn't guarantee higher gold valuations, it does suggest that the current euphoria
towards the greenback and the equities market may be in its own bubble.
In financial news, the U.S. equities sector bled off momentum after starting the week
on a positive note.
The S&P 500 finished virtually at dead-even on Thursday at 2,039 points, while the Dow
Jones went up a quarter of a percent to close at 17,652 . The precious metals complex remained
range-bound after last week's massive sell-off, with gold closing down slightly to $1,160
while silver lost 10 cents to finish the session at 15.72.
Palladium took the heaviest of losses, dropping 1% of valuation to close at 769 on the ask.
Finally, digital currency news was set alight as bitcoin made a recent push to 460 dollars
before pulling back and settling in a range of 440 at last count.