Here’s the news of the week – and how we see it here at Mcalvany Wealth Management:

The Week in Brief

I will be out for the remainder of this week and next week, so I thought I would post a few data points relevant to MWM investors that I thought were worth sharing.  I’ll list these in bullet-point format for the sake of concision:

  • Cash market rates have been on the rise both in China and European markets.  It’s a bearish economic indicator suggesting that confidence in money market lending and borrowing is on the decline.  The PBOC has been the first to act, injecting 255 billion yuan into money markets to keep the “system” liquefied. As a result, Chinese cash rates have in fact retreated, which set a firm tone for stocks worldwide.
  • By the close Wednesday (today), the NASDAQ stock index had led a speculative charge higher, though larger cap indexes (Dow and S&P) have lagged as lackluster fourth quarter earnings have investors worried about what comes next.  Cost cuts and leverage continue to drive earnings growth (on the whole), in the absence of significant revenue gains.  Share prices of the companies engaging in these practices have been under pressure.
  • Wall Street analysts’ sell recommendations outnumbered buys by a ratio of 75 to 1 at last check, with a fair number of negative earnings forecasts (for 1st quarter) contributing to this trend.
  • Money printing leads to inflation!  Demand for gold in Japan has skyrocketed in response to Shinzo Abe’s easy money policies debasing the yen.  Japan gold sales are up 63% (to 37.3 tons) – a five-year high.
  • The largest gold ETF, GLD, saw a sharp increase in ounces under management over the last week. Gold ounces in reserve were up 7.5 metric tons to 797 metric tons for the week ending January 17th.
  • At a little over 1.45 million ounces in reserve, JPM is now the third largest holder of gold ounces on the COMEX exchange. This is a notable difference from the low of 417 thousand ounces the company held back in August 2013.

For the remainder of the week, the economic data may prove to be a complete non-event for the markets.  But next week (January 29th) we’ll get to hear from the Fed again. Fed communications haven’t been very gold-friendly in the last handful of meetings, given the tapering talk, but we’re expecting that to change.  Near-term support for the metal may be tested at $1,222, while any accelerating negativity in stocks may propel gold above the 100-day moving average of $1,277, on to $1,300 and above.  However, during February, typically a “no news” period, markets have been known to do as they may.

Best regards,

David Burgess
VP Investment Management