"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


Friday, March 8, 2013

Gold in some Foreign Currency Terms

By request...

The spike lower in EuroGold below 1200 seems to have been a relatively short-lived phenomenon, for now. You will note that in terms of the Euro, gold has been in a steady downtrend since October of last year with the trend more defined since November.

This is a possibility that it has broken this downtrend but one day does not a new trend make. We need to see CONFIRMATION. For a bare minimum, I would need to see Eurogold trade through the 1240 level and maintain its footing ABOVE that level. I would feel extremely confident that a near term bottom is in if price could climb past 1250.

Sterling gold is displaying a wedging pattern and has not performed as poorly as EuroGold of late. This is due to the extreme weakness in the British Pound which has has trouble lately on the crosses as further weakness displays itself in the British economy. The BOE is engaged in its own bond buying program and there is chatter that it may not be sufficient to lift the economy out of its doldrums over there.

You might notice that Sterling gold does not remain below the 1000 level for any length of time. It is very similar in that sense to Euro Gold and I might add, to US Dollar priced gold in reference to the $1570 - $1560 level.

I would need to see Sterling Gold above 1110 - 1120 to feel that it is going to challenge its all time high near 1180.

Lastly, Yen Gold - what more need be said - it is on a strong tear higher as the Yen has been the whipping boy of the crosses. The new Japanese government is determined to stave off the deflationary funk that has gripped its economy for decades and to that end, is going to create boatloads of yen if necessary. The currency is devaluing against nearly every single currency out there, not to mention gold. I would look for the all time high in this "cross" to be taken out by summer.

Gold Chart plus Comments

I am pressed for time right now but wanted to get some charting out there for the readers. I apologize for the lack of "stuff" this week but a trader's life can be busy at times.

As those who have been regular readers of this site know quite well by now, I have been very cautious in regards to gold for some time now. When a market continues to violate one chart support level after another, it is never a bullish sign, no matter what all the self-proclaimed experts are pontificating whether it be some backwardation nonsense chatter or "bullish COT" reports.

I have said it before and will say it again, speculators, particularly the large ones, aka, hedge funds, are what drive markets nowadays. When they are selling, it is never bullish. The only time it is bullish is when they are loading up on the short side and a market is not breaking down through support levels.

We might have just reached that point. I want to emphasize, "might" because I need some further confirmation from the price action. What I am seeing however is a market that keeps entering a zone that I have marked, "STRONG BUYING ZONE" and every time that it does, it does not stay in that zone for more than three hours time.

Note the following 60 minute chart and you can see that the moves lower into this zone generate high volume buying in which price tends to spike off of the worst levels rather than closing each bar down on the lows. That is an indication of heavy buying by some very strong hands.

We have had three occasions now since the first of this month that this level has held rock solid. it is evident that the bears have been unable thus far to break the price down through the bottom of this zone.

What I want to see to feel more confident is an upside breach of the top of this trading range that REMAINS ABOVE this level for at least 4-6 hours, preferably a day. I believe that if this occurs, we will begin to see some of these hedge funds start to cover.

If gold can get back above $1600, it will suggest that a bottom is in. The flip side is of course if this support level gives way. Let's hope it does not.

One last thing, gold was VERY FIRM today in terms of nearly EVERY SINGLE MAJOR CURRENCY. Whether it was Yen gold, Euro gold, Sterling Gold, Swissie Gold and even Aussie Gold and Loonie Gold, the metal was higher even as the US Dollar was sharply higher. That is very noteworthy. In the past I have spoken to the idea that if gold is moving higher in terms of most of the other major currencies besides the Dollar, the chances of the bears breaking it down sharply in US Dollar terms is greatly diminished. The opposite of course holds true; if the metal is higher in US Dollar terms only while it is moving lower in terms of these other majors, the rally is not going to last much longer.

What today's move is signaling is that gold is trading as a currency again and not so much as a Dollar related issue. Again, I would like to see additional confirmation of this besides just in the Yen (Yen Gold is on a tear higher). It is still a fact that regardless of talk about early cessation of the QE3 and QE4 programs, many of the Western Central Banks, and I am including Japan here in that sense, are employing their own versions of QE or have adopted monetary easing policies. While speculators are busy being enamoured of stocks, it is not being lost on gold as to what these Central Bankers are all doing to their currencies. Never in the history of mankind has so much paper currency been created simultaneously. It is a wonder that we are already not using the stuff to heat our houses instead of wood!

Let's see what next week brings us. At least the HUI has stopped going down for now!