Gold loses battle for $1750- needs to push through $1765

The failure by Ol' Yeller to extend past $1750 has tripped some of the shorter term technical indicators into a sell mode. As you can from looking at the blue downtrend line, Gold cannot seem to extend past this line. The positive is that it is also holding the uptrending red support line with the result being a tightening pattern or almost a type of coil that is forming.

Gold bulls need to watch this carefully as a failure to hold above $1650 will send the metal very quickly towards the $1600 level where it must find active buying to prevent a deeper setback in price which could potentially take it first towards $1550 and even towards the $1500 level should it fail to hold there.

A push back through $1765 turns the chart pattern friendly with only a closing push through $1800 allowing for the resumption of a strong uptrending pattern and a test of the all time high.

All eyes in gold are on Europe for the time being as its fortunes are tied to developments there. If the European ministers meeting in Brussels this coming Friday come up with a plan that assuages fears of investors/traders in regards to the sovereign debt crisis there, gold should extend to the upside as the market will move towards the risk trades again. If they disappoint, gold is going to be fighting some very strong headwinds as the Dollar will rally and possibly take out strong resistance near the 80 level on the USDX.

Euro Sliding Lower - Surrendering Gains

The morning euphoria tied to news of proposed deficit cuts in ITALY and news that both Germany and France had agreed to push for changes to the EU treaties in regards to tighter budget and deficit rules for member nations has given way as news hits the trading floor that ratings agency Standard and Poors is placing both Germany and France on review for a potential downgrade.

Other AAA rated European nations are also going to be placed on review. Once put on review, any downgrade could occur within 90 days.

Gold and Silver were both hit hard on the newsflash.

CFTC moves on the heels of the MFGlobal debacle

While definitely late, the CFTC is moving to bring some much wanted scrutiny and overdue regulation to the futures industry in regards to segregated customer accounts.

Here is the story from Reuters:

http://www.reuters.com/article/2011/12/05/us-financial-cftc-meeting-idUSTRE7B410420111205

CFTC approves rule on protection of customer funds

WASHINGTON | Mon Dec 5, 2011 11:21am EST

(Reuters) - The U.S. futures regulator approved on Monday a rule that puts tighter limits on how brokerage firms can use customer funds, a measure that the now-bankrupt MF Global had encouraged the agency to delay.

The measure was finalized by the Commodity Futures Trading Commission by a 5-0 vote. The rule was initially proposed by the CFTC in October 2010.

Crude Oil market could show some fireworks this week

As trading takes place in the Asian session, the US equity futures market are solidly higher as risk appetite returns on news coming out of Italy that a proposal to cut some 30 billion euros worth of debt is in the works. While the commodity futures markets are not particularly excited about this, the stock world surely seems to be taking it as a harbinger that something is going to come out of this Friday's meeting in Brussels which has the potential to provide a healthier environment for the risk trades.

One market that is certainly reacting higher is the Crude oil market which is solidly above the $100 barrel level (WTI) and is threatening its former recent top near the $103 level. One of two things now happens - it either fails at this level sparking a round of long liquidation with talk of a double top emerging or if the risk appetite is strong enough, it takes out $103 in convincing fashion and kicks another leg higher on the price charts.

If it is the latter, here comes the fallout to the consumer from this liquification game being played by the monetary officials and political leaders. Rising energy prices cannot be separated out from a general round of risk trade money flows. If the bureaucrats and money masters want to stave off the deflationary implications of a meltdown in the sovereign debt markets, then they MUST BE FORCED into accepting surging energy prices which will certainly have a negative impact as far as growth goes on the overall global economy.

We are looking at the CATCH 22 scenario once again.

If traders suspect on the other hand, that nothing is going to come out of this Friday's summit, then crude oil will move lower reflecting the disappointment of the market that the punch bowl is not going to be spiked any further.

Trader Dan on King World News Weekly Metals Wrap

Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Weekly Metals Wrap.

http://tinyurl.com/br5g876

Registration of Shares

Dear Folks:

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Thanks,
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A First Step in the Right Direction

Fox Business is reporting that the former head of MF Global has been subpoenaed to testify in front of a Congressional House Panel

Here is their lead in to the article:

Jon Corzine, the former head of bankrupt commodities brokerage firm MF Global, has been subpoenaed to testify about his role in the collapse before a congressional committee.
Corzine hasn’t been heard from publicly since MF Global imploded in October, the result of bad bets on European sovereign debt, a risky gamble reportedly pushed by Corzine himself.

Read more: http://www.foxbusiness.com/politics/2011/12/02/corzine-subpoenaed-to-appear-before-house-panel/#ixzz1fOoGfStV

Let's see where this leads. I hope it is just the tip of the iceberg as far as what he and his former firm reap.

Bank of Korea purchases Gold

Dow Jones is reporting that the Bank of Korea has announced that it has increased the amount of gold in its reserves for the second time this year.

The report states that they purchased 15 tons in several batches last month. The last purchase was back in June for a total of 25 tons.

It now has 54.4 tons in reserve. Even with the purchases this year, it still has only 1% of its total foreign exchange reserves in gold. The former amount was a mere 0.7%.

We do not know the actual price at which these purchases were made but there is no doubt in my mind that they occured on forays down into the zone near the $1600 level. This level has seen strong buying by assorted Central Banks for some time now and I see nothing that would cause this to change anytime soon.

The fact is that many of the banks that have been accumulating gold are doing so to both diversify their reserves and to provide confidence to investors world wide .

As traders/investors this is valuable information for us as it points to very strong downside support in gold with sizeable accumulation occuring among a group of market participants who are not buying the metal only to try to flip it for some sort of short term gain. They are buying because they see value in the metal at these prices.