"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


Thursday, May 9, 2013

US Dollar Surge through 100 Yen Derails Gold

This afternoon, the long awaited movement by the US Dollar through PAR with the Japanese Yen finally occurred. As it did, the entire Forex machine was thrown into convulsions with the US Dollar moving sharply higher against most of the majors. Thus far it has gained almost 2% against the Yen, 1% against the Euro; 1.4% against the Swissie, and nearly .85% against the Aussie. The British Pound and Canadian Dollar are also both moving lower against the Greenback although not to the same extent being witnessed in the other majors.

Gold was weaker throughout most of the session failing to extend on yesterday's late session gains but when the Dollar broke through par against the Yen, sellers came out of everywhere to sit on gold.

Silver and copper both moved lower as well with silver once again failing at $24.

Moving over to the gold chart - I want to continue to emphasize the falling volume in this chart. Speculative fever simply does not exist right now judging by the lackluster volume. Rallies are not generation any enthusiasm which is what one wants to see if the momentum is shifting in favor of the bulls.

Chart resistance beginning near $1470 and extending towards $1485 is confirmed by today's action. Support down near $1440 might be tested overnight depending on the attitude of Asian buyers towards the metal. If they believe that additional downside is possible, they will pull back on their bids and wait for prices to drop lower before swooping in to buy. Remember, physical market demand is what is keeping the gold market supported; if that falters for any reason, speculators will be eager to sell it especially with stocks moving higher. Today, the Dow pushed through 15,100 for a while before a bout of profit taking set in. Specs love equities right now (except for gold and silver miners it seems) and continue to chase prices higher there while jettisoning gold.

I am going to be watching the entirety of the commodity complex quite closely the next few days since the Dollar looks like it wants to now move higher across the board. If so that will more than likely continue to feed into the current spec trade of dumping commodities in favor of equities. With the Aussie weakening further today and having fallen down through its chart support level near 101, commodities could be coming in for a rough ride once again. We are going to want to see how it closes out the week tomorrow.

Were it not for gains in the Grains and in Coffee and Unleaded Gasoline, the commodity complex would have been lower based on the GSCI.

Time precludes me from putting up a chart of the US Dollar right now but it has a chance of testing 83 tomorrow. If it can put in a solid gain above that level, odds favor it making a run to 84. We need to keep in mind that while the link between the US Dollar and gold has weakened somewhat in recent times, there still exists a connection that cannot or should not be ignored.


  1. Hilarious.

    The markets are now so hypersensitive to news these days,

    All it takes is one simple tweet from Jon Hilsenrath about QE ending in order to cause an instant cascade in GLD equal to 2 months worth of mine production within seconds.

    Imagine what would happen if Bernanke started tweeting or if he dropped hints of QE ending, then you would see 3 years of annual mine production instantaneously swamp the COMEX in a flurry of "sell at market" order tickets.

    This is why Bernanke is now the greatest of all time, because he has the market conditioned to react to any news items, so he can quash inflation in an instant, spook the stock shorts, an support the Almighty dollar in the midst of even greater deficit spending.

    When you think about it, he's made Central Banking so easy!

    1. "Rallies are not generation any enthusiasm which is what one wants to see if the momentum is shifting in favor of the bulls."

      Is this what Dan meant to say?

    2. I am building an "IDOL" a replica of the magnifigant Ben himself.


  2. Don Baja, Yes. Dan Norcini meant to say "Rallies are not GENERATING any enthusiasm [read "volume"]. Therefore we see that momentum has not shifted in favor of the bulls.

  3. you write a good cold blooded letter; the only suggestion i have is that you discontinue writing for the morons at kwn; besides yourself and zulauf and faber, i wonder what kind of sandwiches the permabulls are eating this week and whether they are asking for mustard or mayonaisse; the only sector to hold out is grains and beans and I have a sneaking hunch that tomorrow will bring them all back to reality, as it is becoming very obvious that the china story is R.I.P. Bye bye bye commods and soon stks and bondolas

  4. Every time a pleasure to read your posts. Thanks for the updates.
    Yup, let's keep an eye on the dollar index.

    On a weekly basis, fibo, fibo, fibo again, blocked by the 1487 $ fibo level of the 750-1950 move upwards.
    If we get through it, why not target 1570-1580, mlh sup of the andrew's fork, ma20? Seems possible to me.


    But on a daily basis, Bollinger Bands are closing to each other, which imho would rather advocate for a longer period of low volatility, squeeze / range like, between 1385 and 1487.

  5. New highs today in Disney, Harley-Davidson, Gap Stores, Priceline, etc.

    Poor Gerald Celente must be at his wits end building his bunker while the rest of the world celebrates crashing commodity prices, cheap money, and massive government handouts easily financed with infinite fiat.

    Epic breakout in the U.S. Dollar must mean that global institutional investors are in a buying panic to own U.S. stocks, Treasuries, muni-bonds, or any other paper speculations they can get their hands on.

    Business students working on their PhD's are now busily taking notes, witnessing and documenting the greatest financial miracles ever experienced:

    Parabolic rise in the Nikkei, new record highs in stocks, unlimited ability to print more cash with no inflation worries.

    Bernanke has invented a "Perpetual Motion Machine".

  6. Dan, you have written on the subject of the Yen carry trade. Is this what can explain, at least in part, the rise in stock prices? Short Yen > long $US> buy stocks? Then, coupled with the China MOPE to keep the Yen carry traders out of commodities?


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