There are a couple of things at work today. First, after expectations that the Fed was going to announce a tapering at next week's FOMC meeting, traders have now largely dialed that back.
Secondly, and more importantly, this is contributing to further US Dollar weakness. We saw that yesterday but it is more notable in today's session as the USDX slid under the 80 level.
The Dollar has been recently been trapped in a range trade of its own. The top comes in between 81.40 - 81.00 while the bottom of the range is 79.20 - 79.05. As the Dollar has pushed higher in this range, gold has pushed lower. Now that the Dollar is breaking lower and moving back towards the bottom of the range, gold is powering higher.
In the case of gold, its upward progress has been exaggerated due to the build in hedge fund short positions which are vulnerable anytime one of these overhead chart resistance levels can be violated. That brings on another wave of strong short covering, which coupled with bottom picking, results in some sharp moves higher.
It should also be pointed out that we are now at that time of the year when some traders are going to begin squaring books for the end of the year. Shorting gold has been a fantastically profitable trade for 2013 and many shorts will look at the recent price action and decide to actually book those profits before they slip away.
Remember the old adage in trading: Bulls make money; Bears make money but Pigs get slaughtered.
In looking at the chart there are two things to note. The first is that HUGE VOLUME that I have noted on the chart when gold went back down and RETESTED the recent low of $1210 on that payrolls number. As mentioned in a post that day, the price action caught my attention as it portended a possible exhaustion day of the bearish leg lower. Gold however was unable to extend past the initial resistance level noted on the chart which would have confirmed that $1210 region as a double bottom on the chart. It did so today however and that needs to be respected.
I have made some annotations on the price chart. Today's move higher does open the door to a move up towards what will be stubborn selling resistance near $1290 - $1295. Bulls will want to see gold maintain these strong early-session gains however as the day wears on to give the market a realistic shot at such a scenario.
If this move is for real, we will not want to see the rally being losing steam as the day drags on. That would indicate that the short covering burst is failing to attract FRESH NEW BUYING.
Also helping gold is the fact that the HUI has managed to recapture the 200 level.
I am noticing that interest rates are moving lower once again as traders dial back expectations on the timing of any tapering. That is why the Dollar is seeing selling pressure and why gold is moving higher as a result. Recent action in interest rates reveal that rising rates on the long end of the curve have tended to bring selling into gold. In the absence of any widespread inflation fears, traders have tended to see this as a reason to sell gold.
We'll keep monitoring price action and see if we can decipher what the market is thinking.
Mining stocks dead as usual, not confirming the move.
ReplyDeleteEvery rally in names like Newmont Mining are sold with the utmost urgency.
Too many hopers who wasted too much time attending Q & A sessions and going back and reading the same hysterical websites over and over again are now desperate to unload these losing investments to get these horrid items out of their portfolios before December 31 so they can start fresh in 2014 and never ever look at these gold-related investments ever again.
Wow a better description of a bottom would be hard to find... thanx
DeleteMark do they pay you for working overtime on day like this.
DeleteDude, Mark, shut it for once. Most of us here are sick of your BS.
DeleteOne more substantial rollover in the price of these metals and you won't hear much about them. INDUSTRY is loading up their supply and will do so more at cheaper prices for more electronics to the consumer. Keep in mind that an ounce of SILVER goes a long way in today's disposable goods.
DeleteI still think this is a good short opportunity right here but I'm not as well versed as the chart experts.
Most industry is on too small a margin to accumulate PM.
DeleteAnd that is the reason we are up??? You can have your negative sentiment for sure, but it is pretty obvious there is some level of squeezing go on right now, so if anything there is some covering and/or buying going on.
ReplyDeleteGDX up 4% and GDXJ up 4.5%. Seems a decent confirmation to me.
At 8:10 this morning the gold market moved through 1250 with 8 to 10 thousand gold contracts being bought. Correct me if I am wrong. Gold was halted after that unusual to see things halted on the upside.
ReplyDeleteHello,
ReplyDeleteSharing my thoughts, after the quick bounce on the daily time unit.
First, for me the long-term key support to be saved for gold at the close of 2 week time unit (close this friday) / 2 months time unit is 1225 $. I am following "intuitively" a Fibonacci which is not standard because it doesn't consider 1920 as the top, but 1805, the top of the range instead, and 1920 as an "anomaly". I am using it that way because the retracement levels then fit quite well with horizontal support areas on the way up of gold from 300 to 1800...and actually are now fitting on the way down.
So for information, the first 23% fibo level is at 1445, then 38% at 1224, then the 50% is at 1045. This whole correction led us to the 38% fibo level, then we bounced towards the 23%, then back to the 38% again. We are now bouncing up once more, which means that on this time scale, as long as 1225 area holds, my favorite scenario is that we play ping-pong between those two fibo levels, until one of them breaks. That portends the possibility of an upwards move towards 1445 again from now.
But Dan said that the trend is down and trying to bet long is most of the time a fool's errand. I agree to the fact that the current bounce short term is not enough to reverse the trend of longer time units. So how do I try to get long in such a mess? I need a lot of confirmations on both longer and smaller time units.
The 2months time unit tells me that yes, 1210 is a support area as the Bollinger bands are in a range once more there, with the inf bol band at grossly 1210 for now. That's indeed where prices bounced once more. At least this price area for rebound was legitimate.
What about the 2-day time unit?
The MACD 9 20 7 is about to cross (buy signal), but prices hit the 1268 area which is on my chart a very important level : the neckline of the Head & Shoulders.
Therefore I am now watching the daily and 2days time units with a lot of attention. If 1268 holds, this is still a simple pullback without real strength and I'm not feeling attracted to buy, especially with a ma20 daily still going down. But if we start breaking through those levels and my other indicators turn more positive, I will try to go long probably at some point if prices retrace a bit down.
As Dan mentioned, bear trend, and rallyes to be sold. Means that my only possibility to manage a winning trade is not via chasing prices up, but waiting for a safe spot, a potential support area and wait for confirmation of a reversal up on the lower time unit.
Why just not go short? I feel uncomfortable going short so near of important bullish support areas (1180, 1200, 1225) and at contact point with inf bollinger bands on many time scales. The potential gain of my shorts is limited by the immediate presence of those support areas. So, I prefer to try the contrarian long trade for the moment, but as you see, contrary to silver, on gold at the moment, I missed the entry point at 1220, despite a nice bullish divergence on the OBVD daily time unit.
Interesting day.
ReplyDeleteNow...all we need is 20 or 30 more like it. No problemo !!
forgot to mention...I so hope that this goes on long enough to give shorts the religious experience that they so deserve...I know...dream on. :)
ReplyDeleteafter the second glass of wine I have the same dream. meanwhile the next morning I stay on the sidelines for now.
ReplyDelete