"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

Trader Dan's Work is NOW AVAILABLE AT WWW.TRADERDAN.NET



Thursday, January 23, 2014

Emerging Markets Spark Flight to Safe Havens

I mentioned in an earlier post today that there was a general flight out of equities after the overnight news that Chinese manufacturing had experienced a rather significant slowdown. U S equity markets were spanked hard in the process ( of course the usual dip buyers showed up once again as they have been well rewarded for so doing time and time again).

Interestingly enough, it was the commodity-based currencies such as the Aussie and Kiwi ( initially along with the Loonie) which saw some heavy selling. The Aussie and Kiwi, with their close exposure to China, got hit the hardest which is understandable. I must admit at finding it odd to see the Kiwi rally back from its worst levels of the session like it did however.

I learned later in the session that the Turkish Lira hit another record low against the US Dollar. This was in spite of direct market intervention by the Turkish Central Bank.

This occurrence, along with the weakness in most emerging market currencies, was what sparked some strong buying in the Japanese Yen and the Swiss Franc today. It is also the reason, in my view, that gold experienced another one of those mini-melt ups that it has been famous for lately. It was odd to see the US Dollar sinking so severely on a day in which risk aversion was in, especially in regards to the EM's, but I think it was the lackluster US economic data, coupled with sinking interest rates here in the US coming on the heels of those big money flows into bonds, that undercut any safe haven bid that we might otherwise have seen coming into the Greenback.

Europe and Japan seemed to be the winners in the currency wars today.

Obviously that brought a fair amount of buying into gold as a safe haven, something we have not seen in a while as it and silver have tended to trade more in sync with the risk on/risk off trades, rising on the former and sinking on the latter. Well, today we got the latter ( risk off) and gold benefitted so go figure.

Just goes to prove how fickle these markets are anymore and why extrapolating too much from one day to the next's price action is not too advisable. During episodes such as this, TECHNICALS RULE THE DAY so whichever side, bull or bear, happens to have the technical on their side, will win the day's battle. That is what we saw today in gold.

I should note that silver does not know what it wants to do. It still is having large troubles with the $20 region as it is attracting selling up here. It cannot decide whether it wants to be a safe haven with gold or a risk on trade with copper. Right now it is caught in the middle of them both.

Today's move higher in gold seems a bit overdone to me, but that is more a hunch rather than anything grounded in pure Technical analysis as the gold chart is very much improved by today's strong push higher. We'll see if the bulls can grab the initiative completely in tomorrow's session or if they decide to bank what paper profits that they made today and rest content with those.


20 comments:

  1. Has anyone notice somewhat of a price disconnect between GOLD and SILVER today? Take a look at a CHART of the GOLD/SILVER RATIO. The ratio is widening. I'm not sure what to make of this other than mention it as a curious observation.

    The News UNIT

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    2. disjointed markets are usually a good sign of a sucker rally. Besides the volume on this rally is small compared the first 2 since the June 28 low.

      http://stockcharts.com/h-sc/ui

      I suppose anything can happen but many saw the double bottom and think it's here the time is finally arrived!

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  2. Yep the sensationalism is ramping up, talk of those $100 up days for gold are finally here, massive short squeeze to $3000, somebody knows something etc.....
    Must mean it's time to take a short position. Same thing as last time gold went from 1180 to 1400, then 1250 to 1350, this sucker rally will be even shallower and short lived. JMHO

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    1. Prophet; I kinda think you are right, as the 6 wk rally in plat vs. gold I think has come to the end now that the mining strikes are all baked into the cake; day in and day out is a tough proposition and that is why I trade light and with WIDE stops; I do not even get up in the middle of the night anymore to see what the action is; my sleep and health is much more important; the more wicked the rallies in Yen, Swissie and Euro are, the more bullish the $ I get; finally and for the last time, for China, it is like it was for Japan in "88, and that is to say that it is game, set, match, and R.I.P. baby, the fat lady is singing; that is all in sparks

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    2. Yeah, I remember Japan in the 80-ies. It was for sure for sure taking over as the world superpower. I read two books and dozens of articles and essays about it. They got me all hyped up. The parallels were drown between exchange of the world-leader button from GB to US. I even took Japanese levels 1 through 3.
      Now they tell me it's Mandarin I should speak to be able to converse with my new boss. I ain't taking no lessons no more!

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  3. Sensationalism in gold is part of the game it's always ramped up! But I hear you maybe time to put a short there is no way this thing is breaking out besides the people from market watch are saying gold is going to 800! Lol . Seriously I think a short close to 65 with a tight stop could be a good play

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  4. Taking into consideration every fact know about the gold market, and all the ideas of collusion, manipulation, demand, dollar reserve policy, and really everything else, and have come to the simple conclusion that its easy to make gold go down when its in a downtrend and easy to make gold go up when its in an uptrend. Its that simple whether the US has any gold left or not or whether Germany gets its gold or not, or whether the president is a clown or not. When its in an uptrend maybe it will get to 3000 and in a downtrend maybe it will get to 1000, although there might be factors relating to the cost of production. So every opinion expressed here over the time this site has been up will be right just depending on what the trend is.

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  5. I'm still waiting for that $1,180 alert to ring on GOLD. I only wish those would happen when the markets are open. Not at 11PM or 4AM ET. Why is all the action outside my trading times?

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    1. Is the PM Train left starting to leave the station? Is it time to sing Happy Days are Here Again; the skies above are Shiny again ?

      Do we need to see the WALL of WORRY remain ?

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  7. Hi Dan,

    I was thinking about the tremendous amount of precious content and information you are giving and in a way, wasting, because its visibility is 3 days max on your current blog.
    I'm thinking the same about jsmineset and other blogs.
    The "blog" format is an information killer.
    It forces you to repeat and repeat again the same information because readers will focus on the latest line and have no way to access the remaining one.
    If one could spend enough time reading even only your commentaries since jan 2013, he would be able to compile 95% of what he needs to understand trading and gold market.

    If you are pragmatic, and given the time you are giving to this blog, why don't you consider changing its structure at some point :
    - keep the blog lines as they are, of course
    - add an area where people can select key topics and discussion lines, from the blog's home page. It could be an everything you wanted to know section with choices as : "gold manipulation", "COT reports", "key technical indicators".

    You would make a great service to all new readers who come and discover this blog from zero, as 99% of them would not go dig farther than one week in your previous posts, but probably the same percentage would click and access directly to key information from the home page.
    As an extra, you'd save your own nerves and precious time. Instead of repeating yourself, hop, a hypertext link in your comments towards the related section.

    Btw thanks for stressing on the ma50, might be a "basic" indicator for some, but I really wasn't following it at all until you put in under light. It gave me the level and purpose to buy at 1238 a few days ago, I was watching prices stop and bounce just above it. Once more, I think this blog is a great chance for all readers to discover, as you are the perfect combination which I haven't been finding anywhere else for PM, and I mean I'm watching the web quite a lot, so I know many, many gold related blogs since 2008. I'm not saying people should follow you religiously as a guru, no, nope, nein, nicht :), it's never good, but definitely at least take into account seriously what you are saying. Why? :
    - a free blog, without a letter to sell or a special interest in gold sector
    - a real trader's experience i.e objectivity about markets technical elements
    - a trader specialized in PMs with a deep understanding of fundamentals and how to use all indicators, technical and fundamentals.
    - a trader who hasn't continuously said he was long gold, or short gold, but who adapts to price action (well...that's the definition of a trader lol)
    - a person who proved he is not a parrot of his community and keeps saying his own personal opinion, whatever the consequences. No compromises because some of your old friends won't share your opinion. As you said, friends don't have to agree on everything.
    - a forum where everyone can express himself freely and receive your answers individually. Gold "bashers" have a free speech here, and that's important. As a French, I like your Voltaire attitude :)

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    1. Hubert;

      I wanted to briefly acknowledge your both gracious and thoughtful comments this morning. I am extremely busy right now but realize that your hours are a bit different than mine over here so out of fear that I might miss you, please know that I sincerely appreciate the suggestions and will give them serious thought. My main problem is that my spare time is so limited that I do not know if I can spend much trying to learn how to accomplish what you are suggesting here. I like the concept very much however!

      Having you post here at this blog is a real blessing for all the readers!

      Thank you bon ami!

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    2. Thanks Dan,
      If I wasn't in the midst of a mission myself, I'd take time to find out about such options, but I lack the knowledge myself.
      I know of a friend who manages a blog just the way I described, but we can discuss this later in private.
      Your fears that I might miss you are not mistaken, though I think I still miss my wife more, being faraway from her for a while, which, I think, is a good sign :)
      Have a nice weekend :)

      Delete
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  9. I'm not to worried about the short term moves in gold it's a bit like watching two heavy weight boxers in round fifteen leaning and pushing as they struggle for points. Obviously with GS JPM and the like moving long shorts who won't be delivering must at some point start to get pretty nervous, many likely levered and paying interest, yesterday case in point.

    I suspect however the main drivers for Gold will be Janet Yellen taking over the now 75:1 insolvent FED, and within a week of Bernanke taking for the lifeboat Yellen will have to start tapering.

    See link: http://money.cnn.com/2014/01/22/news/economy/lew-debt-ceiling-congress/index.html

    You would have thought someone at the FED had spoken to congress about the impending taper. The US is becoming more disfunctional by the day, Gold is starting to reflect this.

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  10. See allstarcharts $GDX $GLD

    http://stocktwits.com/message/19312019

    GDX up 11% this year as of 23 January

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  11. AGQ did a REVERSE SPLIT overnight. That was clever.

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  12. I can't short this GOLD and SILVER for another 20 minutes. By then it will be too late. No doubt with the economic improvement we'll get our bounce off the bottom here.

    CNBC is going wild and so is Marketwatch....LOL

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