The rally in gold is finally pulling the lackluster mining shares higher and while it has somewhat improved the technical chart posture of the complex as a whole, work remains to be done to cement a bottom or at the very least, spook some of the bears who have been extremely complacent.
I have noted a significant chart gap that the index has of yet been unable to close. For this chart to turn friendlier, bulls must at least push into the gap, preferably closing it completely and holding the index through it. Should that occur, we will begin to see some more sizeable short covering in the complex.
The key question potential buyers of the miners are asking is whether or not the rally in the metal will continue or stall out below $1300. There is a line of thinking that the sell off in the Dollar is only due to money flows reversing as many traders were completely caught off guard by Mr. Bernanke's almost bizarre reversal on the duration of the QE program yesterday afternoon in his comments. (Count yours truly in that crowd).
That being said, many look for interest rates to rise FIRST in the US before elsewhere around the globe meaning that the sell off in the Dollar, though quite deep, may only be temporary before buyers return and begin bidding it up again. Upcoming economic data will be critical in this regards.
So far the Euro remains well bid against the greenback but most would agree that the state of the overall European economy is decidedly weaker than that of the US (which isn't saying much now is it?). If the Euro were to clear 1.34, we would have to re-evaluate that but as of now, it has already retreated one full point off its best level against the Dollar. Let's see how it closes the week out tomorrow and whether or not the trade reversals are pretty much done by now or will continue some into the close of trading Friday. If the Dollar begins to start working higher again, gold could come under some selling pressure.
"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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