When Janet Yellen Talks, Why Do People Still Listen? – Ep. 188

When Janet Yellen Talks, Why Do People Still Listen? – Ep. 188


* The price of gold fell about $12/oz today; silver prices were down another .28
* Both metals have been falling since recent new yearly highs
* Gold, though is not very much below the highs
* The real carnage has been in the mining stocks, particularly today; today was one of the biggest down days I've seen all year
* The GDX index was down just over 7%
* Some of the mining stocks were down 10% or more on a very small move in the price of gold and silver
* In fact, we've wiped out the last 2 months of gains in the mining stocks
* What is the catalyst for this?
* Early this morning, around 8:30 - 9:00 New York time before the U.S. Stock Market opened
* No news - gold was up 1 or 2 bucks...
* All of a sudden a huge sell order hits and gold drops about 7 or 8 bucks on no news
* Somebody decided to dump a lot of gold on the market, at one time and didn't really care what the execution price was
* Considering how large the sell order was, it didn't really knock the market down very much
* But the gold stock market was a different story
* It kind of made me think that the rationale for getting gold to drop was the impact it might have on the gold stocks themselves
* My guess is that a lot of people who were running with stops, that's when you have an order to sell below the market to try to protect your profits
* My guess is that they hit a lot of stops today in a lot of these mining stocks and maybe, some of the bigger players were able to buy more gold stocks based on the shake-out that was created
* By a relatively modest drop in the price of gold
* Meanwhile, the dollar didn't rise very much today; the downtrend still seems to be firmly in place
* What everybody seems to be focusing on is the Fed
* People are worried about what Janet Yellen might say on Friday
* The Fed's Jackson Hole Conference gets underway tomorrow and Janet Yellen speaks on Friday
* I guess the thoughts are: "Maybe she will say something hawkish."
* Maybe she'll say the U.S economy is strengthening and the Fed is getting closer to meeting its objectives
* And that a rate hike is possible in the near future
* So what? That's what she always says.
* Now she's not going to come out and say, "We're raising rates for sure. We're moving rates in September."
* The only thing she could say is that a rate hike is still possible
* That is no different than anything that she has said in the past
* So people being nervous about a possible unprecedented hawkish statement makes no sense
* Even in Janet were to say she is raising rates in September and she followed through a rate hike
* So what?
* It's not going to hurt gold and it's not going to help the dollar
* Expected rate hikes were already baked into the dramatic rise of the dollar in 2014-2015
* Gold declined from a high of almost $1900 to a low of $1050 because it was discounting all the rate hikes that are never going to materialize
* Even if we get one or two more, that is nothing compared to market expectations
* Even if we get a couple of small rate hikes, even if we get to .75 or even 1%
* That is still not enough to hurt gold or help the dollar
* When are people going to figure out it doesn't matter what the Fed does
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