Categories: Precious Metals
Topics: General Precious Metals

How to Be Ready for Higher (or Lower) Gold Prices

May 19, 2016

U.S. housing starts rose 6.6% in April — they were expected to come in at 4.6% — to a seasonally adjusted annual rate of 1.172 million units, the Commerce Department said Tuesday May 17.

The U.S. April consumer price index came in at up 0.4% — the highest since February of 2013 when it was up 0.6%. The figure was expected to be up 0.3%, and up 0.2% excluding food and energy.

Manufacturing in April was stronger than expected. There was also a 0.3% gain in output at factories, which followed a 0.3% decrease the prior month, a Federal Reserve report showed Tuesday.

Total industrial production, which also includes mines and utilities, climbed a larger-than-forecast 0.7%, boosted by the strongest advance in electricity demand in more than nine years.

For the past two months utility output had decreased, but did an about-face and was up 5.8%

Oil has rallied and is flirting with $50.00 a barrel.

Why does any of this matter to those of us that speculate in the junior resource market?

Because if the Federal Reserve is looking for data — and the decisions Janet Yellen makes are always data-dependent (as she so often reminds us) — to support a credibility-saving, normalization of interest rates in the form of another 0.25% hike... This data would be supportive of a small hike that wouldn’t be meaningful to us, other than in the context of other global events that could trigger another rise in the dollar and weaken metals prices temporarily.

A dollar rise in the short term would be negative for metals prices and the juniors we speculate in, especially in light of the fact that we would be dead smack in the middle of the summer doldrums.

This line of reasoning is why I’ve called this year’s rally “the last fake rally in gold.”

So what should we be watching? 

Click this link to continue reading on Outsider Club, where this article was originally published.