"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


Friday, November 8, 2013

US Dollar Strength Derailing Gold

One look at the following weekly chart pretty much says all that one needs to know about what is happening to gold and why. This week and last week, the US Dollar has been higher. Guess what happened to gold over those same two weeks? Yep - it went lower.

The two weeks previous to those the US Dollar was weaker. Guess what gold did back then? Yes - it went higher.

It is all coming back to the US Dollar once again. Simply put, rising interest rates in the US tend to favor additional strength in the US Dollar as traders fear that apparent stronger economic readings will bring the Fed back in on the TAPER SIDE of the QE equation.

When you toss in the fact that Euroland just got hit with a surprise rate reduction yesterday, is it any wonder why traders are favoring the US Dollar right now? It is also helping the greenback immensely that foreign investment appetite for US equities which continue their one-way trek higher is boosting demand for the US currency as well.

All of this adds up to some very difficult headwinds for gold to overcome.

You can see on the chart that the US Dollar is in a slight, but observable upwardly moving price channel. Moves down into support at the rising bottom trendline of the channel, are keeping the greenback above the rectangular support zone noted.

Also, note that the indicator is at levels commensurate with rallies.

By the way, for the ag guys out there such as myself, today's USDA report was considered friendly towards corn and bullish for beans while bearish for wheat. We might have seen an interim bottom in the corn market although we are still talking about a record US corn crop. USDA reduced the harvested acreage number but kicked up the per acre yield. However, the emphasis on this report seems to be on the demand side of the ledger with the agency expecting that to increase due to the low cost in comparison to previous years. Recent  export sales have moved up significantly over the last couple of weeks leading some to expect additional demand to surface.

More on this later....


  1. "End of the World" predictors got blowtorched today, ES ran 30 points off the lows from this morning virtually wiping out yesterday's gains.

    Absolutely breathtaking action in JPM, MET, PRU, SCHW, and many financial stocks.

    Dupont, GE, MMM, and other cyclical stocks made 52-week highs today.

    Anybody listening to the constant hysteria about the "Coming Collapse and Catastrophe" and missed out on these fantastic stock market gains since the 2011 lows in Europe must be kicking themselves for missing out.

    Unprecedented "Massive Wealth Destruction" has already occurred in the stock portfolios of many of the mining executives who have been preaching the "Endgame" and "Hyperinflation" which never happens and never seems to arrive.

    Proves that it pays to be on the side of the Fed, and as Dan preaches here daily, to watch the price action and believe what you see.

    Price action does not lie.

    By the way, anyone watching the Cypress stock market? Up 45% in just a few days, incredible meltups happening everywhere.

    Looking forward to Dan's sobering commentary this weekend.

  2. Sorry, by "gains", I mean the gains of the guys who shorted off of the 1775 highs yesterday morning, gotta take your bacon if you are short seller, sorry..

    1. Mark,
      It all depends on your time units and trading horizon.
      Traders who shorted SP at 1775 or CAC 40 near 4300 and bought back from 1750 and 4240 were imho totally in their right mind and followed correct signals showing a real opportunity which already transformed into cash. They are not losers, but winners.
      Trading depends on your time horizon for every trade.
      If I trade, should I trade on the 5 / 1 minute?
      Should I trade on the 2h / 15 minutes?
      It is absurd.
      I will trade on the market AND the time unit which show some opportunity.
      You want to trade on gold only market always in the same time unit? You will trade very rarely, or you will lose.

      I'd prefer to see your endless bashing about gold investors (so your bashing will have to end a few more years because they are still in the middle of their long term trade on their own time unit) by explanations about what are your current positions, when do you get into the market. A little track record please?

  3. MARK, did your buddies feel sorry for the miners today and let them get a few bucks? All the miners index went up..just not as much as the general market. Better get them under your wing!!!

  4. Attempts to create inflation to pay back debt with future worthless currencies is going to eventually destroy future generations. But our Gods in the federal reserve know better. If only individual wages would increase in likeness to this government's dreams..or..maybe it is their nightmare?

  5. Despite gold getting kicked in the nards again today, on a bright note the miners hung in well and rallied back towards the end of the day. This is either indicating gold is going higher next week, or simply a head fake to fleece retailers. I heard all those who lost on this sharp decline since April are now trying to trade the volatility to and earn their money back. I think the big boys know this so go the opposite direction you think you should go. If gold is up Monday it could mean miners will be going down, or rise with gold then head down second half of the day just as you're jumping in to buy, remember they always need sucker buyers and sellers.

  6. ...and of course TWTR, FB, TSLA, and DUST all finished red today.

  7. Dan- any comments on the divergence seen today on Gold which dropped and the HUI which popped. Possibly the HUI was just following the broader market up, or something more significant? Perhaps the gold stocks are finding some footing at this level? But then again we haven't reached the full brunt of probable end of year tax loss selling season...


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