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Gold is currently is in a consolidation phase with a higher bias. The broad range that is containing it is $1435 on the topside and $1390 on the bottom.
It has moved from the bottom of the range to the top and is now at a point where it either needs to clear $1435 and press on towards $1445 or it will set back towards $1420. While it has pushed through what I consider to be an important technical resistance level, namely $1430, it cannot seem to hold its gain above this level for any length of time. This suggests that the bulls are hesitating to take on the selling cap at $1430 thrown in place by the bullion banks.
If you note, both the Percent R and the Stochastic Indicator, trading range indicators, are now either at their sell zones or are moving down and away from that zone. Bulls need to quickly push this market higher or they run the risk that some of their more fickle comrades will liquidate longs and wait for a lower level to re-enter on the long side again. A fast, strong push through $1435 will negate the negative signals from Percent R and Stochastics.
Should price move down away from today's resistance zone and find buying near $1420, we could see the range in gold tighten considerably.
Silver kept to its recent pattern of moving higher after the close of pit session trading adding another 10 -15 cents in the after hours trading but was unable to breach $36.50, the last line of defense being erected by the shorts to prevent a surge above $37.
Volume to the upside has been pretty good but not strong enough to dislodge the shorts from behind this castle.
Upside momentum is waning on this time frame chart as it is reflecting the inability of the bulls to breach $36.50. The Percent R, which is an indicator that is useful to gauge oversold and overbought zones for markets which are range trading or consolidating, which is what silver is currently doing, is now at the sell zone. That puts the burden upon the bulls to press through the sell side barrier and kick the market into a trending phase higher or some of the weaker longs will decide to book some profits and wait for another pullback before coming back in again.
If that should occur, we will want to see how the market handles any setback towards $36. If it can hold that level, it will embolden the longs to move back in very quickly and force some of the weaker shorts back out. If that level fails, there is support on the downside first near $35.50 and then near $35.
There were no reported deliveries for silver scheduled tomorrow according to exchange data released this morning. There are still 875 contracts open in the March contract, a drop of 23 compared to yesterday. We are running out of days in the month of March so it will be interesting to see how this plays out.
The March contract still remains at a very slight discount to the active May (about half a cent) with the May at a 1.5 cent discount to the July. The structure of the front three silver contracts is one of a slight contango. It does not appear that a squeeze of the March is going to occur. Silver seems to be doing fine without it anyway.
The longer silver remains above the $36 mark, the better the chance of it breaking into another leg higher. It has one line that I can see standing between it and just that, namely $36.50.
The HUI weakness, (thanks to the hedge funds and their spread trades), is weighing a bit on gold and taking some of the pressure off of the silver bears at the Comex. Any move higher by the HUI above 550 will embolden the bulls to try to take out $36.50.
Silver has been in a pattern of late which sees it GAIN strength after the close of pit session trading. Let's see if that pattern holds true today.
The session is still young but the silver bulls finally appeared to have beaten back the defenders at $36 on good volume. Bears are attempting to stymie the move higher by digging in near $36.50. When the market dipped earlier and fell below $36, the selling dried up and the shorts were forced to cover.
That has emboldened the longs who are pushing and attempting to now take out the last refuge of the shorts here. A strong push through $36.50 sets the market up for a run towards $40 with initial resistance standing near $37.20 - $37.30.
If the market is going to break out it needs to hold $36 on any possible setback in price now that it has cleared that level.
The Broad Dollar index is a much wider or "broader" representation of the plight of the US Dollar on the global markets as the basket from which the index is created is more representative of the globe than the smaller basket of currencies that comprise the USDX.
Even at that, it still shows a very similiar pattern to the USDX and is also now technically within striking distance of its 2008 low having broken downside support near 97.
It is highly unlikely that gold will not make a new lifetime high if this support level near 95 fails. I can easily see it above $1500 were this to occur.
I also believe that the US Dollar is at levels that are now necessitating it to be watched very closely by the US monetary authorities. In much the same manner as the Yen went flying to the upside, so too the Dollar could go crashing to the downside if the speculators decide to sit on it in earnest. While the Fed and the US officials WANT a lower Dollar, they do not want a Dollar crash. Sometimes it is easier to talk about such things than to actually accomplish it.
Should the Dollar carry trade increase in intensity, every hedge fund on the planet would be arrayed against the G7. That would be weird to say the least as the G7 monetary officials do not want the Yen any higher yet if they are not careful they may end up pushing the Dollar past the point of no return. What an awful stinking mess!
As has been the pattern over the last view trading sessions, the US Dollar has become the whipping boy for the global forex trading crowd.
Today is was strength in the Euro which sent it lower. Talk is picking up that the next move in regards to interest rates by the ECB will be to raise them. That contrasts sharply with the situation around the US Dollar where rates will remain low for the immediate future.
Given this fact, it is difficult to make a case for the Dollar right now as it moves ever closer to a long term inflection point on the charts. It is sitting only a mere 40-45 points from this support level with the RSI not yet in oversold territory. That alone is rather foreboding.
Each blip higher in the Dollar has kept the RSI in a defined downtrend as indicated by the inability to break the downtrend line shown on that indicator.
Simply put, there is currently no strength in the Dollar. Keep in mind this is taking place against a backdrop where the Yen is being kept weak. Imagine where the Dollar would be had not the G7 intervention taken place?
I also happen to believe that is one of the reasons that made it easy for the G7 to agree to a round of coordinated intervention. It might have also been to help the Dollar also! Had the Yen not been taken down, the Dollar would have crashed through a major support level.
