"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


Tuesday, January 31, 2012

Monthly Gold Charts - January 2012

Gold knocking on the door of resistance at $1750

One thing in particular that really stands out to me in today's trading session is the resilience of the gold market even as the safe haven trades were being put back on by a decent sized contingent of traders. The Euro got knocked down about 50 points and the US Dollar saw a pop higher as traders were expressing signs of nervousness over both Greece and now Portugal. Additionally, the long bond rallied up nearly a full point and is once again at the top end of a trading range that is now three months in duration.

This combined with the fact that Euro Gold is extremely strong tells us that gold is attracting a fairly large amount of safe haven flows itself and is not being impacted all that much by the risk aversion trades which hit silver, copper and platinum today. If this sort of thing keeps up, it will make it much more difficult for the bears to prevent $1750 from being breached.

A strong upside breach of $1750 should clear the way for a run at $1775 - $1780 which will also be heavily contested by our pals at the bullion banks. Downside support should emerge first near $1720 and then lower at $1705 should buyers decide to sit on their heels a bit.

The yield on the Ten Year note CLOSED at an all time LOW. The yield has moved lower but has never CLOSED for the month below 1.80% before. It is evident that the FOMC news from last week continues to have a profound impact on these markets. Inflation is not the primary concern of bond traders at this point.

Silver has run into a bit of difficulty clearing the $34 level as it has hit this level or near there for the last three trading sessions but has been unable to decisively push through. It will take a lessening of concerns associated with European sovereign debt for silver to run through this barricade and try for $35.

What is Euro Gold telling us?

Gold priced in terms of the Euro continues to be most impressive on the chart as it creeps ever closer to its all time high. This move upwards is a visual telegraph that there remains deep-seated concerns over the European sovereign debt situation, especially on the Continent itself, in spite of the recent euphoria over "free money" for the next two years.

While the Fed has given the markets, and in particular, the wild-eyed hedge fund community, the green light to buy "risk assets", there is an underlying current of palpable worry which remains in our global markets. Short-term oriented players are betting that they are faster than the next guy and can exit any risk trades if something goes wrong. Longer term players are more cautious but also do not want to be sitting on the sidelines missing potential profits. Expect some wild swings in price even on an intraday basis as we move forward. "Conviction" is not something that we will see much of.