Now, for what is really important news.... this one is especially for my readers from down under!
Australian Wild Pig Drinks 18 Beers, Gets in Fight with Cow
http://www.natureworldnews.com/articles/3981/20130914/australian-wild-pig-drinks-18-beers-gets-fight-cow.htm
Seriously--- after the horrific news from yesterday involving that Naval Yard shooting, I thought that it might be helpful to get a bit of news that is not so saddening. One cannot read the reports from that terrible crime scene without realizing that something is wrong with the culture in this nation. At times it seems as if we are rotting from within. Virtue, honor, decency are becoming the truest of scarce commodities. Once again however we learn about another shooter with mental illness issues - how do these people keep falling through the cracks and are thus enabled to carry out their twisted deeds?
Tuesday, September 17, 2013
Monday, September 16, 2013
Gold Cannot Shrug off Bearish Sentiment
Rallies continue to be sold in the yellow metal as the bounce higher ran out of steam near a tough resistance level at $1330. Many traders were watching to see how gold would react on any approaches to this level and whether or not it could maintain its gains having secured a foothold there. It did not... that triggered some long liquidation as well as bringing in fresh short sellers.
Bears are trying to break the market down below the $1300 level. Bulls are attempting to hold it above there. We will know very soon which side has the advantage near term. Rallies however continue to be seen, for now, as fresh selling opportunities. It is going to take some more positive performance on the price charts for that to change. The failure to hold above $1330 is not helpful to the bulls in that regard.
There seemed to be some strange goings on in the Treasury market today with the long bond soaring to 131' 12 overnight only to puke out most of its gains as the trading session wore on. Treasuries look as unsure of their next move as the gold market does right now. Higher yields seem to be here to stay but no one knows exactly "how high" those yields will be before stabilizing. The truth is that the US economy is in no shape to handle higher interest rates and most bond traders realize that. They are also trying to come to terms however with any Federal Reserve "tapering" or "lack of tapering" to gauge whether they should be buying bonds or selling bonds. Each piece of economic news is therefore having an overexaggerated impact on the long bond as it confirms or denies traders' perspectives. The result is more volatility and herky-jerky type price action as firm convictions are lacking.
Markets like these are the realm of the one- three minute bar chart geeks and scalpers.
Bears are trying to break the market down below the $1300 level. Bulls are attempting to hold it above there. We will know very soon which side has the advantage near term. Rallies however continue to be seen, for now, as fresh selling opportunities. It is going to take some more positive performance on the price charts for that to change. The failure to hold above $1330 is not helpful to the bulls in that regard.
There seemed to be some strange goings on in the Treasury market today with the long bond soaring to 131' 12 overnight only to puke out most of its gains as the trading session wore on. Treasuries look as unsure of their next move as the gold market does right now. Higher yields seem to be here to stay but no one knows exactly "how high" those yields will be before stabilizing. The truth is that the US economy is in no shape to handle higher interest rates and most bond traders realize that. They are also trying to come to terms however with any Federal Reserve "tapering" or "lack of tapering" to gauge whether they should be buying bonds or selling bonds. Each piece of economic news is therefore having an overexaggerated impact on the long bond as it confirms or denies traders' perspectives. The result is more volatility and herky-jerky type price action as firm convictions are lacking.
Markets like these are the realm of the one- three minute bar chart geeks and scalpers.
Sunday, September 15, 2013
Summers Drops out of the Fed Chairman Contest - Dollar Weakens
The market is interpreting Larry Summers's withdrawal from consideration as Ben Bernanke's replacement for head of the Federal Reserve as negative for the dollar and thus as a positive for gold this evening. The reason? - Summers's was viewed as a more hawkish replacement for the soon-to-be retiring Bernanke. That leaves the door open further for Yellen, who is viewed as very dovish and thus more inclined to stay the course on the Fed bond buying program.
Gold has responded higher on the news but has run into a solid wall of selling just above key short-term resistance at $1330. The December contract has posted a high thus far of $1336. It will take a further push through this level in either European trading or in the New York session to run the bears out who sold into the news.
I find it rather interesting to note a very large rally in the long bond as the market there is fully one point higher on the same news. In other words, US interest rates on the long end of the curve are dropping with traders seeing a dove replacing Bernanke. Of course the S&P 500 is greeting the Summers news as wildly bullish for US equities with that index clearing 1700 in Asian trade. It looks as if it is Happy Days are Here Again for equity bulls as the punch bowl will be spiked further if the current sentiment now being reflected in this overnight trading is indeed correct.
We will have to closely watch the FOMC meeting for further clues into subsequent action but for now, Wall Street loves it.
I am concerned for gold however - if it cannot clear this overhead chart resistance on news that is obviously impacting the Dollar, the Treasury markets and the equity markets to this extent, then I am not sure exactly what it is going to take to move it into a sustained uptrend. I do want to note however that there is widespread weakness in the grain markets this evening as wide swaths of the Midwest were hit with significant rains over the weekend. That will tend to pressure food prices somewhat if this downward trend continues and thus take some of the heat off the food inflation front. Also undercutting strength in gold this evening is weakness in crude oil/energies.
We wait to see what New York bring us....
Gold has responded higher on the news but has run into a solid wall of selling just above key short-term resistance at $1330. The December contract has posted a high thus far of $1336. It will take a further push through this level in either European trading or in the New York session to run the bears out who sold into the news.
I find it rather interesting to note a very large rally in the long bond as the market there is fully one point higher on the same news. In other words, US interest rates on the long end of the curve are dropping with traders seeing a dove replacing Bernanke. Of course the S&P 500 is greeting the Summers news as wildly bullish for US equities with that index clearing 1700 in Asian trade. It looks as if it is Happy Days are Here Again for equity bulls as the punch bowl will be spiked further if the current sentiment now being reflected in this overnight trading is indeed correct.
We will have to closely watch the FOMC meeting for further clues into subsequent action but for now, Wall Street loves it.
I am concerned for gold however - if it cannot clear this overhead chart resistance on news that is obviously impacting the Dollar, the Treasury markets and the equity markets to this extent, then I am not sure exactly what it is going to take to move it into a sustained uptrend. I do want to note however that there is widespread weakness in the grain markets this evening as wide swaths of the Midwest were hit with significant rains over the weekend. That will tend to pressure food prices somewhat if this downward trend continues and thus take some of the heat off the food inflation front. Also undercutting strength in gold this evening is weakness in crude oil/energies.
We wait to see what New York bring us....
Saturday, September 14, 2013
Trader Dan Interviewed at King World News Markets and Metals Wrap
Please click on the following link to listen in to my regular weekly audio interview with Eric King over at the KWN Markets and Metals Wrap.
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2013/9/14_KWN_Weekly_Metals_Wrap.html
http://www.kingworldnews.com/kingworldnews/Broadcast/Entries/2013/9/14_KWN_Weekly_Metals_Wrap.html
Friday, September 13, 2013
Surprise Late Session Rally in Gold
I just completed my weekend interview with Eric King over at King World News for the Metals Wrap. We were discussing the very late in the session price action in gold and talking about the impact of the news story that he broke with Andrew Maguire about the whistleblowers from Morgan and the gold price manipulation scheme.
I remarked at how unexpected the late-in-the-day rally was to me and was wondering what might have caused the surge in volume late on a Friday to produce it.
It certainly appears that as the story made the rounds, a lot of interest was generated in buying both from fresh longs now looking for a bottom as a result and some nervous bears who were unsure how the market would react to it.
We now await the open of trade in Asia Sunday evening to see how traders over there will react to the story and whether or not gold can at least clear the $1330 level to signal whether or not another short term bottom is in the market.
I am putting up a THREE HOUR CHART, to show you the spike upward during the last three hours of trading. I also noticed that for a Friday afternoon, the volume was unusually high. Normally, we see hardly any volume whatsoever that time of the day on a Friday as most traders are long gone for the weekend.
Should be interesting Sunday night - just not sure what we are going to get....
I remarked at how unexpected the late-in-the-day rally was to me and was wondering what might have caused the surge in volume late on a Friday to produce it.
It certainly appears that as the story made the rounds, a lot of interest was generated in buying both from fresh longs now looking for a bottom as a result and some nervous bears who were unsure how the market would react to it.
We now await the open of trade in Asia Sunday evening to see how traders over there will react to the story and whether or not gold can at least clear the $1330 level to signal whether or not another short term bottom is in the market.
I am putting up a THREE HOUR CHART, to show you the spike upward during the last three hours of trading. I also noticed that for a Friday afternoon, the volume was unusually high. Normally, we see hardly any volume whatsoever that time of the day on a Friday as most traders are long gone for the weekend.
Should be interesting Sunday night - just not sure what we are going to get....
Same Play; Different Act for Gold
Nothing has changed in the least iota for gold - it continues to drop through one support level after another as traders/investors simply have no incentive/desire to chase this market higher. If anything, they are shorting it.
This is why I have been trying to publicly rebut that nonsense out there that gold is in backwardation and is therefore wildly bullish. Guess what? The market action tells me that it could care less about that sort of claptrap. You will get some who should recant this stuff but instead they will blame it on the nefarious bullion banks instead.
Also, while JP Morgan was the big buyer/stopper during last month's gold delivery process, this month they have been issuers/sellers out of their House account, albeit not to the same extent that they were buying last month.
Look, I agree that the feds have a vested interest in keeping the gold price under wraps as it competes directly with the US Dollar but we have a proven track record of the Commitment of Traders for over 12 years now detailing that the nasty bullion banks are always selling DURING UP MOVES... if they do anything while price is breaking lower, they are covering shorts or buying. The current wave of selling that has been occurring in the gold market this week is largely due to hedge funds, not the bullion banks.
We will get this week's report later on today and I can analyze it then but it should be noted that it will not include the price action from Wednesday through today and I can tell you fairly confidently that it was not bullion bank selling that took the market down through $1360 - $1350 and again through $1320. It was hedge funds... what the bullion banks were doing was selling up near $1400 as the remaining vestiges of hedge fund shorts who were exiting were buying. They provide the cap and then let the hedge fund computers take over but they DO NOT CHASE PRICE LOWER. PERIOD!
Arguing against the price action is a fool's errand and is the last refuge for those who are wrong and cannot admit it. As I have said many times, there is nothing to be ashamed at when one is wrong about a market's direction. We all have been there ( I surely have many times) as we are all mere mortals and are not omniscient (there is only one Being that is). The key is to quickly admit that the market does not agree with you and take corrective action if you are a trader so as to avoid suffering serious losses. Doggedly refusing to acknowledge the obvious however is a recipe for disaster especially in the futures markets where the extreme leverage can inflict such carnage in such a short period of time.
What I am taking away from the recent price action is that gold is back to experiencing "Tapering" jitters. Hedge funds apparently are more and more losing their concerns about the degree or extent of any Fed tapering and thus are becoming emboldened to play gold from the short side as there is yet no solid evidence of widespread inflation issues. Just today Goldman came out with a recommendation for investors to use any bouts of weakness in the equity markets to accumulate stocks as they see a "dovish" tapering of only $10 billion per month if the Fed moves in that direction.
While that may be good for stocks in Goldman's view, apparently gold is getting increasingly nervous about it.
Incidentally, one has to marvel at how the Dow people included Goldman and Visa in the Dow "INDUSTRIALS". My suggestion is that they just scrap the entire term and replace it with "those stocks which go up". I am waiting for them to throw out another one of the Dow 30 and replace it with Tesla.
There is a mixed signal coming from the food sector where the grain markets have become a two-sided affair. On the one hand, the corn market finally experienced an epiphany today as it comes to terms with what looks like a record breaking corn crop. Corn prices scored a THREE YEAR LOW today. Corn is such an integral part of the protein side of our diets as it is the main feed ingredient for cattle, hogs and poultry. With falling corn prices hopefully comes cheaper meat/poultry over the longer term although near terms issues will dictate current price levels. That will tend to keep food prices a bit tamer than they would have otherwise been thus pulling away a key part of the inflation picture.
On the other hand, soybeans have been on a tear of late as the recent bout of hot/dry weather over large parts of the Midwest have turned what at one time looked like a record breaking crop into a much lower than originally expected national yield. This will impact poultry producers and hog producers to a certain extent but not nearly as much as corn will impact them in the other direction in my view.
All in all, I do not see the same upward price pressures in the food sector looking out as I did at this time last year. It could be some of the eagerness to press gold lower is coming from this concern. For whatever the reason, the gold market is simply not attracting sufficient buying interest from Western investors to drive it higher at the current time.
About the only positive that I could see in the gold sector today was the fact that the HUI did not implode even though it remains lower as I type these comments.
The yield on the Ten Year remains just shy of the 3% level having backed off from that key point this week. Still, when one considers that at the first of May the yield was 1.6%, that is rather stunning for the degree of increase in less than 5 months. After all, it has almost doubled!
As far as the gold chart goes - it is the same from yesterday except the price is lower. Gold is perched quite precariously right at a chart support level, which if it does not hold, will allow the market to fall through psychological support at the $1300 level. It barely held on today moving to within less than $5 before rebounding somewhat. It is trying to hold here in the afternoon which is constructive but I need to see this market push back above $1330 before I would be a bit more comfortable or optimistic about it.
The thing that gets my attention is the fact that the ADX line is continuing to rise as the price moves lower. This is indicative of a market that is entering a trending phase but as I stated yesterday, I generally like to see the ADX ABOVE the 20 level to confirm that. The indicator does however show the bears currently in control of the market with the market unable to stay above the 50 day moving average as it did yesterday. The prognosis near term is for further weakness unless the bulls can come out swinging Sunday evening and force some sort of abrupt turnaround.
This is why I have been trying to publicly rebut that nonsense out there that gold is in backwardation and is therefore wildly bullish. Guess what? The market action tells me that it could care less about that sort of claptrap. You will get some who should recant this stuff but instead they will blame it on the nefarious bullion banks instead.
Also, while JP Morgan was the big buyer/stopper during last month's gold delivery process, this month they have been issuers/sellers out of their House account, albeit not to the same extent that they were buying last month.
Look, I agree that the feds have a vested interest in keeping the gold price under wraps as it competes directly with the US Dollar but we have a proven track record of the Commitment of Traders for over 12 years now detailing that the nasty bullion banks are always selling DURING UP MOVES... if they do anything while price is breaking lower, they are covering shorts or buying. The current wave of selling that has been occurring in the gold market this week is largely due to hedge funds, not the bullion banks.
We will get this week's report later on today and I can analyze it then but it should be noted that it will not include the price action from Wednesday through today and I can tell you fairly confidently that it was not bullion bank selling that took the market down through $1360 - $1350 and again through $1320. It was hedge funds... what the bullion banks were doing was selling up near $1400 as the remaining vestiges of hedge fund shorts who were exiting were buying. They provide the cap and then let the hedge fund computers take over but they DO NOT CHASE PRICE LOWER. PERIOD!
Arguing against the price action is a fool's errand and is the last refuge for those who are wrong and cannot admit it. As I have said many times, there is nothing to be ashamed at when one is wrong about a market's direction. We all have been there ( I surely have many times) as we are all mere mortals and are not omniscient (there is only one Being that is). The key is to quickly admit that the market does not agree with you and take corrective action if you are a trader so as to avoid suffering serious losses. Doggedly refusing to acknowledge the obvious however is a recipe for disaster especially in the futures markets where the extreme leverage can inflict such carnage in such a short period of time.
What I am taking away from the recent price action is that gold is back to experiencing "Tapering" jitters. Hedge funds apparently are more and more losing their concerns about the degree or extent of any Fed tapering and thus are becoming emboldened to play gold from the short side as there is yet no solid evidence of widespread inflation issues. Just today Goldman came out with a recommendation for investors to use any bouts of weakness in the equity markets to accumulate stocks as they see a "dovish" tapering of only $10 billion per month if the Fed moves in that direction.
While that may be good for stocks in Goldman's view, apparently gold is getting increasingly nervous about it.
Incidentally, one has to marvel at how the Dow people included Goldman and Visa in the Dow "INDUSTRIALS". My suggestion is that they just scrap the entire term and replace it with "those stocks which go up". I am waiting for them to throw out another one of the Dow 30 and replace it with Tesla.
There is a mixed signal coming from the food sector where the grain markets have become a two-sided affair. On the one hand, the corn market finally experienced an epiphany today as it comes to terms with what looks like a record breaking corn crop. Corn prices scored a THREE YEAR LOW today. Corn is such an integral part of the protein side of our diets as it is the main feed ingredient for cattle, hogs and poultry. With falling corn prices hopefully comes cheaper meat/poultry over the longer term although near terms issues will dictate current price levels. That will tend to keep food prices a bit tamer than they would have otherwise been thus pulling away a key part of the inflation picture.
On the other hand, soybeans have been on a tear of late as the recent bout of hot/dry weather over large parts of the Midwest have turned what at one time looked like a record breaking crop into a much lower than originally expected national yield. This will impact poultry producers and hog producers to a certain extent but not nearly as much as corn will impact them in the other direction in my view.
All in all, I do not see the same upward price pressures in the food sector looking out as I did at this time last year. It could be some of the eagerness to press gold lower is coming from this concern. For whatever the reason, the gold market is simply not attracting sufficient buying interest from Western investors to drive it higher at the current time.
About the only positive that I could see in the gold sector today was the fact that the HUI did not implode even though it remains lower as I type these comments.
The yield on the Ten Year remains just shy of the 3% level having backed off from that key point this week. Still, when one considers that at the first of May the yield was 1.6%, that is rather stunning for the degree of increase in less than 5 months. After all, it has almost doubled!
As far as the gold chart goes - it is the same from yesterday except the price is lower. Gold is perched quite precariously right at a chart support level, which if it does not hold, will allow the market to fall through psychological support at the $1300 level. It barely held on today moving to within less than $5 before rebounding somewhat. It is trying to hold here in the afternoon which is constructive but I need to see this market push back above $1330 before I would be a bit more comfortable or optimistic about it.
The thing that gets my attention is the fact that the ADX line is continuing to rise as the price moves lower. This is indicative of a market that is entering a trending phase but as I stated yesterday, I generally like to see the ADX ABOVE the 20 level to confirm that. The indicator does however show the bears currently in control of the market with the market unable to stay above the 50 day moving average as it did yesterday. The prognosis near term is for further weakness unless the bulls can come out swinging Sunday evening and force some sort of abrupt turnaround.
Thursday, September 12, 2013
Gold gets "Whack-A-Moled"
Some of you might remember that cheapie little kids game called "Whack A Mole" in which you get a plastic hammer in order to beat the crap out of the little mole that sticks its head up through the plastic opening in the slide. Well, that is what gold reminded me of today. All it took for the metal to get "whacked" down through support was a jobless claims number. Once that hit the wires it was all downhill for the metal. And yes, it is not helping matters none that the Syria situation has turned into "Peace in our Times" as far as traders are concerned.
I mentioned in yesterday's piece that gold could drop down into the next support level near $1330 - $1325 should its support level give way. That is where it is currently sitting and truthfully, it looks like bears are growling and wanting more. If the market cannot hold above $1320, it can easily drop down to test the psychologically important $1300 level. Bulls would not want to see gold lose its "13" handle as that would be devastating psychologically, especially during a time of the year in which we generally have pretty hefty physical offtake over in Asia ahead of the festival seasons.
We simply have to wait and see what kind of response we get to the various economic data releases that are hitting the wire in order to get a better feel as to whether or not gold is going to hold support or not. The only thing I believe I can clearly say is that the bears have regained the short-term momentum in this market.
The following chart notes the ADX indicator which I like to use to judge trend strength. Notice that the ADX line has been moving lower, indicative of a LACK OF TREND. It is now rising, albeit ever so slightly while the -DMI ( Negative Directional Indicator) is also rising and is trading above the + DMI ( Positive Directional Indicator - blue line). That is very clear - the market is moving sideways to lower with bearish forces in control. I do not know how to spell it out any clearer.
The shorter term 10 day moving average has completed a downside cross of the 20 day moving average which is a negative signal. I will be the first to admit that moving averages can be useless during phases in which markets are choppy as they can generate signals which can get you whipsawed but the facts are that the hedge funds are still in love with the things and thus they cannot be ignored. The fact that the price has now dropped below all four of the moving averages noted on this chart will get the attention of their algos... My thinking is that hedge funds are in the process of rebuilding those recently lifted short positions - the ones they were covering for most of the last two months and what drove the price over $200 off the low. That is not what any bulls want to hear right now. Perhaps some news will hit the wires that demands no break or let up whatsoever in the Fed Bond Buying adventure but that is an unknown and we have to work with what we have at the current time.
The HUI fell completely apart today ( again).... it has major support near 220 - 217 which it had better hold or else....
Silver proved just how fickle it can be as it was blasted into the nether regions today. The 50 day moving average is about 50 cents or so below today's close ( $21.38).... one would expect it to encounter some buying near that level if nothing else from some short covering. If not, the charts indicate a drop into a former congestion zone from $20.25 - $19.75.
Even as I type these late afternoon comments, price for both of the metals is continuing to sink lower....the damage on the charts is significant once again with the bulls under the gun to hold the market here or face increased losses.
I mentioned in yesterday's piece that gold could drop down into the next support level near $1330 - $1325 should its support level give way. That is where it is currently sitting and truthfully, it looks like bears are growling and wanting more. If the market cannot hold above $1320, it can easily drop down to test the psychologically important $1300 level. Bulls would not want to see gold lose its "13" handle as that would be devastating psychologically, especially during a time of the year in which we generally have pretty hefty physical offtake over in Asia ahead of the festival seasons.
We simply have to wait and see what kind of response we get to the various economic data releases that are hitting the wire in order to get a better feel as to whether or not gold is going to hold support or not. The only thing I believe I can clearly say is that the bears have regained the short-term momentum in this market.
The following chart notes the ADX indicator which I like to use to judge trend strength. Notice that the ADX line has been moving lower, indicative of a LACK OF TREND. It is now rising, albeit ever so slightly while the -DMI ( Negative Directional Indicator) is also rising and is trading above the + DMI ( Positive Directional Indicator - blue line). That is very clear - the market is moving sideways to lower with bearish forces in control. I do not know how to spell it out any clearer.
The shorter term 10 day moving average has completed a downside cross of the 20 day moving average which is a negative signal. I will be the first to admit that moving averages can be useless during phases in which markets are choppy as they can generate signals which can get you whipsawed but the facts are that the hedge funds are still in love with the things and thus they cannot be ignored. The fact that the price has now dropped below all four of the moving averages noted on this chart will get the attention of their algos... My thinking is that hedge funds are in the process of rebuilding those recently lifted short positions - the ones they were covering for most of the last two months and what drove the price over $200 off the low. That is not what any bulls want to hear right now. Perhaps some news will hit the wires that demands no break or let up whatsoever in the Fed Bond Buying adventure but that is an unknown and we have to work with what we have at the current time.
The HUI fell completely apart today ( again).... it has major support near 220 - 217 which it had better hold or else....
Silver proved just how fickle it can be as it was blasted into the nether regions today. The 50 day moving average is about 50 cents or so below today's close ( $21.38).... one would expect it to encounter some buying near that level if nothing else from some short covering. If not, the charts indicate a drop into a former congestion zone from $20.25 - $19.75.
Even as I type these late afternoon comments, price for both of the metals is continuing to sink lower....the damage on the charts is significant once again with the bulls under the gun to hold the market here or face increased losses.
Wednesday, September 11, 2013
Gold looks hesitant
By now it should be obvious that any Syrian premium that was in the gold market has now been effectively rung out. Price gains due to geopolitical events tend to be quite fleeting unless the events escalate which in this case they did not. As far as the market is now concerned, Syria is off the map and most traders realize nothing is going to happen over there to change the status quo in the least bit.
That means other drivers for gold are now coming back into focus. While the US dollar is weaker today, it is not helping gold much with the exception of perhaps allowing it to remain above an important level of chart support. From my perspective, the markets looks "heavy".
I keep coming back to the same thing I have been focusing on for the last couple of weeks now - namely - the recent gains in gold have come mainly from hedge fund short covering as their short positions had become rather large from an historical perspective. Now that they have covered a large number of those shorts ( bought them back) there is simply no additional source of buying on a large enough scale to take the market through important overhead chart resistance levels. Large speculators do not have any technical reasons to chase the price of the metal higher and thus they are NOT ENTERING this market in large numbers. Without thrust to counteract the pull of gravity, markets will tend to follow the path of least resistance and that is lower. It will take some sort of economic data news release to trigger any strong, concerted, and more importantly, SUSTAINED NEW BUYING.
As you can see from the price chart, gold is perched right on top of an important chart support level that extends from $1360 - $1355 or so. Bears are gunning to break it down through this region for they realize, if they do, that price will fall rather rapidly to $1325 - $1320. For the bulls to get anything going beyond this boring, nothing-to-the-upside aspect, they will need to clear $1380 at a bare minimum but more importantly, recapture that "14" handle.
The fact that the mining shares seem rather comatose right now is not aiding the cause of the metal. Also, it does not help gold to see interest rates rising here in the US especially since most investors believe that inflation is a non-existent threat for the time being.
The one thing gold has going for it right now is that it is into a period in which it normally is strong from a seasonal perspective. That brings us to same factors which have always been supportive, namely far-Eastern buying of the metal. The question is the same however as it has been for some time now - can the physical market demand for the metal be enough to support a market which is lacking any serious investment demand from the West? The answer to that question is also the same - Yes, the physical market demand can put a floor of support under the gold price but it is important to understand that this demand, while it can be most impressive, is insufficient to generate a sustained bullish uptrend. That will not happen unless western based investors decide to chase the price higher, something which they are not currently doing.
One more thing - at the risk of beating a dead horse - you will note that for all this erroneous talk of "backwardation", the gold price simply cannot make much headway to the upside.
That means other drivers for gold are now coming back into focus. While the US dollar is weaker today, it is not helping gold much with the exception of perhaps allowing it to remain above an important level of chart support. From my perspective, the markets looks "heavy".
I keep coming back to the same thing I have been focusing on for the last couple of weeks now - namely - the recent gains in gold have come mainly from hedge fund short covering as their short positions had become rather large from an historical perspective. Now that they have covered a large number of those shorts ( bought them back) there is simply no additional source of buying on a large enough scale to take the market through important overhead chart resistance levels. Large speculators do not have any technical reasons to chase the price of the metal higher and thus they are NOT ENTERING this market in large numbers. Without thrust to counteract the pull of gravity, markets will tend to follow the path of least resistance and that is lower. It will take some sort of economic data news release to trigger any strong, concerted, and more importantly, SUSTAINED NEW BUYING.
As you can see from the price chart, gold is perched right on top of an important chart support level that extends from $1360 - $1355 or so. Bears are gunning to break it down through this region for they realize, if they do, that price will fall rather rapidly to $1325 - $1320. For the bulls to get anything going beyond this boring, nothing-to-the-upside aspect, they will need to clear $1380 at a bare minimum but more importantly, recapture that "14" handle.
The fact that the mining shares seem rather comatose right now is not aiding the cause of the metal. Also, it does not help gold to see interest rates rising here in the US especially since most investors believe that inflation is a non-existent threat for the time being.
The one thing gold has going for it right now is that it is into a period in which it normally is strong from a seasonal perspective. That brings us to same factors which have always been supportive, namely far-Eastern buying of the metal. The question is the same however as it has been for some time now - can the physical market demand for the metal be enough to support a market which is lacking any serious investment demand from the West? The answer to that question is also the same - Yes, the physical market demand can put a floor of support under the gold price but it is important to understand that this demand, while it can be most impressive, is insufficient to generate a sustained bullish uptrend. That will not happen unless western based investors decide to chase the price higher, something which they are not currently doing.
One more thing - at the risk of beating a dead horse - you will note that for all this erroneous talk of "backwardation", the gold price simply cannot make much headway to the upside.
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