“Woe to the land whose king is a child and whose leaders are already drunk in the morning. Happy the land whose king is a nobleman, and whose leaders work hard before they feast and drink, and then only to strengthen themselves for the tasks ahead”. (Eccl 10: 16-17)


"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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Tuesday, May 8, 2012

Gold Down but Holds Support at $1600

In spite of the strong wave of selling that has swept across the entirety of the commodity complex in today's session, gold did rebound from its move below the psychological round number support level at $1600. If you note on the chart, the market continues to be essentially trapped within a very broad range that with a brief exception made in late December of last year, has held the metal for the last 7 months. That range is basically bounded on the top by $1800 and on the bottom by $1600.

Within that $200 range, there has been a tighter range for the last two months bounded on the top by $1680 with the floor of support down near $1600.

Gold is now testing the bottom of this range to see whether or not there is sufficient buying to keep it elevated and within its borders. Central Bank buying has been very active on any dips below the $1600 level in the recent past and I would expect this to continue. The key is whether or not speculative dishoarding of gold will be absorbed by these buyers. If the market pops from here and recaptures the floor in the region between $1620 - $1630, that will make evident that the buying is strong enough to offset the liquidation from the risk aversion trades.

If the market cannot get back above that level and falls through the floor at $1600, we should see very active large buying down towards $1550.

I would feel a bit more comfortable about the NEAR TERM prospects of the metal should it be able to reclaim the $1650 level.



5 comments:

  1. Hi Trader Dan,
    When you say "Near Term" do you mean a couple of days or a week or so?

    ReplyDelete
  2. Bonjour Dan,
    pouvons nous entrer aux états-unis sur une période de désinflation plus prononcée ?

    http://averagetime.blogspot.fr/2012/05/gold-and-real-interest-rates.html

    ReplyDelete
  3. JB,
    désinflation aux États-Unis? oui dans la mesure où le crédit diminue.
    Mais dans la mesure de l'argent papier, c'est l'inflation qui va l'emporter à moyen terme. C'est ce que ton lien explique, ie le lien entre le prix de l'or et l'inflation.

    salut
    marc

    ReplyDelete
  4. ok thank you, I looked at the CPI in year over year and free money M2 less M1

    have a nice day

    Jean-baptiste

    ReplyDelete

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