Early in today's session ECB President Draghi threw the Euro bulls a nice bone to chew on and with that, it was off to the races for that currency with the US Dollar and the Japanese Yen both getting ceremonially dumped.
If that was not enough for the US Dollar, one of the Fed governors, Mr. Dudley, made his way to the microphones to state that the "Fed has a long time before raising short term rates". STRIKE TWO for the DOLLAR.
STRIKE THREE seemed to come in the form of ????. Perhaps it was Dudley's comment about the tapering being data dependent ( recent data has not exactly been resplendent). He did go on to say however that the threshold to change the tapering plans would be "pretty high".
Either way, today was one of those days in which certain commodity sectors were seeing big inflows of hot money. Soybeans continue charging higher with corn getting in on the action. Already there is chatter that the planting season here in the US is going to be delayed on account of the abnormally cold weather ( where is that damned global warming when we really need it?).
Gold garnered support from the surging Euro but was also aided by the vote out of the Crimean Parliament which wants to put to a vote the idea of breaking away from Ukraine and becoming a part of the Russian sphere. Some are viewing this as an escalation in the drama over there and that of course brings a bid into gold.
Like I said the other day, if you have the uncontrollable urge to actually trade the yellow metal at the Comex either lock yourself in vault somewhere away from a computer screen or at least trade small in size. This market is very fickle right now. Just be careful and do not get reckless or listen to all the hype currently coming out of certain segments of the gold community.
I put far more credit on what is happening to the Euro and the Dollar than I do to the ridiculous talk of a nuclear war. If the Euro can clear a strong overhead resistance zone near the 1.39 level while the Dollar CANNOT hold support between 79.50 - 79.00 on the USDX, gold should be able to breach overhead chart resistance near the $1,360 zone. It would have to best $1,375 but if it does, should be able to set up at least a test of psychological resistance at the $1,400 level.
Dip buying has continued to occur in gold with the situation in Ukraine keeping bears nervous but in my mind, the big driver has been the weakness in the Dollar and the continued move higher across certain key commodity markets. Strangely - and I have yet to make any sense out of this - Copper continues to go absolutely NO WHERE. It baffles me to no end to see this key industrial commodity NOT LEADING the sector. Either copper is going to have to make a sudden move higher or I am concerned that we are going to see some big retracements in the commodity sector at some point. There is a lot of hot money flooding into the sector but a great deal of it is purely technical in nature as momentum funds are buying. The problem is that unless there is a strong fundamental underpinning to some of this, once the upside momentum plays itself out, prices could get hit hard as the longs bail out.
The key, at least in my mind, will be whether or not the US Dollar can find its friends again. That is going to take some strong economic data soon. Perhaps it will be a payrolls number but one thing is for sure, the more traders are convinced that the Fed is not going to move on the short term interest rate front any time soon, the more the gigantic specs are going to play their carry trade and shove certain commodity sectors higher.
More later if time permits.... busy, busy week....
"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
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Thursday, March 6, 2014
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