Trader Dan's Market Views: 09/18/14

"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

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Thursday, September 18, 2014

Gold Losing Ground in Other Assorted Currencies

Some of the long time readers will know that I like to check the charts for gold, when priced in terms of the other major currencies, to get a sense of how the metal is doing when viewed from outside of this country. Since it is an internationally traded commodity, it makes sense to compare its performance to see whether there is a general global trend in the metal or whether it is diverging from such a trend depending on which currency it might be priced in. This helps us assess overall global sentiment.

With the big Scotland vote in the headlines, I thought it might behoove us to see how the metal was faring in terms of the British Pound. I understand that more than a few Scots fear for their life's savings and were pulling money out of banks just in case. One would think that gold would be a likely recipient for some of that cash.

However, in looking at the price chart, it is rather lackluster ( and that is trying to be kind) as the metal has actually BEEN FALLING ahead of the vote. Not exactly a VOTE of confidence ( sorry, I could not resist the pun) in the metal from what I can see on the chart at this point.

There is chart support near 740 and on down in increments of 10 pounds. If the metal were to lose 720, it would constitute a breach of a major support level.

Here's Euro Gold - a bit better looking chart but is mainly because the Euro has been so weak. That being said, it is range bound and moving lower towards the bottom of the range near 920. For Euro gold to have any chance of a sharply higher move, it will have to clear 990 with the 1000 mark more preferable to get any serious excitement underway.

Here is Yen Gold:

Again, the chart is much better than that of Dollar priced gold but this is a function of how poorly the Yen has been performing on the Forex markets against the Dollar. Remember, the weaker a currency is against the Dollar, the more expensive gold is in terms of that currency. The stronger a currency is against the Dollar, the less expensive gold is in terms of that currency.

That is the reason that gold remains ABOVE the 2013 ending price for all three currencies. All have been weak against the Dollar this year. The British Pound had actually been holding its own against the Dollar until just recently.

Gold bulls can gain some bit of comfort from the above. At least the metal has not been falling apart across the global currency front.

I would keep an eye on the gold shares to see if they sense anything as far as a possible bottom. I do wish to remind the reader however, a market may bottom without beginning a sharp reversal to the upside. All it may do is meander sideways within a lower range.

Gold in US Dollar priced terms is in a short term downtrend but remains mired within that broad trading range I have been noting for some time now. In other words, on the Daily Chart it is TRENDING LOWER but on the intermediate time frame, it is still trading sideways above $1180. If $1180 goes for any reason, this market is in serious trouble.