"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 free work will soon be available at www.traderdan.biz

Tuesday, September 2, 2014

Strong Dollar finally catches up to Gold

Geopolitical events had been supporting gold of late but those can only carry the metal so far when several fundamental factors were acting as a strong headwind against a further rise in its price.

We have mentioned falling inflationary fears as evidenced by the TIPS spread, falling commodity prices as evidenced by the GSCI and a stronger Dollar, not to mention a stock market than continues to make all time highs.

We have had reports of falling demand for gold but those were being ignored as traders chose to focus on events in Ukraine, Iraq/Syria, and to some extent, Gaza.

Apparently today was the day that those who were buying gold based on geopolitical events threw in the towel.

With the US Dollar trading above the 83 level on the USDX and with crude oil plunging nearly $3.00 at one point, if inflation fears were the reason some were buying gold, those fears evaporated today. The ISM number only fueled further talk of higher interest rates in the US. When one contrasts that sort of talk with chatter that the ECB may actually move to lower rates, it is not hard to understand why the Dollar is rallying. Rates in Japan are certainly not going to move higher any time soon.

The Aussie has been moving in a tight range between 94 and 92 against the US Dollar for nearly 5 months now. It will be interesting to see whether this key commodity-based currency will undergo some sort of breakout from that range.

From a technical analysis standpoint, the Dollar is in a strong trending move higher as evidenced by the ADX over 50. While the Euro is trading down slightly, the bulk of the gains in the Dollar today have been at the expense of the Yen, and the various commodity currencies.

Gold fell through chart support at last week's low and remains below that level as I type these comments. There is some light support near the $1260 level with stronger support near $1240. Indicators are negative at the moment with the ADX indicating the lack of a clear trend with more of a grinding type move lower.

Beans are trading higher as bulls talk up the recent rains as being excessive and hurting quality in some locations. That remains to be seen. Early harvest reports from the South are strong. The market may have to wait until closer to harvest before deciding to wring out what is left of any weather premium in both corn and beans. Heat/warmth now to finish the crop are what are needed as rains have ensured adequate moisture in most growing regions. I have not seen any forecasts of an early killing frost at this point.

We'll get the crop condition/progress reports this afternoon as they were not published yesterday due to the Labor Day holiday.


  1. Welcome back from the Hamptons fellow traders. I hope you are ready to make some fat stacks through year-end.

    As a reminder, the stock market is nowhere near bubble territory. For those that remember, this is what the last great American equity bubble looked like:


    1. If memory serves Gold topped 3 years ago Today at $1920 per ounce so that means the 3 year correction is now officially over...Not.

  2. Investors are dumping anything and everything related to hard assets and buying tech stocks and financials.

    Halliburton and Exxon getting crushed while Facebook and Tesla make new highs.

    If only Eric King had interviewed Mark Zuckerberg and Elon Musk instead of all the gold pushers and peak oilers.

    He would be a hero by now instead of a goat.

    1. Actually Eric King is a marketing whiz who knows how to appeal to his target audience - doomers, gloomers and preppers.

      The typical average working class man that needs some excitement in their regular routine of Mon-Fri 9 to 5.

      Conspiracy entertainer Alex Jones works the same, he makes the average man feel like he's part of the special resistance against the powers that be. And if the viewer wants to continue to be entertained they buy AJ's silly products like iodine, orange juice and hormone boasters for men and woman at above average prices.

      Best part about it is they don't even have to feel guilty making millions, cause just as a Hollywood actor they provide entertainment for their niche audience.

    2. You have to be careful regarding all sources of information, however, that doesn't mean I think things are going well in the world right now, either.

    3. You're a scratched record Mark!

  3. "So this is a golden opportunity to buy and I would take advantage of it. Could gold get just a little bit cheaper? Maybe, but I don’t think there is much downside because I maintain that there is a bid underneath the gold market from the Chinese. I think the recent Russian purchase of gold is yet another indication that the Chinese are willing to support the price because the Russians and the Chinese are working together right now. So for those who are long-term planners, like the Chinese, and you see the price of gold has dropped, you have to accumulate more gold on these dips because that’s what China is doing.”

    Your mileage may differ
    (cos this particular Chinese certainly isn't backing up the truck "at these bargain prices", and even if All the Commies in the World, Unite!", it's going to take something spectacular to keep this Zeppelin of a market from crashing & burning)


    1. It's funny. I was reading many of the interviews of KWN until Dan was shown the door.
      I think this kind of selection was all I needed to know about the objectivity of such a website, and I haven't visited it once since then.
      Good luck to them and especially good luck to their readers. They are going to need it.

  4. large specs in soybeans are what, largest net negative since 2008 or so. squeeze a few today on excess water in soybean country and there is frost at the canadian border about 10 days out. large specs in wheat are still quite short, so that probably helped the weakness accelerate when ZW lost it's 50-day MA last friday, and golly looking over at CL GC ZB this morning gotta bail wheat! the net long in the corn managed money is still quite long and quite wrong.

    There was about $10 billion in bonds issued today, led by bank of japan 4.5bil so that's being mentioned why the long bond is so weak... sept. is the weakest month in the history of SPX, mentioned for some profit taking today.

    it's an interesting start to sept. for sure, and we might wait til the week closes after all the central bank decisions and non-farm friday to make any conclusions about what big money will be doing after the summer (they are supposed to be back to work.)


  5. So the fun story of the last month is how the Russians and Chinese are doing energy deals in Rubles and RMB/Yuan because the $ is no good, right? So, which currency do they try to chisel each other in? hahaha, lol

  6. here is the kiss of death for gold bulls; their boy king has the economist kid Leeb thinking gold could go to 15,000 in 10 years. we all know how good economists are at calling the mkts, right? think, Easy Al right? Anyway, at least he did not make the famous 50,000 General Jim call . but do not ever forget that they also know everything about currencies, energies, interest rates and how geopolitical events will all pan out.

  7. How is it possible for gold to get knocked down in price so many times in row every Sunday?

    1. Free Market;

      How is it possible for corn prices to get knocked lower so many times in a row every Sunday?

      Same answer to this as to your above question - more sellers than buyers....

      Price must then fall to levels that entice buyers to step up.

      For gold, that meant there were not enough buyers above $1280 to meet the number of willing sellers.

    2. Dan, you are forgetting the "savvy" money and sovereign investors waiting on the sidelines just below $1300: "I know there were large sovereign bidders in this market near the $1,300 level"

      I know this to be true, because 'a market insider and whistleblower' said so on the internet (as they always do, betraying commercial secrets being their stock-in-trade & all)


      and again


      and againhttp://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/6/20_Maguire_-_Massive_Central_Bank_Buying_To_Crush_Gold_Shorts.html

      and again


      and again


      and again

    3. Yeah, okay. Gold getting knocked down every Sunday more than 59 times in a row must be a coincidence. What are the chances of this? About one in four quadrillion? There really isn't any manipulation and I'll change my name to Paul E. Anna.

    4. For some real analysis, go to


    5. Free Market;
      Henceforth, please title all your posts "Paul E. Anna". That way we will know who is doing the posting.

      If you are looking for a website to preach about gold suppression by the feds, this is the wrong site. We deal with the realities of the market.


    6. Good eyes.Asia sellers.Try to make money from it.

    7. In other words, you can't offer an actual explanation of odd patterns like I mentioned or the massive market sell orders that happened yesterday. It's much easier to just take numbers at face value and pretend it's business as usual.

      Does this also mean I should believe the unemployment numbers? GDP growth? Reasons to fight Russia?

    8. Free Market (AKA Paul E. Anna);
      You must be a newbie to this site. I have written on this repeatedly over the last 3 years at this site. Go back and read it as I am wasting no more of my valuable time dealing with this GIAMATT stuff.

      Hedge funds and other large specs drive markets.

      The Dollar is rising, commodity prices are sinking, equities are hitting lifetime highs, why in the world do you insist on forcing your view on gold that it must rise in that environment.

      Learn to read the tape if you want to prosper in the markets.

      That is all I am going to say to you on this. Go back and read the various articles I have written over the past few years if you want to learn something and actually make some money trading/investing.

      This website will be of no use to you if you insist on holding to that theory that every time gold experiences a sharp selloff it is due to "evil manipulators".

  8. it's a bit of an asymmetric bet, to be honest; over an indeterminate timeframe, Gold only has to spike once and they are "proved" to have been right all along;

    This mindset is evident in the repeated references made to the spike in Silver back in 1980 which, on an inflation-adjusted basis, "proves" that Silver's fair value is around $500 oz or something. http://www.sharelynx.com/chartstemp/free/freelongtermCPIAG1700log.php

    Or, if you adopt my perspective, it just means that Silver was insanely overvalued 35 years ago, but either way, the notion is that they will be proved right "one day".

    Whether we will all be around "when tomorrow finally comes", or whether we would actually want to be caught in possession of a wheelbarrow full of Silver in a post-apocalyptic Mad Max scenario is an open question ....

  9. LOL, those guys at KWN dead wrong over and over again but they never give up hope.

    Gotta hand it to them for their resilience or stupidity, or both


  10. Strong dollar doesn't even faze Tesla, up $14 to new world record high.

    Wow, what a strong stock.

    1. http://wolfstreet.com/2014/08/13/tesla-fairest-welfare-queen-of-all-cracks-whip-taxpayers-jump-through-hoops-environmental-laws-get-shafted/

  11. considering how strong the dollar is performing, gold is holding up relatively well. Silver is getting beaten down badly. Gold is the go-to currency.

    If the dollar tapers off here, gold could rebound. GDX is actually holding up vs. the gold/silver prices. These make me want to not be too aggressive shorting here. I covered half my short at close here.

    Hubert, I posted this on Trader Dan's previous missive a few minutes ago. I will repost here.

    thermonuclear war is very survivable. the fallout is only a few days, and the radioactive iodine is what poses the biggest problem. A half life of 4-5 days.

    It is much different than Chernobyl or Fukushima and all those heavy metal isotopes. The china/russia alliance does not want to destroy the US. They just want its military targets immobilized. Places like CO Springs, Norfolk, VA, would not be a good place to settle down. They want our oil and energy and all that wonderful farming land. The US is really a beautiful place. It's sad that we are walking into a buzzsaw. But that buzzsaw is further away than the preppers think. We still have some time. But the globalists know that this will be the only thing that will scare us enough to go along with the final stages of the NWO.

    The process to get to this war is a long term plan and process. Unfortunately, the steps that need to be taken are being currently undertaken. Thus it will happen, but there are some other things that need to be done. This is why I estimate next decade.

    The globalists are coaxing this strike to come about. They want it to happen. The globalists know if they can "collapse the US tentpole" the whole circus tent will fold. But as much as Russia, and especially China, would love to see the US out of the way, they both know that the US globalists are hiding their trump cards and are scared to call their bluff. Eventually, they will get enough courage to strike, but as Russia has said their next generation missile tech will not be operational until 2020. So, I doubt anything will happen before then.

    Obviously, this is a work in progress.

    1. Actually, Iodine's most prevalent isotope has a half-life of eight days, and emits beta particles. Thus, by taking large amounts of iodine salts immediately after a nuclear explosion or by having enough in the diet (Americans are seriously deficient in I), one can prevent most health problems from radioactive iodine. The body prefers non-radioactive iodine in the diet and will only absorb radioactive iodine if one is deficient in I.

      BTW, Trader Dan has been writing some great articles here. Keep up the great work. And thank you for allowing us to comment.

    2. Eph; you should start smoking pot instead of horseshit; give us all a break and take your miserable theories elsewhere

    3. Steve Brassey;

      Lighten up on the language please.

      I have a different view on nuclear war and the globalists than Eph 6 has but if he wants to post his view on that sort of thing, and if others want to comment about it, it is fine with me.

  12. Lots of comments on gold today from the bulls and the bears here.

    What the comments seem to miss is that this probably all comes down to the markets believing the Fed has things under control and will be able to finally exit their years of money printing and 0% interest rate polices.

    So no need for gold and buy the dollar. Especially if the Euro is about to start QE.

    The market seems to be saying there is finally a real economic recovery.

    The bond markets are saying there is no recovery.

    History looks to show both the bond market and the stock market can't be right at the same time.

  13. Well, Barney, it could perhaps reflect any one - or a combo - of the following

    1. Fatigue amongst geopolitical speculators, technical traders following chart patterns, or the "Waiting for Godot" moonshot crowd

    2. The unwind of carry trades referencing the September futures contract, given that yesterday was First Delivery Date http://www.cmegroup.com/trading/metals/precious/gold_product_calendar_futures.html

    3. A structural rebalancing towards income-generating asset classes going into Q4

    4. The counterpart to a strengthening USD in the run up to the NATO summit and NFP

    5. General weakness in the commodities sector - with particular reference to China http://www.zerohedge.com/news/2014-09-02/chinese-commodity-crash-continues-pigs-are-flying and with WTI under $93 / Brent testing towards $100 (both down over $3)

    It doesn't have to reflect an obsession with QE and monetary policy - both of which will certainly influence the Gold price over time, but neither of which is likely to cause sudden weakness such as that seen yesterday (at least in the absence of market news)

    When all you have is a hammer, everything starts to look a little bit like a nail

    1. COMEX Open Interest figures have not been published (or "painted") yet, but watch this space: http://www.cmegroup.com/market-data/volume-open-interest/exchange-volume.html

      If - as I suspect may perhaps be the case - a large number of speculators were forced to show their hands yesterday (or, rather "show me the money!" then we should see a very significant fall in OI as they sold out of their September positions (although note that September is nominally not an "active" month for Gold)

      Back in July Keith Weiner was noting that the carry trade in Gold and Silver offered strong commercial incentives for banks to take the opposite side of speculative long positions, and hedge themselves by buying physical metal and carrying it into delivery: his actual phrase was that "the Warehouse becomes the Buyer of Last Resort"

      If those speculative Long positions have now been unwound - by selling Futures - then the owners of physical metal in the Warehouse who had been "carrying" the metal as the counterpart of that trade will no doubt seek to unload that inventory too (presumably into the open market)

      If this is in fact what has been happening, then what we have experienced is a technical "double whammy" impacting both the Futures and the Spot market, and I have no doubt that Weiner will have some commentary on this dynamic in his monetary metals report next week

      So, watch the OI, and wait for Keith to analyse what has been going on in the Basis; both could be quite informative, but until then the market looks very soft

  14. With the Ukraine news yesterday you could see the short opportunity in Gold and Crude coming...Thought about it but didn't pull the trigger (gotta take off for Labor Day!)...

    Mark- be careful about thrashing on KWN. If they ever go bullish on equities or you ever go bullish on gold, Eric may want to hire you to write headlines for them! Your descriptive posts would rival any headlines written on KWN!

  15. Nothing is going to happen in the Ukraine, at least nothing new that hasn't already happened , with the US having to support Assad to slow down ISIS , and the winter around the corner ... Putin has the west where he wants .

    1. I'm not sure. Despite the simplest economic common sense, Europe is raising and reraising at the sanctions level.
      I would not be surprise to see them add even more sanctions after the NATO meeting next week and Russia cut the gas this winter.
      Whatever pushes those guys, it doesn't seem to be very rational. Or at least, on a purely european economic point of view.
      But all they see about Putin already is that he is a new Hitler.
      It is sick, but that's the way it seems to be when I see reactions around me.
      Let's see what happens next.
      I'm simply shamed for the Ukrainian people themselves.
      Mere pawns on a chessboards, if you listen to people talking about their country, as if it was a mere boardgame between US and Russia.

  16. Gold broke through its two only short term upwards supports today on my charts. I'll get rid of another 1/3 of my short position if we reach the inf bollinger band on the weekly time scale, around 1252.

  17. Silver.

    Horizontal support 18.80 fits with median of pitchfork.
    Area of 18.80 maybe worth monitoring for short term buy order.


  18. Eur Usd.
    I think it's overbought on the short term. This area near 1.3120 should provide at least a small bounce towards 1.3250.
    I'm out another 1/3 of my position, if it's too early, so be it.
    Rest of position targetting 1.28 longer term.

  19. Today gold broke below the bottom side of the compression triangle that has been forming since the beginning of the year (on the daily chart). Does not bode well for the bulls. Maybe it can find support at 1260ish level ( a 62% fib retracement from the $200 rise from 1180 to 1380 earlier this year).

    Monthly chart on gold still within a compression triangle.

    Silver chart is not looking very pretty....Hubert does look like 18.80 may be in site.

  20. Regarding my position on SP500 :
    - microscopic short took at 1990.
    - second microscopic short took at 2000, then out at 2001 on monday.
    (microscopic i.e 1 CFD contract I.e 1990 $ per contract).
    So I'm still short 1 contract 1990, aiming at shorting once more around 2015 IF my indicators look better.
    And as, even with the smallest positions, the bleeding must stop at some moment, my stop loss of the whole position will be set around 2025.
    See arnie, it doesn't work all the time :) But at least I keep it small (very).


Note: Only a member of this blog may post a comment.