Gold Bullion holds its ground as Fed's taper talk grows - Wealth Managers

Staunch defense of $1,360 level suggests stimulus removal already priced into bullion market

Gold largely shook off the growing tapering message transmitted in the widely anticipated minutes of the Federal Reserve's July policy meeting, even hitting session highsabove $1,375 after their release before falling back to the $1,365 level by late afternoon Wednesday.

"Gold dipped briefly in reaction to the minutes but quickly rebounded to set new intraday highs," one dealer noted.

Meanwhile, stocks tumbled again, with the Dow posting its sixth-straight day in the red. "The Fed must be feeling significant political and global pressure to begin tapering because their language described in today's minutes release does not correspond to the current macro economic climate of the country," wrote Todd Schoenberger, managing partner at LandColt Capital.
"More importantly, the risk of reducing QE is higher than maintaining the current program because the negative impact would multiply if the Fed cut too soon, and had to revert back to the current bond buying schedule."
Stocks, bonds "at expensive levels"
Edmond Bugos of Strategic Metals Research & Capitalexpects gold to move back up over $1,600 by year-end and to new highs by midyear 2014.

Fed chief Ben Bernanke's "late 2012 policy moves shocked the stock market to life, but now you've got these assets (both stocks and bonds) at expensive levels and you have to stop inflating, eventually," he said. "You have to have forgotten how every other crisis has ever come about to get yourself to sell your gold here and jump on the stock bandwagon with the averages at record highs."  

So what did the minutes say? "Almost all committee members agreed that a change in the purchase program was not yet appropriate," and a few said that "it might soon be time to slow somewhat the pace of purchases as outlined in that plan. ...
"A few members emphasized the importance of being patient and evaluating additional information on the economy before deciding on any changes to the pace of asset purchases," the minutes show. "Almost all participants confirmed that they were broadly comfortable" with the committee moderating "the pace of its securities purchases later this year." 
Gallup poll: Unemployment rockets to 8.9%
However, the Fed has a tough row to hoe given that its stimulus program is tied to a lower unemployment rate. The August unemployment report from the Labor Department'sBureau of Labor Statistics will be a key cog in determining its tapering plan when it meets in September. Don't look now, though: Bad news on the jobs front has come from theGallup polling organization, Breibart reported.
"While the BLS and Gallup findings might not always perfectly align, the trends almost always do and the small statistical differences just haven't been worthy of note. But now Gallup is showing a sizable 30-day jump in the unemployment rate, from 7.7% on July 21 to 8.9% today. This is an 18-month high.

"At the end of July, the BLS showed a 7.4% unemployment rate, compared to Gallup's 7.8%. Again, a difference not worthy of note. But Gallup's upward trend to almost 9% in just the last three weeks is alarming, especially because this is not a poll with a history of wild swings due to statistical anomalies." If the next jobs report from BLS mirrors Gallup's, any tapering likely will be muted at best.
"We're going to start seeing gold running"
Whatever the Fed does, gold looks on pace to finish the year strongly. That's what McEwen Mining chief Rob McEwentold TheStreet: "I think we're going to start seeing gold running in the last quarter of this year." Since about 2012, gold has been" experiencing a correction/consolidation within a long-term uptrend," he also noted in Forbes.

And Gartman Letter publisher Dennis Gartman told The Gold Report that "the gold bear parade had gotten a bit overcrowded. It was actually quite astonishing to me. Everybody was overtly and manifestly bearish of gold. If I've learned anything in 40 years, it's that when things get terribly one-sided, it's probably time to go to the other side. Gold had reached some technical levels that I found interesting, but more important, it had reached a level of psychological bearishness that pushed me off the sidelines, off from being bearish of gold, to being bullish." 

And one investor who never gave into bearish sentiment is former Texas Congressman Ron Paul. According to CNBC, "Paul's investment portfolio is dedicated almost solely to hard assets, with 64% in gold and silver miners, 21% in real estate and 15%in cash. ... The other 1%? An allocation to stocks, but on the short side in a bet against the equity markets."

Another major investor that hasn't given up on gold either is China. "Acquisitions by China's gold mining companies reached a record this year as the metal's steepest quarterly drop in more than nine decades slashes mine values and sidelines Western rivals laden with debt. Takeovers and asset purchases by producers based in China and Hong Kong rose to a record $2.24 billion this year, beating last year's record $1.96 billion," Bloomberg reported.

"The gold declines are good for key Chinese producers to buy overseas assets," said Chen He, head of overseas resources development at Zhaojin Mining, China's fourth-largest producer.

Meanwhile, with India's economy struggling and the rupee sinking in value, a technical analysis by Kotak Commodities Services predicts the gold price in Mumbai will extend a rally from a two-year low to a record as an upward trend channel signals further gains. How a rising price will affect India's festival buying season remains to be seen. After all, India's buyers love to buy the dips. Still, gold imports have resumed as the festival season cranks up, with its Raksha Bandhanfestival occurring Tuesday (Aug. 20), and the government's trade restrictions have failed to dampen demand. In fact, smuggling is a bigger problem than ever. With September being one of gold's strongest-performing months price-wise, largely because of Asian buying, gold investors in the West should closely watch developments in India.

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