Simmering tensions in the Middle East, particularly in Libya, a major oil producer, sent gold bears scurrying for cover today and brought in a wave of safe haven related buying.
That buying enabled gold to smash through upside chart resistance near $1,400 in the process. Last week gold had ended on a strong technical note, having cleared the selling coming in near the $1385 level with relative ease. Today it built on those gains as it now appears to have caught the attention of the momentum crowd in a much larger way. It had been grindly steadily higher, helped to no small extent by its star next door, silver, but today it seemed to be moving on its own merits.
The fact that the unrest which began in Tunisia, spread across to Algeria, Egypt, Iran and now Libya, seems to be growing instead of abating, has unnerved more than a few investors, and particulary buyers of crude oil, which shot up more than $5.00/barrel today even as Brent crude went on to make a new 29 month high at $105. With crude oil soaring and the mid-East unstable, gold is seeing very strong safe haven flows. Even the utterly useless IOU market, that would be the US long bond, was higher today, benefitting from that same desire for safety (there - I brought myself to say the two words together; "bonds" and "safety" even as unpleasant as that is to do - excuse me now while I go and wash out my mouth to get rid of the horrible taste).
The result of all this has been to turn the technical price chart very bullish the shorter term 10 day moving average has now completed a bullish upside crossover of the 40 and 50 days. The 20 day is also now running firmly higher and looks to be on track to complete its own upside bullish crossover in the next two or three days. All of the major moving averages are now moving in the same direction, namely higher. That indicates that the market is in a trending phase and should engender buying on dips in price.
First order of business for the bulls is to take it up through $1420 to clear a path for a run towards its all time high near $1432. Having taken out $1400 in convincing fashion, we should now see the recent resistance level down near $1385 acting as a support level on any dips in price.
I did find it rather interesting to note that even with all this safe haven buying taking place and a surge in investor caution, the US Dollar did not receive much of a bid today. I am not sure that is a harbinger to come but it does not speak well for the Dollar if this unrest continues and that is the best it can do. Some of that might be blamed on the holiday here in the US but I am not so sure about that; not with the other markets moving so strongly. Someone was paying attention that is for sure.
The US equity markets were closed along with the rest of the main US markets, but the electronic trade was open in the futures pit as well and based on that performance, US stocks did not like what they saw of the increased chaos in the middle East with the emini S&P down rather sharply during the day. It will be interesting to see how it fares on the reopen of trade later.
As a side note, I cannot thing of any other region on the face of this earth which is so closely tied to two single words, "chaos", and "unrest". It just seems that this part of the globe can never escape this.
"When misguided public opinion honors what is despicable and despises what is honorable, punishes virtue and rewards vice, encourages what is harmful and discourages what is useful, applauds falsehood and smothers truth under indifference or insult, a nation turns its back on progress and can be restored only by the terrible lessons of catastrophe." … Frederic Bastiat
Evil talks about tolerance only when it’s weak. When it gains the upper hand, its vanity always requires the destruction of the good and the innocent, because the example of good and innocent lives is an ongoing witness against it. So it always has been. So it always will be. And America has no special immunity to becoming an enemy of its own founding beliefs about human freedom, human dignity, the limited power of the state, and the sovereignty of God. – Archbishop Chaput
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