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Summary

  • Janet Yellen's dovish statements yesterday support the SPDR Gold Trust near-term.
  • Developments around Russia's troop positioning on the Ukraine border, including even the latest reported events, continue to support gold interests long-term.
  • Precious metals appear to have found support at current levels and reinforce my confidence in my long view.

My SPDR Gold Trust (NYSEARCA:GLD) outlook this week is tightly hinged to two key recent developments. First is the ongoing standoff at the Ukraine border, which continues to threaten geopolitical instability and serves as a pain to fiat currency, solidifies gold. Second, but not of lesser importance, are the most recent reassurances of Fed Chair Janet Yellen, which seemed intended to call off concerns about the Fed Funds Rate outlook. This Friday, though, issues a new catalyst to the fore, so stay tuned for my analysis of ongoing developments.

Russia's proud leader kept pushing the issue this past weekend, and the news of the fresh Russian military buildup along the Ukraine border finally reached the American public. It made all the Sunday morning programs across the major networks.

On Sunday, a four hour meeting between U.S. Secretary of State John Kerry and Russian Foreign Minister Sergei Lavrov seemed to result in some progress, as one Russian battalion was later ordered away from the border on Monday. Though, NATO says it sees no sign of a Russian pullback. In any event, one battalion only numbers up to approximately 1,500 troops of the tens of thousands threatening Ukraine today. It's no matter anyway, because this is not the first time Putin has made such an order. On March 4th he did the same, and yet later annexed Crimea before we ended up in this threatening situation this weekend.

Yesterday, it appeared to me that a market misreading of Putin's posturing released pressure on stocks and temporarily took away gold's likeliest near-term support. A catalyst was added Monday though, when Janet Yellen came to the rescue of both stocks and gold (we would expect). At a conference in Chicago, the new Federal Reserve Chairperson said the job market will require low interest rate support for some time. She gave an extraordinarily dovish speech that seemed to me to be intended to make up for the fright issued the market at the last FOMC Monetary Policy Announcement and Economic Projections release. That was where the FOMC surprised investors with a Fed Funds Rate Forecast implying increases in 2015.

Of course, Friday's Employment Situation Report will be pivotal for both gold and stocks. An inline or better than expected result would support stocks and harm the GLD, while another poor data point would serve the GLD. At this point, economists are looking for the unemployment rate to measure 6.6% and nonfarm payrolls to rise by 206K, so you have your measuring stick.

Over the near-term, the SPDR Gold Trust should be finding support from Yellen's statement, and over the long-term it should get it from Putin's prowess. But yesterday's immediate reaction seemed to have capital invested in gold and gold relative securities like the GLD continuing to bleed out in order to feed stocks. Today, however, we are seeing a leveling of trading for the GLD. In fact, many gold relative securities with greater leverage to the gold price are significantly in the green. Therefore, it appears my positive outlook for the SPDR Gold Trust is solidified for both the short-term and long-term.

As I wrote this article, the spot gold price was down 0.2% while COMEX gold futures contracts due in June were off 0.7%. The SPDR Gold Trust was down 0.1% while the SPDR S&P 500 (NYSEARCA:SPY) was higher by 0.6%. Other metal relatives are trading in a manner reflecting support here. So, stay long the GLD.

Security

Today

YTD

TTM

SPDR Gold Trust

-0.1%

+6.3%

-20.2%

SPDR S&P 500

+0.6%

+1.8%

+20.5%

iShares Silver Trust (NYSEARCA:SLV)

Unch.

+1.9%

-29.6%

Market Vectors Gold Miners (NYSEARCA:GDX)

+0.5%

+12.9%

-36.3%

Direxion Daily Gold Miners Bull 3X (NYSEARCA:NUGT)

+2.0%

+29%

-87%

When I issued a recent report expressing my disagreement with Goldman Sachs' bearish gold outlook, I took a lot of heat. I believe that was partially due to a lack of understanding of the situation on the Ukraine border. As a result, I have some suggested reading listed here to help reinforce understanding of these dynamic and critical current events.

  1. The Russians are Coming - 10 very good reasons not to believe Putin when he says he's totally not going to invade Eastern Ukraine (recommended to me by a follower)
  2. Rogers: Troop movement, "covert operation" suggest Putin not finished in Ukraine
  3. NATO Sees No Evidence of Russian Pullback
Source: Putin And Yellen Support The SPDR Gold Trust Outlook