"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


Thursday, April 3, 2014

Gold Oscillating around a Key Pivot Point

I have mentioned and illustrated how I believe the $1280 level is a key level for the gold market as both sides ( bull and bear ) attempt to ascertain the next move for the yellow metal. See those previous posts for more particulars.

Suffice it to say that most players were unwilling to press their case very hard ahead of a crucial employment report tomorrow morning. All I can say is that it is going to be another one of those "Friday's" in which we can expect to see some fairly wild price action if it is going to be like the previous Fridays on which we have gotten the jobs number from the feds.

There is no sense in posting much of anything up for now until we get that report out of the way and see how the market responds. My own thinking is if the number comes out close to 200K or above, gold will react negatively as the Dollar will probably move higher. The reason - the market will regard the previous employment numbers, that were very disappointing, as being more a function of the severely cold weather during January and February rather than the beginning of a trend which would cause the Federal Reserve to scale back its tapering plans.

I am taking the various Fed governors' at their words, which seem to have been pretty consistent with one another for a change, that it is going to be a high bar to induce the Fed not to procede with their current tapering plans.

When I look at the inflation numbers coming out of the Euro zone ( which are well below the 2% target that the ECB has acknowledged it would like to see ), it occurs to me that a stronger jobs number will feed into the sentiment that higher rates are on tap here in the US long before they will be for the Euro zone. That should, in a normal world, tend to support the Dollar at the expense of the Euro.

The flip side is if we get a much weaker than anticipated jobs number. In that case, we would expect to see the Dollar weaken somewhat and gold move higher as traders would then begin to doubt the Fed's stated intention to taper anywhere near the extent to which is already in the market.

In other words, it will take some sort of strong negative surprise on the employment front to shift the current mindset that the poor numbers the first two months of this year were due a large extent to the inclement and record setting cold weather. If we were to get such a thing, traders might begin to believe that a trend towards weaker hiring is underway and that would be enough to halt any upward movement in the Dollar.

We shall see what we get tomorrow. One thing I can guarantee is that the HFT crowd will be making lots of money off of the rest of us. They are the human equivalent of spotted deer ticks.