CEA Monthly Issue – January 2016
Commodity: Gold
Welcome to the New Year my friends!
As you’ve likely noticed, the markets are starting off 2016 on a sour note. Major equity indices are down rather sharply the first four trading days of the year.
What’s going on?
A number of things actually…
First of all, Chinese growth fears are front and center once again.
A recently released Caixin purchasing managers index (PMI) report revealed exceptional weakness in China’s vast manufacturing sector in December. The closely watched report came in at 48.2 in December, which is firmly in contraction territory. What’s more, the reading was far below the consensus estimate of 49 and November’s reading of 48.6.
Clearly, China is still stuck in a rather severe economic growth slowdown. Investors are becoming decidedly worried this contraction will leak into other major world economies.
Speaking of which…
A closely watched gauge of US economic activity, the Chicago PMI report, came in at 42.9 in December.
That’s a 6-1/2 year low and reflects a deep contraction in the region’s economic activity.
What’s going on here?
Judging by various recent economic data points from around the world, global growth is starting to stutter quite noticeably.
Here’s the real problem…
Just this past December, the US Federal Reserve raised rates for the first time in nearly ten years. While the increase in rates was small, the US central bank is leaving behind its highly accommodative policy of the past six years.
Here’s the deal…
The Fed is likely tightening at precisely the wrong time!
As it appears now, Chairman Janet Yellen and her cronies at the Fed are tightening the screws on the US economy, just as it and other major economies are slowing down.
If they stay on this course, we could see a US and global recession develop sometime in 2016.
But here’s where it gets really interesting…
Gold is already up 3% in 2016. That’s right, the yellow metal has rallied just over $30 an ounce in just the past few days.
Fact is, investors are quickly realizing the Fed will likely be forced to back track, returning to quantitative easing in order to save the US economy from another downturn.
Of course, a return to quantitative easing would be a huge shot in the arm for gold bulls.
So here’s what we’re going to do…
For the first time since February 2014, I’m recommending you get long the gold market!
Here’s how we’ll play it…
Go ahead and purchase the SPDR Gold Shares ($GLD) at any price under $106.00. In case you’re unaware, $GLD is a commodity tracking ETF that trades in lockstep with the price of gold.
I’ll give you additional details on this trade in our update later this month. For now, just focus on acquiring $GLD at any price under $106.00!
Technically Speaking:
WHAT TO DO NOW:
SPDR Gold Trust ($GLD) is trading at $104.67
Buy $GLD up to $106.00 per share
Our profit target is $130.00, or more
Risk Control Price is $94.21 or 10% from your entry point
Category: Commodity Trading
