While the near term chart picture for the US Dollar is decidedly friendly, more and more frequently we are reading reports such as the following out of Dow Jones.
It is not difficult to see where all of this is heading. The US is declining and going the way of all empires and kingdoms throughout history who spent themselves into oblivion and refused to consider the long term implications of their policies.
Esau squandered his birthright for a bowl of stew. The US monetary authorities and inept political leaders have squandered the Dollar's reserve currency status for what??? A pox on the whole pathetic batch of them all.
DJ Australia's Swan: To Discuss With China Possible Direct Conversion of Australian Dollar, Yuan
HONG KONG--Australia will discuss with China officials the potential for
direct conversion of the Australian dollar and the Chinese yuan for
transactions completed in mainland China, Australian Treasurer Wayne Swan said
Wednesday.
"This has the potential over time to help reduce the cost of trade between
Australia and China," said Mr. Swan, who spoke at a forum in Hong Kong before
heading to Beijing for discussions with officials on yuan internationalization.
Mr. Swan said Australia has strongly supported China's move toward a freely
traded currency, and toward "a fully integrated economy that will very soon
lead the world."
Tuesday, July 10, 2012
Silver Chart - by Request
Taking a look at silver on the weekly chart it is not too difficult to see that it has been in a well-defined downtrend since peaking in the spring of last year. Rallies are being sold but dips into the region near $27.00 - $26.00 have been bought. The result has been to form a perfect triangle pattern on the chart. This latter or bottom level of support has thus become CRITICAL to the future prospects of the metal.
It is getting very close to this downside line again this week. Bears are going to continue to try to press it to see if they can push enough longs out of the market to break it lower. If the bulls falter or waver in the least, the metal will buckle and then drop very quickly to the 75% Fibonacci Retracement level near $25.47 with the $25 level also within range.
To get anything going to the upside in this market is going to require a push through the $30 level that can maintain a handle of "30" in front of this market.
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It is getting very close to this downside line again this week. Bears are going to continue to try to press it to see if they can push enough longs out of the market to break it lower. If the bulls falter or waver in the least, the metal will buckle and then drop very quickly to the 75% Fibonacci Retracement level near $25.47 with the $25 level also within range.
To get anything going to the upside in this market is going to require a push through the $30 level that can maintain a handle of "30" in front of this market.
US Dollar Looks Strong
The rally in the US Dollar continues not out of any particular set of strong fundamentals in the US but rather out of a general aversion to the Euro and by consequence, to the European currencies.
While the Fed seems to be basically standing pat for the immediate moment, the Bank of England has announced another round of its bond buying program while the ECB has lowered rates. Given that backdrop and the lingering fears and uncertainty over the bailout mechanism put in place by the European finance ministers and political leaders, traders continue to bid up the Dollar. This buying is a reflection of the unease among traders over current market conditions. People are confused to say the least and when they are, moves tend to be exaggerated as liquidity is falling off with some either lightening up or simply moving to the sidelines altogether.
That being said, this buying has pushed the Dollar right smack dab to an important technical resistance level on its longer term chart. If you note, it has already bested both the 50% and the 61.8% Fibonacci retracement levels of the entire decline from back in 2010 to 2011. It remains above this latter level this week. If it can push through that overhead resistance line, there does not appear to be a whole lot between it and the 2010 peak. That means it would have the potential to make a run towards the 89 level.
While that seems difficult to envision for some Dollar bears, given the pathetic condition of the US economy and it fiscal woes, one has to keep in mind that compared to the Euro, it looks good! (that is not saying much but the USDX is weighted against the "value" of other major currencies). We will have to wait and see should the Dollar indeed manage to move higher as we could normally expect to see pressure across the commodity sector in general.
I would imagine that conditions in the Eurozone would have to begin deteriorating more rapidly to see the Dollar accomplish this feat. If that were the case, traders would most assuredly work those "slowing global growth" trades once again. That would bring some further pressure on the silver market. It would also however ramp up pressure on the US Fed to move forward with their next round of bond buying, a factor which, if traders are convinced is coming, would see the grey metal shrug off that selling pressure and move higher in anticipation of the next wave of liquidation injections.
![]()
While the Fed seems to be basically standing pat for the immediate moment, the Bank of England has announced another round of its bond buying program while the ECB has lowered rates. Given that backdrop and the lingering fears and uncertainty over the bailout mechanism put in place by the European finance ministers and political leaders, traders continue to bid up the Dollar. This buying is a reflection of the unease among traders over current market conditions. People are confused to say the least and when they are, moves tend to be exaggerated as liquidity is falling off with some either lightening up or simply moving to the sidelines altogether.
That being said, this buying has pushed the Dollar right smack dab to an important technical resistance level on its longer term chart. If you note, it has already bested both the 50% and the 61.8% Fibonacci retracement levels of the entire decline from back in 2010 to 2011. It remains above this latter level this week. If it can push through that overhead resistance line, there does not appear to be a whole lot between it and the 2010 peak. That means it would have the potential to make a run towards the 89 level.
While that seems difficult to envision for some Dollar bears, given the pathetic condition of the US economy and it fiscal woes, one has to keep in mind that compared to the Euro, it looks good! (that is not saying much but the USDX is weighted against the "value" of other major currencies). We will have to wait and see should the Dollar indeed manage to move higher as we could normally expect to see pressure across the commodity sector in general.
I would imagine that conditions in the Eurozone would have to begin deteriorating more rapidly to see the Dollar accomplish this feat. If that were the case, traders would most assuredly work those "slowing global growth" trades once again. That would bring some further pressure on the silver market. It would also however ramp up pressure on the US Fed to move forward with their next round of bond buying, a factor which, if traders are convinced is coming, would see the grey metal shrug off that selling pressure and move higher in anticipation of the next wave of liquidation injections.
Monday, July 9, 2012
MidWest US Drought Fueling Talk of Soaring Food Prices
The fierce drought that has gripped the lower section of the US corn belt and has been ravaging both corn and soybeans in the region has sent corn futures limit up today and soybeans for the front month July contract to a new all time high. That has sent shudders through the minds of some traders who are convinced that it is only a matter of time before all of this feeds through to the supply chain. REsult - higher grain prices meaning higher food prices in general.
This phenomenon has gotten hedge funds back to buying commodities across the board this morning even with the equity markets careening lower. Gold and particularly silver are getting money inflows as a result.
I mentioned a while back that the old time traders used to see a connection between the price of soybeans and the price of silver. That connection seems to be back in full force today.
This phenomenon has gotten hedge funds back to buying commodities across the board this morning even with the equity markets careening lower. Gold and particularly silver are getting money inflows as a result.
I mentioned a while back that the old time traders used to see a connection between the price of soybeans and the price of silver. That connection seems to be back in full force today.
Saturday, July 7, 2012
Trader Dan on King World News Markets and Metals Wrap
Please click on the following link to listen in to my regular weekly radio interview with Eric King on the KWN Markets and Metals wrap where we discuss this week's price action in the markets.
Friday, July 6, 2012
Payrolls Number Disappoints - Risk Off
If you recall one month ago, when we got that abysmal jobs number, gold initially moved lower, only to then rebound with a ferocity that caught market watchers and traders completely off guard. Risk off trades were being slammed on as longs bailed out and bears began pressing the downside. Literally, on the drop of a dime, the entire complexion of the market reversed with the bears running for their lives as new longs entered the fray. The reason - the number was so crappy that everyone just "knew" that the Fed was going to immediately launch the next round of QE. In other words, the more rotten the economic data, the more the risk trades were being put on.
Today, as is becoming the pattern in these screwed up markets, the exact opposite has occured. The payrolls number in this morning's release was horrific. Down went gold, and silver, and nearly the entirety of the commodity complex, along with the equity markets, and up went the Dollar. This time however we are not as of yet getting any sign whatsoever that traders are expecting the Fed to act on the basis of the weak payrolls number. I see no upside reversal at this hour in any of these markets - just more selling pressure.
I am beginning to suspect that we are seeing more and more traders/investors coming around to the view that no matter what one might want to call it, QE, additional liquidity, monetary easing, bond buying programs, etc., none of it is going to do the least bit of good in the medium to long term. In other words, one has to wonder whether or not the bloom is off the rose of Central Bank powers. It seems to me that the CB's are losing the war against the global economic slowdown in the minds of more and more traders. What is even worse ( in the minds of some), is that they are losing their status as the all-powerful demi gods of the finance world.
Again, at the risk of beating a dead horse, the problem is not one of liquidity - there is plenty of that - the problem is too much debt and not enough velocity of money. You can lower interest rates all day long until the cows come home but if people do not want to borrow or are afraid to borrow, what good does it do?
In other words, money is simply not changing hands fast enough. As a matter of fact, this morning the ECRI reported that their future inflation gauge, or USFIG dropped to 101.2 from 102.3 in May. Their comment: "US inflation pressures are clearly in retreat".
This is where the pressure is coming from on the Continous Commodity Index and why the bond market is moving higher and yields lower once again. Until something occurs that will change this "lack of inflation" psyche, upside trending moves in the commodity sector are going to be few and far between for all but that sector which has the strongest set of fundamental factors going for it. Right now, that is the grain sector, but even they are beginning to show some signs of stress due to the larger macro economic picture.
IN this environment, gold is going to perform better than silver as the latter must have an inflationary environment present if it is going to run higher. The Yellow Metal cannot seem to clear the resistance level noted on the chart which just so happens to be the BOTTOM OF THE FORMER TRADING RANGE in April of this year. Until it does, it is range bound at a lower price with solid buying down below $1580 on down to $1550. Only a strong weekly close through the $1630 - $1635 level gives Ol' Yeller a shot at getting some upside fireworks going.
Take a look at the following chart of the commodity complex via the Continuous Commodity Index or CCI. It has made an almost textbook retracement halfway or 50% of the distance from the peak in late February of this year to the recent low in early June, and has now stalled out. If the inflationary psyche does not return, it will move lower towards the 541 level to see if it can garner some buying there. If not, further back down it goes. For the bulls to get anything going, they must take the sector through the 560 level for starters.
Today, as is becoming the pattern in these screwed up markets, the exact opposite has occured. The payrolls number in this morning's release was horrific. Down went gold, and silver, and nearly the entirety of the commodity complex, along with the equity markets, and up went the Dollar. This time however we are not as of yet getting any sign whatsoever that traders are expecting the Fed to act on the basis of the weak payrolls number. I see no upside reversal at this hour in any of these markets - just more selling pressure.
I am beginning to suspect that we are seeing more and more traders/investors coming around to the view that no matter what one might want to call it, QE, additional liquidity, monetary easing, bond buying programs, etc., none of it is going to do the least bit of good in the medium to long term. In other words, one has to wonder whether or not the bloom is off the rose of Central Bank powers. It seems to me that the CB's are losing the war against the global economic slowdown in the minds of more and more traders. What is even worse ( in the minds of some), is that they are losing their status as the all-powerful demi gods of the finance world.
Again, at the risk of beating a dead horse, the problem is not one of liquidity - there is plenty of that - the problem is too much debt and not enough velocity of money. You can lower interest rates all day long until the cows come home but if people do not want to borrow or are afraid to borrow, what good does it do?
In other words, money is simply not changing hands fast enough. As a matter of fact, this morning the ECRI reported that their future inflation gauge, or USFIG dropped to 101.2 from 102.3 in May. Their comment: "US inflation pressures are clearly in retreat".
This is where the pressure is coming from on the Continous Commodity Index and why the bond market is moving higher and yields lower once again. Until something occurs that will change this "lack of inflation" psyche, upside trending moves in the commodity sector are going to be few and far between for all but that sector which has the strongest set of fundamental factors going for it. Right now, that is the grain sector, but even they are beginning to show some signs of stress due to the larger macro economic picture.
IN this environment, gold is going to perform better than silver as the latter must have an inflationary environment present if it is going to run higher. The Yellow Metal cannot seem to clear the resistance level noted on the chart which just so happens to be the BOTTOM OF THE FORMER TRADING RANGE in April of this year. Until it does, it is range bound at a lower price with solid buying down below $1580 on down to $1550. Only a strong weekly close through the $1630 - $1635 level gives Ol' Yeller a shot at getting some upside fireworks going.
Wednesday, July 4, 2012
Happy "What is Left of our Independence" Day
To all my American readers - after this week's convoluted reasoning from the Chief Justice of the Supreme Court, I wonder what really is going to be left of our Independence.
Just be careful not to breath too deep of a sigh - the EPA is liable to come a knocking on your door fining you for emitting excessive amounts of that nasty pollutant, otherwise referred to as Carbon Dioxide.
If you happen to have the misfortune of residing in New York City, no sense in trying to drown your sorrows in a nice big giant cup of Mountain Dew. Nanny Bloomberg has seen to that.
I keep waiting for the Underwear and Sock Police to start passing out tickets for non-compliance with the officially sanctioned color coordinated guidelines.
We are fast becoming slaves in the land of our forefathers.
Just be careful not to breath too deep of a sigh - the EPA is liable to come a knocking on your door fining you for emitting excessive amounts of that nasty pollutant, otherwise referred to as Carbon Dioxide.
If you happen to have the misfortune of residing in New York City, no sense in trying to drown your sorrows in a nice big giant cup of Mountain Dew. Nanny Bloomberg has seen to that.
I keep waiting for the Underwear and Sock Police to start passing out tickets for non-compliance with the officially sanctioned color coordinated guidelines.
We are fast becoming slaves in the land of our forefathers.
Tuesday, July 3, 2012
Live or Die by the QE Sword
Today's rally in gold (and in silver for that matter) was completely based on expectations for additional liquidity measures forthcoming from the Central Banks of the world. First there was chatter than China would be easing. Then came expectations of a rate cut from the ECB. If that were not enough, talk surfaced that the Bank of England would be restarting its bond purchasing program (England's QE) and of course, the non-stop, near religious belief that the Federal Reserve is going to start round 3 of QE "anyday now".
I do not know about you readers but I am more and more disgusted with what is happening to the trading/investing community in this modern financial system. They seem to have lost their collective minds and their ability to reason.
In a most perverse manner, (perverse is about the only word that I can find to express the sickness that pervades the financial system), the worse the economic data has become, the better the stock markets of the world seem to do. Rotten economic data out of China - why let's just buy copper and increase the price $0.25/pound in less than two weeks. After all, China is sure to lower interest rates and that will certainly ramp up demand once again.
Rotten news out of the Euro Zone - sovereign debt issues - let's take crude oil a full $10/barrel higher.
When even Goldman Sachs' reasonable call for a lower stock market based on its solid analysis of the economic condition gets blown out of the water, you know that the financial world now calls light, darkness; bitter, sweet; and down, up. It really does seem as if we are living in a parallel universe where the "normal" rules are inverted.
The short of all this is simple - for whatever reason, traders have now been properly conditioned by the authorities to buy more and more equities, the worse the economic news becomes. Since traders have been led to expect that Central Bank activity will generate inflation, they bid up the price of the so-called "risk assets", which includes both stocks and commodities.
My own personal belief is that the additional QE will do absolutely NOTHING to impact the LONG TERM PROBLEMS that beset the current global economy. The problem is not that money is not cheap enough - the problem is that there simply too much debt. That however will not stop these Central Banks from pushing the accelerator on the liquidity car nor will it stop these SHORT TERM inflationary outbursts that result as this liquidity finds its way into both equities and commodities. At some point the debt has to clear. What we get however is short term bursts where the VELOCITY OF MONEY increases only to then drop off a cliff as the impact of the QE subsides. In a very real sense, the entire global financial system has now evolved to the point where it truly does either live or die by the QE sword.
A quick look at the gold chart shows the market has found strong buying support down near the bottom of a range near $1550 and strong selling near the top of this range between $1620 - $1630. The latter has been a tough nut for the bulls to crack.
Should the gold bulls be able to muster sufficient strength to beat back the bullion bank selling originating up there, it has a real shot at tagging $1650. Getting through there would be the first legitimate shot gold has at getting to $1680, a level it has not seen since April.
One last thing, I had mentioned a while back in another post that I was of the opinion that the Fed did not want to let the QE cat out of the bag too prematurely as they are acutely aware of the ramifications of rampaging hedge funds particularly in the energy sector of the commodity complex. My suspicions were that these monetary gods would try to wait until the price of unleaded gasoline dropped closer to $2.50 or so before their mouths started yapping about bringing on another round. Lo and behold - look at the unleaded gasoline chart.
Now isn't that sweet! We finally start seeing a wee bit of relief at the gasoline pump and what do our barons do to us - they make certain that we will not be spared from our former pain for long. Gasoline has increased $0.25/gallon in two weeks time based on nothing but hype about QE. Imagine what will happen to this chart if they do indeed give the word. Sad thing is even if they don't, Iran is making noises again and that in itself has the energy markets a bit nervous.
Ben Bernanke has a problem however. If he pulls the trigger on the QE gun to prop up the equity markets for his boss Obama in time for the election, he will NOT BE ABLE TO AVOID surging gasoline prices, which are one helluva negative factor for any sitting incumbent to overcome. Nothing has as much IMMEDIATE impact on the consumer and average citizen as soaring gasoline prices at the pump - NOTHING.
I do not know about you readers but I am more and more disgusted with what is happening to the trading/investing community in this modern financial system. They seem to have lost their collective minds and their ability to reason.
In a most perverse manner, (perverse is about the only word that I can find to express the sickness that pervades the financial system), the worse the economic data has become, the better the stock markets of the world seem to do. Rotten economic data out of China - why let's just buy copper and increase the price $0.25/pound in less than two weeks. After all, China is sure to lower interest rates and that will certainly ramp up demand once again.
Rotten news out of the Euro Zone - sovereign debt issues - let's take crude oil a full $10/barrel higher.
When even Goldman Sachs' reasonable call for a lower stock market based on its solid analysis of the economic condition gets blown out of the water, you know that the financial world now calls light, darkness; bitter, sweet; and down, up. It really does seem as if we are living in a parallel universe where the "normal" rules are inverted.
The short of all this is simple - for whatever reason, traders have now been properly conditioned by the authorities to buy more and more equities, the worse the economic news becomes. Since traders have been led to expect that Central Bank activity will generate inflation, they bid up the price of the so-called "risk assets", which includes both stocks and commodities.
My own personal belief is that the additional QE will do absolutely NOTHING to impact the LONG TERM PROBLEMS that beset the current global economy. The problem is not that money is not cheap enough - the problem is that there simply too much debt. That however will not stop these Central Banks from pushing the accelerator on the liquidity car nor will it stop these SHORT TERM inflationary outbursts that result as this liquidity finds its way into both equities and commodities. At some point the debt has to clear. What we get however is short term bursts where the VELOCITY OF MONEY increases only to then drop off a cliff as the impact of the QE subsides. In a very real sense, the entire global financial system has now evolved to the point where it truly does either live or die by the QE sword.
A quick look at the gold chart shows the market has found strong buying support down near the bottom of a range near $1550 and strong selling near the top of this range between $1620 - $1630. The latter has been a tough nut for the bulls to crack.
Should the gold bulls be able to muster sufficient strength to beat back the bullion bank selling originating up there, it has a real shot at tagging $1650. Getting through there would be the first legitimate shot gold has at getting to $1680, a level it has not seen since April.
One last thing, I had mentioned a while back in another post that I was of the opinion that the Fed did not want to let the QE cat out of the bag too prematurely as they are acutely aware of the ramifications of rampaging hedge funds particularly in the energy sector of the commodity complex. My suspicions were that these monetary gods would try to wait until the price of unleaded gasoline dropped closer to $2.50 or so before their mouths started yapping about bringing on another round. Lo and behold - look at the unleaded gasoline chart.
Now isn't that sweet! We finally start seeing a wee bit of relief at the gasoline pump and what do our barons do to us - they make certain that we will not be spared from our former pain for long. Gasoline has increased $0.25/gallon in two weeks time based on nothing but hype about QE. Imagine what will happen to this chart if they do indeed give the word. Sad thing is even if they don't, Iran is making noises again and that in itself has the energy markets a bit nervous.
Ben Bernanke has a problem however. If he pulls the trigger on the QE gun to prop up the equity markets for his boss Obama in time for the election, he will NOT BE ABLE TO AVOID surging gasoline prices, which are one helluva negative factor for any sitting incumbent to overcome. Nothing has as much IMMEDIATE impact on the consumer and average citizen as soaring gasoline prices at the pump - NOTHING.
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