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.
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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
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