12 Hour Gold Chart

Gold failed to extend past the psychological level of $1,800 and is now moving lower towards the first level of chart support just above $1750 and extending down towards $1725 - $1720.

It was to be expected such a large rally in the US Dollar during today's session (Wednesday) would provide some strong headwinds to any move higher in gold. That and the fact that the CCI was hammered lower today as anything remotely resembling a risk trade was yanked off.

This evening, gold is moving lower as there is follow through selling across both the base metals and the precious metals with only slight weakness being seen in the Dollar. Clearly traders are concerned about the woes in Europe.

As long as any setback in gold holds ABOVE $1680, the pattern that will develop is more consistent with a market taking a breather. A drop below this level, that cannot recover it within the same session, will forebode a drop back towards $1640 - $1625.

HUI holding in relation to the S&P 500

Traders/investors looking to take a defensive posture in the equity markets continue to see the mining sector as a place in which to find some temporary shelter. While the HUI is getting pulled lower today alongside the entirety of the US equity markets, the sector is holding in relation to the broader market.

A good trade has been to spread the miners against the S&P, a trade which I mentioned here some time ago would be a winner for the hedge funds instead of the shortsighted spread trade involving the bullion markets and the mining shares. The hedgies were able to play that trade and profit from it for a while but they overstayed their time with it as investors began warming to the solid profits being generated by many of the mining companies. It also did not hurt the bullish cause to see some of the gold miners increasing their dividend payout.

For a look at the HUI in isolation, you can see that the index has filled the former gap region but failed to rally through the top of that gap and hold above that level. It should find some additional buying support back down at the bottom of this same gap near the 570 level if the dip buyers are going to still feel comfortable committing capital to the sector in the midst of this instability in Europe.

Silver whacked along with Copper as Risk trades are taken back off (AGAIN)

Rollercoaster is too tame of a word to describe the kind of insanity being created in our financial markets by the computer algorithms. Yesterday it was "everyone in; the water's fine". Today is, "Get the hell out; a great white is coming at you".

Tomorrow, it will probably be time for a nice yacht cruise again. Who knows and at this point, why even bother attempting to figure it out.

First the focus was all on Greece. Now it has shifted to Italy. Next it will probably be Spain and if we get to that, it will be the survival of the entire European Monetary Union that will be called into doubt. At some point, if things keep heading in the same direction, with one fire after another popping up, nationalistic tendencies will doom the Euro as nations begin opting out. Either way, history is being made.

The impact of this mess (at least for today) is that Copper and Silver were both spanked as traders are looking for a contagion effect that would slow overall global economic growth. Copper is currently down 3.5% with silver being 2.9% lower.

Gold is getting caught in a tug of war between the commodity index related selling due to risk trade reversals and its role as a safe haven. It is currently trading down but not by all that much considering the carnage occuring in the US equity markets. It is hovering between $1780 and $1790 as I write this.

Interestingly enough, gold IN EURO TERMS, is actually higher today which underscores the fact that the yellow metal is indeed serving as a safe haven. It is currently trading near 1320, a mere 50 euros or so off of its recent all time high.

CME working to release transferred MF Global accounts for trading

For the sake of those who read this site and whose accounts were impacted by the mess at MF Global, here is the latest news from the CME Group. The advisory was issued this morning.

News Release Issued: November 9, 2011 12:50 PM EST

CME Group Provides Update on Customer Account Verification Process in Conjunction With Bulk Transfers of MF Global Accounts

CHICAGO, Nov. 9, 2011 /PRNewswire/ -- CME Group today provided an update regarding the process it announced November 4, 2011 to verify customer collateral transferred to receiving firms through the MF Global bulk transfer process, as authorized by the Trustee.

CME Group is committed to ensuring that all customers are treated fairly as CME Clearing works with the Trustee, is making substantial progress on verifications and continues to receive information from the 12 receiving clearing firms and other Derivatives Clearing Organizations (DCOs) to facilitate this process. However, due to the massive undertaking of processing data to verify 15,000 accounts for CME Clearing, ICE Clear US, The Clearing Corporation, KCBOT Clearing Corp., MGEX, NYSE Liffe US and The Options Clearing Corporation, as well as the unique circumstances of the MF Global bulk transfer process, the validation of each account's collateral balance is taking longer than originally anticipated.

CME Group recognizes the urgency of the situation and is working to complete this process as soon as possible. The company expects that those customer accounts including only futures positions will be verified, and holds will be removed on a rolling basis beginning this morning, November 9. Following the completion of futures-only account verifications, the company will work to complete the process and remove any remaining holds on accounts involving options positions throughout the remainder of this week.

CME Group is using a number of channels to communicate with customers as soon as information is available and will continue to provide updates throughout the process through its clearing members and on its website for this matter, www.cmegroup.com/mfglobal.

 Further information about CME Group (NASDAQ: CME) and its products can be found at http://www.cmegroup.com/.
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The Berlusconi Bash

Maybe that is a bit of an overexaggeration but it was the news that Italian Prime Minister Berlusconi was stepping down, resigning his position leading up the government, that sent the equity markets into an upside tizzy as giddy bulls threw caution to the wind and jumped out of anything resembling a safe haven and back into stocks.

Down went the US long bond, a full point and a half, and down went gold after it had pushed solidly above the psychological resistance level of $1800. Even the mining shares had been moving higher adding onto yesterday's gains before they too gave way under the selling pressure unleashed into gold.

Silver actually was functioning a bit more like a safe haven earlier in the session, drawing buying on off the stronger gold price before it moved lower when gold broke down and could not hold onto its gains. However, the return of speculative inflows  (RISK ON) into copper and many other commodity markets underpinned silver and it clawed its way higher pushing back towards the $35 level.

The Dollar also moved lower as traders jettisoned the greenback for the "undervalued" Euro.

We could just as easily see every bit of this completely reverse before the week ends if these same traders start thinking about the structural difficulties standing in the path of dealing with the Eurozones financial problems. For today, they seemed to think that with Berlusconi out of the picture, a new government would perhaps be more receptive to implementing the "austerity" measures required under the plans by those who hobbled this European care package together. That was interpretted (Beauty is definitely in the eye of the beholder) as meaning the party is going to get going once again as the liquidity spighot opens up.

We'll see how long this sentiment indeed lasts. Suffice it for now, the gold bulls were clawed and bitten some by the bears as a result of this news. The shorter-term oriented bulls quickly sold out and cashed in some of their winnings with a fairly good amount of volume being down up near and just above the $1800 level. Clearly some fresh shorts were put in place today with some attempting to pick a top hoping that the fresh news will provide them with some downside momentum.

Euro Gold within 70 euros of its all time high

Gold when priced in terms of the Euro is showing great strength continuing to track higher ever since it found buying support at the 61.8% Fibonacci Retracement level shown on the chart.

It has now managed to push through the last Fibonacci level of note and based on the norm for most TA, it should now make a push back to retest the recent all time high, which is a mere 70 Euros above its current levels.

It is very evident, that many European investors and average citizens are very far from being comfortable with the so-called "solution" that has been hobbled together by the European monetary and political leaders to handle the fallout from the sovereign debt woes currently besetting the EU.

Gold pushes to $1800

Gold is putting in a very strong showing in today's session as it appears a large influx of new speculative money has found its way into this market. Investors are moving back into both gold and Treasuries as safe havens with gold being the favorite of the two - a nice development to say the least.

Buttressing gold's fortunes us a good showing by silver and a particularly good showing in the mining shares which are surging.

The $1800 level is a psychological resistance level because of the handle change from "17" to "18". If it can clear this level and keep oscillating above it, funds will come in and push it to the $1820 - $1825 level which is the next resistance zone on the chart.

Support should show up on any potential dip to $1755 - $1750 with very strong support now arising closer to $1720.

Note that this very strong move higher in gold is occuring with a backdrop of the US Dollar being relatively unchanged. That means gold is moving higher in terms of most all of the major foreign currencies - a sure sign that the metal is catching its bid as a SAFE HAVEN.

I want to emphasize this because we are repeatedly told by those who should know better that gold has failed as a safe haven. They say this because they do not understand the SHORT TERM effect of money flows in today's financial markets and how interwoven overall commodity market performance is to hedge fund computer algorithms.

Gold gets sold initially during such times of general risk aversion because it is part of the basket of commodities that comprise every single commodity sector index out there. Those indices include the CCI (Continuous Commodity Index), the CRB (Commodity Research Bureau) index, the Dow Jones/AIG Commodity Index or even the Goldman Sachs Commodity Index (GSCI).  Computers do not think - they just do whatever they are programmed to do and selling commodities across the board is programmed into these algorithms when certain pre-defined conditions occur. It takes independent thought and analysis, combined with DISCRETIONARY trading, and not system trading, to counteract some of this mindless buying or selling. Only when there is sufficient Discretionary trading taking place, can enough money flows arise to stem some of the effects from these computers.

That means we need buying in the physical gold market that looks for value to counter the hedge funds. That has been the pattern in the gold market for more than a decade now. Those who keep pronouncing such foolishness such as "gold is a poor safe haven", in order to say something designed to get themselves maximum exposure in the US financial press because of its shock value would be well advised to adopt a longer term view and broader their narrow perspective. They are wrong and could not be more ignorant.

Once the value-based buyers absorb the computer generated hedge fund selling, then the technical factors begin to improve for gold as its chart pattern improves and back in come the same hedge funds, this time on the buy side. That is what is happening today once again.

HUI continues its strong showing

Mining shares are getting a very strong bid in today's session taking the HUI up sharply through the 600 level, a psychological resistance level. As you can see on the chart, the index is moving ever closer to the top of the recent chart gap created last month when the shares were sold off during a downdraft in both the gold and silver bullion markets. I would expect the perma bears in the shares to try to make an effort to hold the index BELOW this resistance level. If they fail, I believe there will be enough momentum in the sector to mount a move back to the recent all time high.

Downside support is back at the bottom of the gap and is noted.

Note how the miners are continuing to outperform the broader equity markets today as they have done so over the last month.

Also note the much longer term monthly ratio chart I have constructed showing the performance of this sector against the broader US equity market over the last decade+.