Trader Dan's Market Views: 03/28/12

"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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Wednesday, March 28, 2012

Goldman Sachs issues "Buy" on Gold; Gold drops lower

Interesting recommendation by Goldman and even more interesting to see the market reaction in gold today. Can you say that someone is particularly overjoyed by the opportunity to take that recommendation?

By the way, Goldman is echoing the remarks from Chairman Bernanke the other day and repeating what my interpretation of those remarks were in this week's comments entitled, "Pass the Juice Please".

Goldman's views in summary can be translated as follows: Gold market weakness has been tied to the fact that the markets were expecting "REAL INTEREST RATES" to rise in light of the recent economic data showing improvement in the US economy. However, the economic recovery is not strong enough to allow for higher rates and that coupled with Bernanke's comments that acccomodative monetary policy will be required for the foreseeable future means that gold has overreacted to the downside.

Goldman is looking for another round of QE which will pressure the Dollar and thus drive gold prices higher.

Rest assured that the hedge fund long liquidation and fresh short selling of today is being met by solid buying from Goldman's customers.

Also, I find it EXTREMELY TELLING that the bond market cannot seem to get much going to the upside today given the fact that the broader equity markets are swooning and the US Dollar is currently higher as the risk aversion trades come back on.

Gold being held in check at $1680

While Gold has been able to punch through this critical resistance level, it has not been able to HOLD ABOVE it. This is must do in order to kick it up and out of its current malaise. Once it does so, it should make a run at $1720 - $1725 in relatively short order.