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.
$US definitely looks to be headed for 85...will be interesting to see what happens there.
ReplyDeleteOn 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.
wow...we are already getting in the vicinity of the lower red line of the downwards channel on the EUR USD.
ReplyDeleteIt 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.
Any thoughts on when or if this strengthening dollar will adversely affect the stock market?
ReplyDeleteVirtually everything bad that KWN predicted has come true:
ReplyDeleteFor those invested in gold mining shares and for dollar bears.
COMPLETE UTTER TOTAL COLLAPSE
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.
ReplyDeleteSPX 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!!
ooops ~choked~ that post 'LIVING in the USA' is the song, sorry springsteen fans :)
ReplyDeleteZB 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!
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.
Deletehttp://money.cnn.com/2014/09/02/investing/strong-us-dollar-euro-weak-ecb/
Silver is getting closer to a critical point soon. An April 2013 type move is in the cards...possibly...
ReplyDeletei started fishing here and there lets see what the future brings
ReplyDeleteit was Kosminski.
ReplyDeleteDan - 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?
ReplyDeleteOn 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...
trinity trader;
DeleteEurope 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.
Zhang Lan;
ReplyDeleteHe 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.
Thanks Dan. It is a goofy environment we are trading/investing in.
ReplyDeleteSeems 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?
ReplyDeleteThis comment has been removed by the author.
ReplyDeleteDr. Don;
DeleteThat 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???