Forecasting

Where are the Stops? Tuesday, November 19: Gold and Silver

Below are today’s likely price locations of buy and sell stop orders for the active Comex gold and silver futures markets. The asterisks (**) denote the most critical stop order placement level of the day (or likely where the heaviest concentration of stop orders are placed on this day). See below a detailed explanation of stop orders and why knowing, beforehand, where they are likely located can be beneficial to a trader.

Stop Orders Defined


Stop orders in trading markets can be used for three purposes: One: To minimize a loss on a long or short position (protective stop). Two: To protect a profit on an existing long or short position (protective stop). Three: To initiate a new long or short position. A buy stop order is placed above the market and a sell stop order is placed below the market. Once the stop price is touched, the order is treated like a “market order” and will be filled at the best possible price.

Most stop orders are located and placed based upon key technical support or resistance levels on the daily chart, which if breached, would significantly change the near-term technical posture of that market.
Having a good idea, beforehand, where the buy and sell stops are located can give an active trader a better idea regarding at what price level buying or selling pressure will become intensified in that market.
The major advantage of using protective stops is that, before a trade is initiated, you have a pretty good idea of where you will be getting out of the trade if it's a loser. If the trade becomes a winner and profits begin to accrue, you may want to employ "trailing stops," whereby protective stops are adjusted to help lock in a profit should the market turn against your position.

Saxo Bank’s 2014 Outrageous Predictions :

• EU wealth tax heralds return of Soviet-style economy
• Anti-EU alliance will become the largest group in parliament
• Tech’s ‘Fat Five’ wake up to a nasty hangover in 2014
• Desperate BoJ to delete government debt after USDJPY goes below 80
• Brent crude drops to USD 80/barrel as producers fail to respond
• Germany in recession
• CAC 40 drops 40% on French malaise

Gold Sheds Nearly 3% on Fed Taper- Bearish Tone Set for 2014 Open

---

Gold was off sharply on the week with the precious metal plummeting more than 2.8% to trade at $1203 ahead of the New York close on Friday. Despite the magnitude of the weekly loss, bullion is set to close well off the lows of the week at 1187. Regardless, the metal is now set to post its first yearly decline in thirteen years and its largest yearly decline in 32 years. As the Fed begins to throttle down from its ultra-accommodative monetary policy stance, the outlook remains heavy heading into 2014.

The main event this week was the FOMC policy decision where in his last quarterly press conference as Federal Reserve Chairman, Bernanke announced that the central bank would begin tapering both Treasury & MBS purchases by $5 billion, effectively reducing QE installments by $10 billion a month. The news proved supportive for the greenback sending gold below support at $1209, its lowest level in over six months. Mr. Bernanke emphasized that tapering is not tightening and although the central bank will be reducing the amount of stimulus being injected in the economy, interest rates are likely to remain at exceptionally low levels as long unemployment remained above 6-1/2% and inflation below the 2% longer-run goal. Despite these “thresholds” the chairman continued to reassert that the move to tighten will be “data dependent” with the quarterly projections showing the majority of the committee expecting the first rate hike in 2015.


As the labor market continues to improve, more emphasis is likely to be put on inflation prospects as we head into next year with concerns over disinflation likely to support the Fed’s accommodative stance. With CPI data this week coming in below consensus, expectations for a prolonged ZIRP (zero interest rate policy) from the central bank may continue to be supportive for risk assets while the subdued inflation outlook remains heavy on bullion.


The release dealt a final blow to gold heading in to the close of the year as demand for the yellow metal continued to wane to the benefit of the greenback. As we head into next year, gold remains at risk amid an improving US economic backdrop and reduced Fed stimulus. With the threat of the fiscal drag also now subsiding, it’s difficult to see gold catching a bid as both equities and the USD press higher.

From a technical standpoint gold has continued to trade within the confines of a well-defined descending channel formation dating back to the August highs. Key support rests at $1179/80 with a break below this threshold putting the broader decline off the 2012 high into focus. Such a scenario looks to target support objectives at $1151/60, $1125 and $1091. Note that divergence has been identified in the daily momentum signature and suggests that a near-term correction higher may be in the cards as we open up 2014 trade. Bottom line: look to sell rallies / breaks of support with only a topside move surpassing $1268/70 threatening our medium-term directional bias.

The forecasting of currencies is very important for successful Forex trading. There are different forecasting techniques available with help of trading softwares but it very important to enter exact rates and times for which forecast is based upon.

Price of Gold in 2014: More Declines to Come?

---

This has been a terrible year for gold, with the SPDR Gold Trust and spot gold prices falling by more than 25%. Many gold-mining stocks have suffered even larger declines, as the Market Vectors Gold Miners ETF lost more than half its value this year. But with gold just barely hanging above the $1,200-per-ounce level, do investors have any reason to hope that the price of gold in 2014 will bounce back after the first losing year for the yellow metal since the turn of the millennium? Let's take a look at some of the factors that caused 2013's declines and see if they're likely to persist into 2014 and beyond.

What will affect the price of gold in 2014?

The biggest factor that could affect the price of gold in 2014 is the policy that the Federal Reserve sets. A big part of the weakness in gold prices in 2013 came from the Fed's moves toward tapering back on its quantitative easing, with even the threat of reduced bond-buying helping to push interest rates substantially higher. Low interest rates have supported gold prices for years, as investors haven't had to give up appreciable income-earning opportunities when they owned gold bullion. Now, though, as the 10-year Treasury yield has pushed back up 3%, gold investors face a rising opportunity cost when they choose to put their money into gold rather than income-producing assets.

Price projections on gold

UBS 2014 estimate	$1,200
Goldman Sachs 2014 estimate	$1,050
ANZ 2014 estimate	$1,450
Morgan Stanley 2014 estimate	$1,313

Source: Analyst projections.

Largely because of the prospects for reduced Fed intervention, analysts for the most part have become very unenthusiastic about gold's future. UBS, for instance, cut its gold-price forecasts earlier this month, dropping its guess for the price of gold in 2014 from $1,325 per ounce to $1,200, citing reduced interest among investors to buy bullion and an erosion of supporting factors like favorable technical-analysis patterns to keep prices up. UBS sees 2014 simply as the beginning of a long stagnant period for the metal, projecting $1,200 gold prices in 2015, rising to $1,250 in 2016 but falling back to $1,210 in 2017.

Goldman Sachs is even more bearish, arguing late last month that gold would have to fall at least 15% next year. At the time, Goldman's call implied a gold-price level around $1,050, but a 15% drop would push gold down even further based on today's spot prices.

Of course, the bearish view on gold isn't unanimous. Analysts at Australia and New Zealand Banking Group have called for gold prices in 2014 to rise to the $1,450 level, pointing to strong demand in China as potentially soaking up supply at new lower levels. Moreover, a recovery in India could go a long way toward helping support gold prices, even though an Indian government move to limit imports of gold hit gold purchases in the emerging-market nation hard during 2013.

Watch what the big players do

The other potential driver of the price of gold in 2014 will be what gold producers do. So far, decisions to cut back on exploration and production have arguably helped minimize the drop in gold prices, with industry giants Barrick Gold and Goldcorp among those scaling back their capital expenditures in efforts to cut overall costs. If mothballing projects results in falling supplies of gold, the resulting supply demand imbalance could put a floor under the price of gold in 2014.

On the other hand, gold miners might decide to protect themselves against further gold-price declines by hedging their production forward. Doing so would mark a big reversal from the stance that most miners took during the 2000s, as companies decided one by one to take off long-held production hedges in order to benefit fully from gold's unstoppable upward march. Such a capitulation among miners would be a big psychological hit to the market, but it could also mark a key inflection point from which gold could finally stage a solid recovery.

'Dr. Doom' Makes Sunnier Prognosis For 2014

---

Nouriel Roubini, labeled "Dr. Doom" when he correctly predicted a housing collapse would lead to the market crash in 2007, is out this week with a relatively optimistic forecast for global economic growth in 2014.

"After a year of subpar 2.9 percent global growth, what does 2014 hold in store for the world economy?" Roubini writes in an opinion piece on the Project Syndicate website. "The good news is that economic performance will pick up modestly in both advanced economies and emerging markets."

Roubini, who recently told Bloomberg News that he prefers to be called "Dr. Realist" rather than "Dr. Doom," says headwinds to global economic growth are easing:

"The threat, for example, of a eurozone implosion, another government shutdown or debt-ceiling fight in the United States, a hard landing in China, or a war between Israel and Iran over nuclear proliferation, will be far more subdued."

Led by the U.S., Roubini predicts that advanced economies will grow at an annual pace near 1.9 percent, after growing only 1 percent in 2013.

The U.S., which saw its economic recover pick up in the fourth quarter, can expect to benefit from the shale-energy revolution, improvement in the labor and housing markets, and the "reshoring" of manufacturing.

Outside the U.S., growth will remain anemic in most advanced economies, particularly in the European Union, where fundamental problems like public debt and high unemployment remain unresolved.

Meanwhile, emerging economies will grow faster in 2014 thanks to strong exports and a robust Chinese economy. He sees 5 percent growth across emerging economies, beating the 4.8 percent below-trend growth seen last year.

2014 Predictions

---

• Africa to develop its overall financial market, more exchanges to launch in frontier African markets, already saw growth in South Africa, new exchange in Zambia and Kenya in 2013.
• Leverage to be questioned, and more discussions in high leverage countries such as the UK and Australia about reducing it.
• HFT to play a strong role in FX markets both on retail and institutional level. Leading to enhancements in low latency software, messaging systems and aggregators across the board will put more emphasis on HFT auto trading
• I think we will see a lot of movement by the People’s Bank of China in the direction finance liberalization. There will be talks, if not actions, of letting the yuan float freely in the new Shanghai Free Trade Zone, allowing more IPOs in the stock markets and letting in big foreign institutional investors into the Chinese equity markets. All the news will lead to more people around the world wanting to hold the yuan and speculate on the time it will be allowed to float, and might increase as much as 30% overnight

Outlook For Gold In 2014

---

Gold had a rough 2013. With a loss of 28% on the year, the spot price of gold was down by nearly the same percentage that the S&P 500 was up. And I don’t expect gold to regain its shimmer in 2014.


Let’s take a look at the macro environment as we enter the new year:

• The inflation that gold enthusiasts have feared since the onset of the 2008 crisis is dead on arrival. The latest CPI figures show an inflation rate of just 1.2%, and energy prices are actually falling.
• The quantitative easing that fueled the inflation fears of the past few years is already being tapered, from $85 billion in bond purchases per month to $75 billion per month…with more tapering to come.
• The Federal budget deficit, though still far too high, continues to fall and is expected to be just 3.3% of GDP in fiscal year 2014.
• Gold miners are contemplating hedging their risk by selling their production forward, which will effectively cap the price of gold (and sends a very negative signal to the market).
• Hedge funds and other large institutional buyers—the driving force behind much of the rise in the spot price of gold in the past decade—appear to be abandoning gold if the outflows from gold ETFs are any indication. Gold ETF holdings are now at their lowest levels since 2008.
• Gold now has competition in the anti-establishment crowd from Bitcoin and other “virtual” currencies. (I think Bitcoin is a joke, mind you, but that doesn’t mean that it won’t continue to steal gold’s thunder for a while longer.)

EUR/USD Weekly Fundamental Analysis January 27 – 31, 2014 Forecast

---

The EUR/USD moved well above the 1.37 price this week but closed at 1.3686 up close to 160 points from Monday’s opening. The eurozone production figures and strong PMI print helped give the euro a bit of momentum as the dollar fell on lackluster data ahead of the Federal Reserve meeting this week. This week brought a series of reassuring news for the ECB: the peripheral rally continued amid massive demand for Spain’s new bonds; the Eurozone flash PMI indices improved to a level consistent with 1.5-2.0% annualized growth; and tensions in money markets eased somewhat, with Eonia ending the week below the ECB’s Refi rate (at 0.21% on Friday). Unfortunately, the latter factor in particular will only buy the ECB more time at best, before it needs to address the liquidity situation again, in our view, by acting either on quantity (SMP sterilization; reserve requirement; other ad hoc operations) or on price (policy rates).

Analysts look for the FOMC to continue with the taper process at its 29 January meeting, cutting another USD10bn from its monthly asset purchase program to USD65bn. Look for the FOMC to announce that it will add to its holdings of agency MBS at a pace of USD30bn per month and will add longer-term Treasuries at a USD35bn per month pace. No change in the Fed funds target is expected. The Fed seeks to rebalance its monetary policy toolkit away from QE towards forward guidance on policy rates.

EUR/JPY Weekly Fundamental Analysis January 27 – 31, 2014 Forecast

---

The EUR/JPY ended up lower for the week as the yen once again became a safe haven after traders abandoned equities are lackluster earnings data. The pair closed at 139.88 easing from the weekly high of 142.41 after the Bank of Japan held rates and stimulus at their monthly meeting. “There’s definitely some nervousness. The world is suffering from the emerging markets’ flu,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles. Worries over China’s growth surfaced after a disappointing manufacturing number spurred the S&P 500′s 0.9 percent drop on Thursday.

China’s efforts to contain a “financial excesses” won’t be positive for growth, Gibbs said. The next major psychological level for Aussie is the 2010 low near 80 cents, he said.

The China Banking Regulatory Commission’s order did not mention concerns that a 3 billion yuan (US$496 million) trust product distributed by Industrial & Commercial Bank of China may default after a coal miner that borrowed the funds collapsed, said the people, who asked not to be identified. Regional CBRC offices were told to also closely monitor risks from trust and wealth management products, they said.

The German IFO business climate for industry and trade will likely increase further in January as suggested by both the PMI composite and the ZEW economic sentiment. We expect the IFO business climate index to increase for the third consecutive month, to 110.2 after 109.5 in December. Our expectation is based on a continuous improvement in business expectations in the manufacturing industry since April 2013. Traders expect both the current conditions index and the expectations index to have increased (from 111.6 to 111.9 and from 107.4 to 108.1 respectively). Similarly, the European Commission’s Economic Sentiment Indices should post a further broad-based improvement in January as the recovery gathers momentum in several countries, including Germany or Spain.