"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



Monday, September 8, 2014

Strong US Dollar Pressuring Gold

The strength in the US Dollar is continuing to batter gold, ( not to mention a whole host of commodity markets) as the inverse connection between the two asserts itself.

Not only that, but continued outflows from the gold ETF, GLD and declining inflation expectations, are all undercutting the price of the yellow metal.

Here is a look at the US Dollar chart on an intermediate term. Note that the greenback is still trading within a 21 month long trading range but is approaching the upper portion of that range. Light resistance is near today's session high. Above that is the 85 level.


The RSI (shown below) is near 80 and at the highest level in over 4 years! Clearly this is one strong market at the moment.

Helping to further aid the Dollar today is the news that polling data out of Scotland shows a majority there now in favor of independence. This is pressuring the British Pound, which is one of the currencies that make up the basket comprising the USDX.

It is therefore rather humorous to continue reading the various breathless emails in my box detailing one more nail in the coffin of the US Dollar. All the while the currency marches relentlessly higher! One wonders how many of these people peddling this stuff ever bother to look at a simple price chart.

Needless to say, the strong Dollar is making for an ugly looking gold chart and ugly looking gold mining share charts as well.

The volatile juniors are still up for the year but the chart is currently negative with the index trading below all of its major moving averages and with various technical indicators all in clear bearish modes. The index looks to be on track for testing the bottom of its range near 32.



The HUI failed to hold the gap on the chart and is also in a bearish posture at the moment.


Gold bulls had better hope psychological support at $1250 holds or gold will revisit key support at $1240.


The Euro continues to fail at one support level after another and looks like it is heading to 1.2800. The weaker the Euro gets, the more difficulty gold is going to have.



On the grain front, we are watching the current forecast models for indications of the upcoming frost event see whether or not temps drop as low as were originally expected late last week. Today's models are showing the frost line further north but traders are still a bit jumpy and will be until the event comes and goes or the forecasts showing something more conclusive and less threatening. This afternoon's crop condition reports are expected to show phenomenal numbers so the grain bulls are praying for an early killing frost to bail them out.

I will try to get something up later after the USDA gives us those numbers.



18 comments:

  1. $US definitely looks to be headed for 85...will be interesting to see what happens there.
    On the grain front, the Canadian prairies aren't going to see anywhere near the bumper yields of last year. Too much cool, wet weather before summer finally decided to arrive.

    ReplyDelete
  2. wow...we are already getting in the vicinity of the lower red line of the downwards channel on the EUR USD.
    It was hard for me to believe that we could somehow reach it, a few days ago, and we are there already!
    The Fibo level is at 1.2750 and I have a buy order today of the remaining 1/3 short position around 1.285 because of the red support which hasn't met the fibo retracement level yet.

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  3. Any thoughts on when or if this strengthening dollar will adversely affect the stock market?

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  4. Virtually everything bad that KWN predicted has come true:

    For those invested in gold mining shares and for dollar bears.

    COMPLETE UTTER TOTAL COLLAPSE

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  5. SPX this year has often brought a correction after monthly payroll report(last friday for this month) with SPX correcting down to the 50-day MA at least. this year it happened in Feb,Mar,April,May, and June.

    SPX was up +3.8% in august:
    When $SPX was up >3% in August and at 12-month high, September was up only 1 out of 12 attempts. @sentimentrader

    ZB was up nicely early today, but has weakened on 'large supply due this week'

    DX the us dollar index has been low end this whole century, a move to high end about 120 is certainly not out of the question! ...sing it: steve miller band 'born in the USA'

    cheers!!

    ReplyDelete
  6. ooops ~choked~ that post 'LIVING in the USA' is the song, sorry springsteen fans :)

    ZB had looked interesting into the SPX correction theme, as in where will the money go if they come out of stocks.

    many commentators are proposing shorts in the commodity currencies today, like AUD CAD MEX. boy the british pound gives euro a fight for worst thus far.

    cheerio pip pip!

    ReplyDelete
    Replies
    1. So a strong dollar is good for this import addicted economy. Won't it adversely affect our already horrible trade imbalances?? Maybe this doesn't matter in the new central banking paradigm? I imagine it may lag a bit but it seems to me US based companies could be hurt by a stronger dollar.

      http://money.cnn.com/2014/09/02/investing/strong-us-dollar-euro-weak-ecb/

      Delete
  7. Silver is getting closer to a critical point soon. An April 2013 type move is in the cards...possibly...

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  8. i started fishing here and there lets see what the future brings

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  9. I note that Mr Turk is at it again on Everyone's Favourite Website: we are back on the "asset price justice" meme (because, of course, if the price of Gold fails to rise that is inevitably an actionable and illicit unfairness). Today we discover that, rather than going to Hell in a Handcart, recent price action shows " the exceptional value that gold represents at these prices.", accompanied by a handy link to buy his book on Amazon

    http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/9/8_James_Turk_-_The_Greatest_LBMA_Injustice_%26_Chart_Of_The_Year.html

    Lest anyone should still be seduced by this nonsense, here is a brief aide memoire of Mr Turks recent antics

    1. On 19th June Silver stood at around $19.70, and he confidently told us " the market is set up for a big short squeeze here.... I've been looking for something over $2,000 on gold this year, and probably approaching $50 and maybe even exceeding $50 (on silver) in the not too distant future.  That would put the gold silver ratio down at around 25/1.... the price of silver may actually be set to double in just six weeks" http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/6/19_Man_Who_Predicted_Short_Squeeze_Says_Silver_To_Skyrocket.html

    2. Six weeks later, on 28 July, rather than $50, Silver had made it 75¢ higher to around $20.50, and Our Hero switched to reassuring us that " support around $1,300 is solid, which is confirmed by the strong demand for physical metal that showed up on these price dips. There is a lot of cash patiently waiting on the sidelines to scoop up physical metal whenever the price drops." http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/7/28_Turk_-_Expect_A_Wild_Trading_Week_In_The_Gold_%26_Silver_Markets.html

    but unfortunately, another 6 weeks later, that money is apparently still waiting, and Silver is far closer to $5 thant to 50: in this article Turk also assured us that "The plain fact is that gold and silver are undervalued, and consequently the tide already has turned in their favor. The uptrend in gold and silver has now been underway for 13 months." "Plain Fact", and you can't argue with that. For those of you who are a little but dumb, here is what that uptrend looks like in a chart http://silverprice.org/charts/history/silver_1_year_o_usd.png

    3. But NEVER SAY DIE, right? On 18th August we learnt that " the central planners can’t drive gold far below $1,300. The long-term accumulators in gold -- and silver too -- are buying every day what the miners put into the market" http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2014/8/18_Turk_-_The_Greatest_Fear_For_Central_Planners_In_Gold_%26_Silver.html butrather unfortunately, since that date the "big money " savvy investors have lost (another) 5% of their investment

    How do people like Turk sleep, knowing they are in bed with a whore every night?

    ReplyDelete
    Replies
    1. Zhang Lan;

      He is another gold barker that should have been discredited among objective and fair-minded people a long time ago. He is a Johnnie one note and has to be because his livelihood depends on people buying the metal. Why the general public or readers or listeners cannot understand such a simple fact escapes me. It is a testimony to the fact that so many rely on someone else to do their thinking and analysis for them, even when those whom they rely on continuously get it wrong.

      Delete
  10. Dan - thanks for the charts today and the ag analysis. Because the Euro is getting hammered do you see the Europeans buying gold and if so, is this buying going to make a difference? Is that part of the world considered the "western" demand you have referred to or are you mostly talking about US and CA?

    On Gold, isn't the 1240 level where you once indicated that a lot of long positions go under water?

    BTW if Scottland disunions with the UK they better hope they get a piece of the remaining oil production from the North sea. Otherwise they are up a cold creek w/o a paddle...

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    Replies
    1. trinity trader;

      Europe is dealing with the same problems afflicting Japan - deflation. They cannot seem to generate any solid growth. That is never bullish for gold. Now, if the ECB does its own version of QE, that might put a bid under the metal as it would tend to undercut the Euro but for all that I know, the currency might actually move higher in this goofy environment. Right now gold is simply not in demand from the West and I include Europe in that group.

      $1240 is a big support level for the metal as there are indeed a large number of longs that would be underwater. If that goes, I think we could expect to see a test of $1200.

      Gold throws off no yield, and in that capacity it is a dead asset so it requires geopolitical or financial discord of some sort to kick it higher. IN an environment in which stocks are the go-to investment class, gold is out of favor. That could change but for now it is not showing in the charts.

      Delete
  11. Thanks Dan. It is a goofy environment we are trading/investing in.

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  12. Seems to be just a relay race in terms of devaluing currencies, its now the Euro's turn to have a go. All the money that gets printed never makes it way into circulation just seems to stay in a closed circuit in banker circles. What do people think, what's the end-game for gold in this environment?

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  13. This comment has been removed by the author.

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    Replies
    1. Dr. Don;

      That sounds like a real solid trading strategy that one could employ to consistently make money trading the currencies. thanks for sharing that bit of "wisdom". I am too awestruck to add anything further.

      Please note this is sarcasm.

      Good grief - do you gold bugs ever stop???

      Delete

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