"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


Tuesday, January 7, 2014

Gold backs down from Resistance

Yesterday's selling barrage up near the resistance zone noted on the chart ( from whatever source it was from it makes no difference from a TA standpoint ) effectively checked the upward progress of gold which moved lower in today's session. A late-in-the-day move higher in some of the gold mining stocks pulled gold off its worst levels of the session with the result that it reinforced the initial support level noted on the chart.

So what do we have for now? Answer - a market ranging between $1245 or so on the top and $1225 or so on the bottom. I am noticing that down volume is picking up which has to concern one if they are bullish but other than that I get no clear sense of overall direction as to any trending move in the metal. It continues to move in a sideways direction.

To kick the metal higher and to give it a chance at perhaps some sort of trending move upwards, bulls will need to take out yesterday's high put in just ahead of the selling barrage that was unleashed. That would set up a shot at testing stronger resistance near $1256 that extends to $1260 and then $1265 or so.

Downside support near $1225 must hold firm to prevent  a drop back towards $1214 - $1210.

If equities continuing moving higher, I think gold will encounter more selling pressure especially if interest rates on the Ten Year tend to hover around the 2.90% level. These higher rates tend to attract money into Treasuries in search of some stable yields and undercut reasons to own gold in the minds of many investors. Remember, gold needs NEGATIVE INTEREST RATES to thrive. If investors believe inflation is low and if REAL INTEREST RATES are consequently positive, gold will lose a reason to own it.

Gold does seem to have bottomed out for now but looks to me to be a market in search of a reason/catalyst to add to its gains. One has to wonder if the physical market demand for the metal, demand which allowed price to push away from sub $1200 prices very quickly, would still remain brisk if prices were to push much higher. That buying must stay strong as Western investment demand from large specs remains suspect.

1 comment:

  1. Dan,
    What has been clear from November of 2012 or so is rising stocks is bad for gold. It seems to trump all other factors. Questioning it and looking for answers as many of us in gold do, is really a non-factor until a black swan like event turns the table that is set upside down. It looks like it will be awhile but when it comes everyone will be caught off guard. By then we will be entirely in stocks.


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