Contributed Commentaries

Mnuchin Moves Gold And Why Precious Metal Investors Should Get To Know Mnuchin

Let us first discuss why gold is moving today and the importance of Mnuchin before discussing The Arora Report updated ratings on gold and silver, long-term allocation to precious metals and short-term trades. 

Who Is Mnuchin?

Steven Mnuchin is the Treasury secretary of Trump’s administration.  The Treasury secretary has always been a powerful position. Mnuchin is especially powerful because of his hedge fund background and the changes Trump is making.  Mnuchin understands the markets.

Typically the Treasury secretary does not directly comment on gold but comments on dollar, budgets, taxes, deficits, borrowing, infrastructure spending and other fiscal matters.  All of these move gold. 

Mnuchin Moves Gold

Earlier today in a comment, Treasury Secretary Mnuchin failed to bolster the case for quick stimulus and also the case for strong dollar.  The dollar has weakened, especially against yen.

Mnuchin's comments are running gold up.  Gold bulls see dollar weakening and stock market falling.  One of the reasons for the stock market going up has been the prospects of quick  fiscal stimulus.  Gold bull's reasoning is that without quick stimulus stocks will fall and money will move into gold.  Now gold has moved into a heavy resistance zone.

Please see updated gold ratings below.

Stocks are simply overlooking Mnuchin's comments and interpreting them differently than gold.  The result is that there is no down draft in stocks.

Oil was already in a bullish mode when Mnuchin's comments came.  Weaker dollar caused oil to rally further. Previously oil was rising on API reporting crude inventories falling by 884K barrels vs. consensus of increase of 3.5 million barrels.  EIA data released at 11:00 am ET showed oil inventories had a build of 0.6 million barrels vs. consensus of 3.48 million barrels.

The Fed

The Fed released minutes of the last meeting yesterday afternoon.  The Fed was more dovish than the consensus.  Probability of a rate increase in March has now fallen from 43% to 36%.

Lower probability of a rate increase is good for gold as gold is very sensitive to interest rates. 

The Chart

While fundamentals are most important, it is prudent to pay attention to technicals on a chart. Very long-term precious metal investors should look at a monthly chart and very, very short-term traders should look at a 15 minute chart. 

Please click here for long-term annotated chart of GLD.

The chart is of popular gold ETF (GLD).  There are five important observations from the chart.

  • As shown on the chart, gold is now at first resistance.

  • This resistance level also corresponds to 23.6% Fibonacci retracement level from the last major down swing.

  • The fact that gold has made it this far without falling to the low point of the last major down swing shown by the 0% line on the chart is positive.

  • The next major resistance is the line marked at 38.2% Fibonacci retracement level on the chart.

  • During the last upswing, gold fell short of 38.2% level and then fell.  This foretold the weakness that ensued. 

Short-Term Trades

Gold ratings, published below, from The Arora Report are popular among short-term traders, bullion dealers and jewelers.   Over the years, these ratings have established unrivaled performance record.  In addition to the ratings, The Arora Report provides short-term signals to trade both from the long side and the short side on gold, silver, and precious metals as appropriate.  These signals have a higher conviction than the ratings but also produce fewer trades.  You can see unrivaled performance of these signals on The Arora Report site.

Allocation To Precious Metals

For those who are inclined to always have gold in their portfolio, a long allocation of 2 - 4% to precious metals from a very long-term perspective at this time is appropriate.  This is separate and distinct from Model Portfolios and trading positions that are subject to more stringent criteria.

For diversification reasons, our rules limit maximum allocable to precious metals and miners to 20% of the portfolio.  Long time subscribers to The Arora Report have handsomely profited from our prior allocations of up to 20% of portfolio to precious metals both from long and short sides.

Gold And Silver Ratings

The Arora Report precious metal ratings are used by bullion dealers, jewelers and investors across the globe.

The first cut of ratings on gold and silver at The Arora Report is generated by complex algorithms that automatically change with market conditions. Then human judgement is added before publication.  Inputs to our algorithms include relationship between currencies, interest rates, sentiment, money supply, global geopolitical picture, global GDP growth, inflation in key countries, leading indicators of inflation, risk appetite, mine production and jeweler demand , smart money actions, speculator actions, and our proprietary technical indicators.

Here are our current ratings.

  • Mild Positive in the very, very short-term.

  • Mild Positive in the very short-term.

  • Neutral in the short-term.

  • Neutral in the medium-term.

  • Mild Negative in the long-term.

  • Positive in the very long-term.

These ratings are reviewed daily and changed frequently to help both long-term investors and short-term traders.  For definitions of time frames, please click here.

Full Disclosure: As appropriate, subscribers to The Arora Report are provided precise buy zones and sell zones as appropriate.  Further, subscribers to The Arora Report may undertake short-term trading positions in addition to the very long-term generational opportunities.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in precious metal products, commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.
kitco news

Precious Metal Charts

Click to see this Precious Metal chart
  1. 24h
  2. 30D
  3. 60D
  4. 6M
  5. 1Y

Interactive Chart