Gold Stuck Below $1320

In looking at the following chart, it is not difficult to see that gold has run into a area of resistance near the $1320 level. Gold did a bit of a bid as some money exiting equities found a home in the yellow metal but many traders continue to use rallies as opportunities to sell out of existing long positions or establish new shorts.

Adding to the general lack of enthusiasm for gold at this time is the lackluster performance of the mining shares which continue to act as an anchor on any upward movement of the yellow metal.

Looking forward into next week, if gold is going to generate some more excitement, it is going to have to break through this week's high and convincingly clear the $1340 level. If it can do so, you will see some hedge fund short covering. If it stalls here near this level, watch for further long liquidation and some more new short selling to emerge. If the bears can change the handle from "13" back to "12", $1280 will come back into play at the lower portion of the recent trading range.

In looking over this week's Commitment of Traders report, we saw a reduction in the net long position of the hedge fund community of nearly 8,000 contracts. Most of that came from long liquidation ahead of the FOMC with a smaller contribution by the addition of some 2500 new short positions from the hedgies. That FOMC statement gave the bulls some fodder but it was a sort of two-edged sword.

One edge was clearly its dovish tone which suggested that interest rates will stay near zero for longer than many market participants were led to expect by the same Fed. The other edge was the clear concern expressed about the lack of inflationary pressures. The Fed, along with the ECB I might add, is clearly worried about deflationary issues. When the Central Bank expresses its concern over the lack of inflation in the economy, it is certainly not a ringing endorsement of a stronger gold price.

Along that line, the PPI numbers that came out today were quite a shock to the market as the number for March came in at a rise of 0.5%. The result was another set of headwinds to buffet gold as traders interpreted that data as evidence that the Fed could actually accelerate its bond buying program and any interest rate hike. Those are negative for gold especially when the market had just gotten the Fed's comments about the lack of inflation a mere two days earlier!

JP Morgan's earnings numbers set the negative tone for the overall stock market today. The broad selloff in equities was one of the reasons that gold did not break down as sharply as some might have expected. The Dollar showed some buoyancy today on the heels of that PPI number but not enough to set it up for a sharp rally.

All in all, it was a day in which volatility in the currency markets and in gold, was relatively mild by comparison to recent days.

Such was not the case in the grain markets, where news of Chinese rejection of corn shipments roiled that market with some spillover being seen in the soybeans. Apparently the Chinese are balking on imports of biotech corn. Reports indicate that China has rejected 1.45 million metric tons of US corn since mid-November. The reason? They claim it contained an unapproved variety of corn which was developed by the Swiss seed maker Sygenta. The variety is called Viptera. Also involved is another variety Duracade.

The National Grain and Feed Association, in a report circulated among its members, expressed the concern that pollen drift ( through the wind ) will make it unavoidable that the variety will impact corn shipments into China. Obviously big US grain shippers are worried. At least for today, that seem to supercede the latest USDA carryover numbers that we got this week.

A quick comment on the S&P 500. I mentioned in a post yesterday that an important support zone on the weekly chart was between 1830 - 1820. The market closed below that level today which puts it in a negative posture as we move into next week. Defensive plays in stocks were in vogue today. We'll see next week if that continues or whether the bulls use the sell off as another opportunity to buy back in. One thing is for certain - the aura of inevitability about a seemingly perpetually rising stock market, took a hit this week. Now we wait for the next batch of earnings reports and the next bit of economic data releases.

Enjoy the weekend... time for some meat on the smoker. Then again, with its high price right now, maybe cheerios are on the menu.

Foreign Central Bank Holdings of US Treasuries back on the Rise again

A while back, I posted a chart of the Custodial Holdings of Treasuries for Foreign Central Banks that revealed a sharp drop in the number held from over $3.021 trillion to near $2.855 trillion, or about $166 billion. At the time I mentioned it was rather remarkable and thus warranted monitoring.

Shortly after the number became public, we had the usual "end of the world" scenarios for the US Dollar as the perma-gold bull community began talking up their usual the "run on the Dollar has begun" thesis. Many were talking Russian dumping of US Treasuries as a move away from the Dollar that was going to snowball. Of course, implied in all this was talk of gold shooting to the moon again.

Well, here we are exactly 4 weeks after hitting the low point in those reported Treasury holdings and we are back to $2.972 trillion, not far off the all-time peak noted above and the largest number since January 30, 2014.

Apparently the run on the Dollar has not begun in earnest among foreign central banks. Here is the chart:

Safe Haven bids boost Gold

Gold put in a nice showing today building on last week's bounce away from chart support near $1280 and the change in handles from "12" to "13".

The FOMC minutes released yesterday continue to put pressure on the US Dollar, but even more importantly, acted to depress US interest rates. That is the key driver for gold in my view at this time. Gold seems to struggle when interest rates here in the US rise as investors see little threat of inflation and seek out assets that will throw off some sort of yield rather than the yellow metal which only provides gains if it continues to rise in price. In a benign inflation environment, many do not believe gold will continue to rise.

For those who are new to this blog, a bit of a disclaimer here - I am giving you the broader market view of the inflation picture ( plus that of the Fed ), not my own view. As someone who lives in the real world and sees grocery prices moving higher, health insurance premiums rising, local taxes and fees rising, etc., I reject the argument that consumers are not getting squeezed by such things. However, until the broader market consensus shifts towards genuine fears of inflation, rallies in gold are going to be viewed as selling opportunities.

By the way, those record high beef prices that are finally being felt at the grocery store should begin to decline over the course of the next few weeks. It takes a while for the higher priced beef ( and pork for that matter ) to make its way into the pipeline but wholesale beef prices have already peaked for now and are working lower. Consumers should see some relief on both the beef and the pork front  beginning within the next few weeks. What happens this summer depends on whether or not grocers can move the high priced stuff during the warmer months. There is an old adage that the "best cure for high prices is high prices" and that is what we will soon see as demand will shift to chicken until consumers get sick of that. Maybe then beef and pork prices will stabilize at lower levels and we can all afford to eat bacon and throw some red meat on the pit smokers. Grocers are usually hesitant to raise retail red meat prices ( they have excellent margins in meat ) for fear of stunting demand but with the goings on in the livestock markets over the last few weeks, many have had no choice but to bite the bullet, raise prices and hope for the best. From what I am hearing, consumers are noticing and are balking.

Back to gold -

From a chart perspective, gold continues to remain within the broad trading range that I have outlined for some time now. It will need a catalyst of some sort to kick it higher or send it lower. What that might be remains unclear to me.

As you can see from the chart, it has run into some selling near the resistance level noted near the $1320 region. Above that, resistance is layered in approximately $20 increments, first near $1340 and then again near $1360.

Downside support comes in near and just above $1300 followed by our old friend near $1280.

On the ADX, which indicates a trendless market, the bulls have regained the short term advantage ( when it held at $1280). Stochastics are rising as price moves up in the range showing the near term friendly picture. How this market handles this $1320 level today and tomorrow, will be a key as to how to approach it. The trading range is pretty broad ( up near $1400 on the top and $1280 on the bottom ). We could see this range tighten up a bit and narrow down somewhat from the current $120.

As mentioned above, I cannot see what would cause this market to break out of its current range at this time. The Dollar would either have to drop off sharply breaking down below 79 on the USDX or interest rates would have to plummet sharply here in the US, along with perhaps a larger selloff in the broader equity markets to take it up out of the top end of the range. On the downside, we would need to see a sharp rally higher in the US Dollar ( alongside especially of a sharp selloff in the Euro ) and a surge in interest rates above the 3% level in the Ten Year to take it down below $1280 in my view.

Take a look at Eurogold ( gold priced in terms of the Euro ). Notice how it too is essentially rangebound. The ADX reveals the lack of a clearly defined trend. The top of the range is up near the 1000 euro region; the bottom down near 880 - 860. If gold could clear the 1000 euro level, we might finally have something to write about. Can it do that? Who knows but if the ECB were to actually proceed with their chatter about their own version of QE and forcing banks to pay interest on reserves held there at the ECB, then we might finally see the Euro weaken sharply enough to send gold higher and through that 1000 level.

Apparently Europe is having the same problems over there as we are over here - a lack of inflation and in their case, an excessively strong currency, which no one over there wants.

Back to the safe haven thing - equities are showing some surprising signs of weakness today, which is odd considering that they got all bulled up yesterday on those dovish FOMC minutes.

A lot of technicians are watching the 1830 - 1820 zone on the S&P 500. That is a big support level. If it were to give way, especially on a closing weekly basis, we could finally see some deeper losses in stocks. As you can see on the weekly chart, that is some uptrend so unless bulls are sent packing by an avalanche of selling, odds favor them coming in and continuing to buy dips. Maybe we can get some range trading/consolidation in stocks for a change instead of this nearly one-way ticket north.

The gold mining shares are providing little if any support to gold judging from their mediocre performance today. One gets the impression that they do not know whether to follow the broader market lower or the metal higher. Either way, it is not exactly a ringing endorsement of further strong gains in the actual metal. Then again the day is yet young and we could see some better buying enter before the close of today's session.

Switching gears just one more time - recent hog slaughter data shows its running a bit more than 7% below last year's levels. USDA told us in their recent Hogs and Pigs report that the worst we could expect was 5%. Their own data is proving the inaccuracy of that last quarterly report; however, the trade is still confused and unclear. Those who are lending credence to that report have been able to gain some advantage but yesterday's bizarre and extremely rare move from limit down to limit up within the matter of a few hours time shows just how unsettled this issue is in the industry. It is going to take at least another full month to sort it out and even then we might not really know for sure. In all my years of trading the livestock markets, I have never seen the hogs so unsettled or so volatile. They are making my old deceased friend, the pork bellies contract, look tame by comparison and that is saying something. I miss that contract and all the shenanigans that accompanied it.

Corn is moving lower today as once again improving weather conditions are stirring talk of field work taking place. Beans are moving lower probably due to some profit taking by longs who have been making small fortunes playing the demand side of the bean equation. Large expected soybean acreage this season is taking a backseat to insatiable demand for beans. While prices for corn and beans are far off record highs from two years ago, they are still very profitable. I am happy for our hard working farmers but I still must take this opportunity to vent against that boondoggle ethanol mandate. I hate that stuff with a passion because of its adverse impact on our livestock sector. That plus the idea of burning 40% of our corn crop in our gasoline tanks strikes me as the height of stupidity. Whenever I hear some politician from the corn belt start talking up a 15% ethanol blend, I want to scream. Anyone seen what that stuff does to seals?

Dovish Fed sinks US Dollar

With no disrespect towards those who actually suffer from bi-polar disorder, if such a thing were not in the world, I would believe that the US Federal Reserve invented it.

Watching them swing from hawkish to dovish in such a short interval makes me understand why our markets are so screwed up. The Fed is consistently changing their assessment of things. That would be just fine and dandy were not the US financial markets addicted to easy money and so utterly dependent on these jokers for their latest fix.

I maintain that our entire financial market system is no longer functional in the sense of reflecting anything resembling reality. As a trader I have to play with the cards dealt me but as someone who cares deeply about the future of this nation, the more I see examples of the kind of crap that we got from these soothsayers at the FOMC, the more despairing I become. Is this what was once the finest example of free market capitalism has become in our degenerate age? The entire marketplace sits around with bated breath waiting, as if some sort of buzzards circling a dying animal, for the pontifications of a group of men and women whom put their underwear on just like the rest of us. Depending on their mood of the month, the markets respond dutifully.

Equities effectively doubled once the news hit the wire and the Dollar proceeded to fall off a cliff, even against the Euro which's zone is struggling with the same "lack of inflation" concerns from their various central bank heads.

The big thing today from the FOMC, in my opinion, was this lack of inflation concern and the fact that the Fed, no matter how much they would love to see it, cannot generate anything anywhere near their target of 2%.

Gold seemed caught in a tug of war between those who believe the near zero interest rate environment, that now certainly seems to be prolonged longer than many expected last month, and those who are keying on this lack of inflation.  The Dollar weakness generated a move into the plus column for the metal but gains were relatively muted as without any sort of serious inflation concerns, the metal run out of guys willing to chase it too much higher, especially with the mining shares relatively comatose compared to the rest of the torrid gains across the equity sector.

Also, brought up was the slowing growth in China and the consequent negative impact on commodity prices, although that was no where to be seen today with the macro funds generally buying through the sector as the US Dollar moved lower.

The Yen actually moved lower against the Dollar as no one seemed to need any safe haven with the spiked punch bowl hanging around longer than guesstimated.

Welcome to the world of our modern markets where a long term trade was cut from 60 minutes to 15....


More later....

Today's Bizarro Land Markets

I wanted to take a bit of time and give you an example of what we commodity traders are now having to deal with as a result of the unprecedented ( and getting worse by the day ) volatility in our modern commodity markets. When hedge fund computers are doing the buying and selling instead of thinking human beings who actually take some time to analyze a trade before placing it, this is what we get.

Here are two of the headlines from the Dow Jones Wire Feed on the same day ( today ).

Get ready - here is the first:

DJ Corn Falls as Warmer, Drier Weather Allows Field Work to Resume

Tue Apr 08 09:18:55 2014 EDT 
Here is the second:

DJ Corn Rises as USDA May Lower Stockpiles, Field Work Delayed

Tue Apr 08 11:24:29 2014 EDT
The first story came down around 9:18 EDT. The second one at 11:24 EDT, about two hours later. As you can see, the first one attributes the fall in corn prices to warmer, drier weather. The second one attributes the rise to weather delaying field work.

Down, then up. Tomorrow? Maybe up and then down. When some readers take me to task for pointing out the fallacies in the GIAMATT Crowd, this is what I am referring to. Computers are running our markets of today - not discretionary human beings. The result is maddening, more often than not, completely unpredictable swings in price that can have little, if any, connection with underlying fundamental realities. The reason they do not is because at one time fundamentalists dominated our markets. Not any more! We have been completely taken over by the systems trader. These guys would not know a butt cut from a hog from a belly cut and they do not care. All they care about is motion - if it moves they chase it.

The end result of all of this computerized idiocy is extreme volatility and both big spikes higher in price as well as sharp drops lower in price. It all depends on what the computers are doing at any given time and what those mindless black boxes happen to be looking at for that particular moment.

Quite frankly, a "long-term" trade has now morphed into a 60 minute time interval. Once upon a time, "long term" meant something significantly different.

This is the reason I tell traders to be careful about reading too much into the day to day gyrations in the markets anymore and not to load the boat as far too many in the gold community are prone to do after reading some bullish prediction after a day or two of upward price movement in the gold market.

If one cannot even get the same headline within two hours time, how in the world do some of these self-appointed and egotistical "experts" predict that the gold price "must go to this price" (apparently because they have commanded it to do so). The FORCE must be strong with them. It could be that but I would wager it is more a case of hubris and clever marketing to peddle their worthless newsletters that take advantage of unsuspecting novices who find themselves completely mystified by the baffling swings in price in far too many of our markets.

Human beings love clarity and seek certainty. That makes them easy dupes/victims to those who seem to possess it. All I can say is that it takes a conscienceless Cretan to bilk sincere but gullible investors out of their hard-earned money as they promise absolute certainty in an environment in which such is not possible, nor shall it ever be.

COT Breakdown

Another Friday - another release of the Commitment of Traders report from the CFTC - let the entrail reading begin in earnest!

A caveat before we begin - the report only covers trading through the end of the combined pit and screen session on Tuesday of the current week. It therefore does not take into account the price action from Wednesday through the close of trading on Friday.

On Tuesday of last week ( 3-25-2014) gold closed at $1311.40. On Tuesday of this week, it closed at $1280 for a loss ( Tuesday - Tuesday ) of $31.60.

Here is what happened over that time period. Hedge funds were big sellers once again - therefore it should come as no surprise to see the price move lower. They bailed out of over 8000 long positions and added over 5500 NEW SHORT positions. The net impact was that they were sellers of some 13,687 contracts.

The other reportables, which include the big floor locals, CTA's, CPO's and other large private traders were also big sellers on the week. Their combined NET SELLING amounted to 4,724 contracts. By the way, this includes both futures and options combined for the funds and this other big group of speculators.

The combined selling of these large specs was 18,591 contracts.

The big commercial category were NET BUYERS on the week as were the Swap Dealers ( WHOOPS - there goes the theory of the evil bullion banks manipulating the price of gold lower). The combined NET BUYING from both these camps amounted to 14,858 contracts.

The balance was made up by the small spec category which were NET BUYERS of some 3,553 contracts.

In other words, we had the biggest speculators in the market selling with the commercial interests buying as price lost that $31.60.

This has been the pattern in gold since early 2001, more than a decade ago.

In some gold bug circles much ado was made about the big open interest drop in gold that occurred early in the week as if it was somehow a hugely significant market event and portended something big was about to happen in the gold market. As usual the hype, while amusing to read, was not based on anything remotely resembling reality. Guess what - April gold was entering its delivery period and many traders who were SPREAD using that month lifted their spreads.

The total number of spreads lifted was - are you ready for this? - 51,299 contracts ( futures and options combined). As you can see, that outnumbers the amount of actual buying and selling of outright positions by more than 3:1.

Remember this the next time some breathless article is written about some big open interest drop, especially if the market is entering a delivery period.

Where do things stand now ( as of this Friday)? As stated in a previous post, gold has had a nice bounce off an important chart support near the $1,280 level. I strongly suspect that the big rally off of $1280 has had more to do with short covering on the part of the hedge funds which stuck on some of those fresh shorts noted above. Without having the actual data in front of me ( we will need to wait until next Friday ( April 11), I would hesitate to be too dogmatic about this, but I would not look for the move over the last three days of this week to be characterized by a wave of brand new, aggressive long positioning.

Gold held where it needed to hold on the charts to prevent another leg lower and that ability to stay firm near $1280 has sparked another round of short covering. Now we need to see where the bulls can take this thing as the new week begins. There should be some overhead resistance centered near the $1320 level and again near $1340. If they can take it through both levels, I think we will see more aggressive short covering again and some new longs coming back in.

The key will be the Dollar and the US interest rate markets. There could also be some safe haven buying of gold if the US equity markets start looking shaky. We did get some of that in the recent past so it would not be unexpected to see it again if the selloff in the equity markets worsens.

Another way of saying this is that the bulls have regained some short term momentum. Whether or not they can capitalize on it is unclear. The charts will make it clear in their own time. In the meantime, stay flexible. Each new piece of economic data, whether from the US or from the Euro Zone or from China, is going to swing prices accordingly. I would suggest no one who is trading take too large of a position because it can reverse on you faster than you can blink. The name of the game right now is to survive. Let the computers chop up someone else besides you! Don't be the one providing them the funds for their extravagant lifestyles. Let them suck it out of someone else - blasted infernal leeches that they are.

As the reader can probably tell - I loathe what these computers have done to my profession. Mindless, unthinking machines ( in contrast to we carbon-based life forms known as discriminating human beings ) shoving markets all over the place, oftentimes without rhyme or reason, is in many quarters hailed as more efficient markets. I don't know whether to laugh in contempt or to weep with sadness over how shortsightedly blind our nation has become.

I have seen enough of the carnage these computer generated price moves can inflict on legitimate hedgers looking to offset risk to have had my complete fill of them. Sadly, it is here to stay and we have to learn to adapt to them in order to survive and prosper.

"Disappointing" Payrolls Number Spurs Gold Buying

And the number of new jobs created for the month of March is... drum roll please... Disappointing. With the market looking for something north of 200K, it didn't get it. Up started the talk of a halt to any interest rate rise next year.

And with that, gold was off to the races as back down went interest rates with buyers coming back into the Treasury markets. The yield on the Ten Year note fell to 2.737% as I type these comments.

For me, it is really a rather simple concept - gold will move north as US interest rates move south and gold will move south as US interest rates move north. That, for the immediate moment, is what is driving the gold price even more so than the actual movements of the US Dollar.

The Dollar was initially weaker on the employment number news but after traders began attempting to decipher exactly what ECB President Draghi was saying about the lack of inflation pressures over there and the possibility of the ECB's own version of Quantitative Easing, the Euro came under some pressure. That floated the Dollar a bit higher against the Euro but it is basically sitting here doing nothing at the moment.

The strength in the forex markets was more among the Yen ( here we go with that safe haven trade again???) and the Canadian Dollar. The Aussie was also higher. Traders seem to have mixed feelings about the greenback with some yapping about the employment numbers, while disappointing, were not that bad. What to take away from all this? - more uncertainty as once again each piece of economic data will dictate the day to day price action across so many of these markets. There is just not much in the way of conviction.

This is what we get when we have near constant interference from Central Bankers. I have said it in the past and will say so again, the source of so much of the wild volatility we are seeing in the market place these days is Central Bank activity. When the investment/trading world spends most of its time parsing statements from Central Bankers rather than studying real world fundamentals, the result is extreme sensitivity to comments from these monetary masters. Then again, trying to understand the fundamentals in an economic world created by Central Bank actions ( QE/bond buying programs) or government stimulus programs ( think China) is at times an exercise in futility.

Another side note, the much respected analytic firm Economic Cycle Research Institute released their US future inflation gauge numbers this morning. It showed a decline to 103.1 in March from a 104.4 reading in February. Interpretation? There are no concerns about inflation pressures. This is what makes me expect any rallies in gold to attract selling pressure.

Back to the jobs number and the impact on the gold price in today's session. Gold is currently trading up 1.6% at $1305 as I type this. It has surged through psychological resistance at the $1300 and recaptured that handle. Of course, do not look for any talk about manipulation of its price today even though a small drop in interest rates in the US and a weak but relatively stable Dollar hardly justifies a move of this extent in the yellow metal. A short covering rally due to nervous weak-handed bears is pretty exciting but a key factor for SUSTAINED higher gold prices is whether or not NEW LONGS/BULLS want to commit in size to this market. So far that has not been the case. These occasional short covering rallies are exciting and stir up the "gold is going to the moon" talk every single time they occur but as we have seen, they do not tend to last.

Only if gold can generate more new buying than short covering does it have a chance at starting any kind of sustained uptrend. It is still a traders' market and that means short-term oriented guys can work this market and take advantage of the price swings but beyond that, extrapolating about lofty upside price targets is premature in my view.

Incidentally, I am sure most of the readers have seen or are aware of all the chatter about the HFT crowd as a result of that "60 Minutes" interview last Sunday and the subsequent dust up we have all had the pleasure of watching over at CNBC.

Many in the GIAMATT crowd ( Gold is Always Manipulated All The Time) have seized about this story to justify their contention that gold is a rigged market just like they have been saying for many years.

Here is the problem with that rationale - on the surface, yes, it looks like they have been vindicated. But this is important - it is a FAR, FAR cry to rightly discuss the impact from the HFT crowd, a crowd which I feel has no useful purpose whatsoever in our markets other than, like ticks, to suck the juices out of the host and enrich themselves in the process - than - to draw the illogical conclusion that therefore the gold price is rigged by the US government and the Fed and Treasury.

After all, the claim is that every single stupidly named "flash crash" lower in gold is the result of nefarious government forces colluding to artificially shove the price of gold lower and prop up the US Dollar. But, these folks, some of whom I count as friends, always point to the BULLION BANKS, the JP Morgans, the Goldman Sachs, etc. as the forces suppressing the gold price at the behest of the feds. In their mind, they, not the HFT crowd, are the enemy of all common decency. They are the evil market riggers.

The report about market rigging that is currently the talk of trading town is the High Frequency Traders doing their thing, not the bullion banks, but proprietary funds especially those front running orders and getting an unfair advantage in the markets.

I wanted to go on record about that because it seems to me that one cannot have it both ways. Here it is in a logical form:

PREMISE: The gold market is manipulated by the government using their proxies, the bullion banks, especially JP Morgan and Goldman Sachs to regularly "bomb" the gold market lower and artificially suppress the price.

AXIOM: The HFT funds engage in activities that involve front running orders coming into the electronic pit and skimming pennies out of every market and doing so thousands of times over and over again.

CONCLUSION or INFERENCE: Gold is manipulated by the federal government.

Do you see the fallacy in this argument being made by the GIAMATT crowd?

Now, if you want to talk about gold prices getting slammed lower by big orders coming in from hedge fund computers, which do not employ, scale up or scale down tactics but rather are seemingly all in or all out, then we can talk about that but to infer a manipulated gold price based on well-needed exposure of HFT activity is a big stretch. It's more faith than logic.

Back to the charts however...

Notice that gold bounced right near the critical $1280 level. It needed to hold there to prevent a much sharper fall and it has done so. That is what has spooked some of the shorts and why they are furiously covering. At this point, the market is maintaining its strength of the day and looks poised to end up near the session highs ( that could obviously change ) but if it can hold above $1300 to end the week, the bulls will have dodged a bullet and can thank that disappointing payrolls number for bailing them out.

Going into next week, with this strong close, it should set up a test for the next resistance level WITHIN THIS BROAD TRADING RANGE near the $1320 level.

The ADX remains heading lower, again, revealing the lack of a definitive trend in this sideways moving market. While bears recently were able to seize control within this range, the +DMI is threatening an upside crossover of the -DMI signaling the bulls might be back in the driver's seat for a while. Back and forth we go.

More later as time permits...

Gold Oscillating around a Key Pivot Point

I have mentioned and illustrated how I believe the $1280 level is a key level for the gold market as both sides ( bull and bear ) attempt to ascertain the next move for the yellow metal. See those previous posts for more particulars.

Suffice it to say that most players were unwilling to press their case very hard ahead of a crucial employment report tomorrow morning. All I can say is that it is going to be another one of those "Friday's" in which we can expect to see some fairly wild price action if it is going to be like the previous Fridays on which we have gotten the jobs number from the feds.

There is no sense in posting much of anything up for now until we get that report out of the way and see how the market responds. My own thinking is if the number comes out close to 200K or above, gold will react negatively as the Dollar will probably move higher. The reason - the market will regard the previous employment numbers, that were very disappointing, as being more a function of the severely cold weather during January and February rather than the beginning of a trend which would cause the Federal Reserve to scale back its tapering plans.

I am taking the various Fed governors' at their words, which seem to have been pretty consistent with one another for a change, that it is going to be a high bar to induce the Fed not to procede with their current tapering plans.

When I look at the inflation numbers coming out of the Euro zone ( which are well below the 2% target that the ECB has acknowledged it would like to see ), it occurs to me that a stronger jobs number will feed into the sentiment that higher rates are on tap here in the US long before they will be for the Euro zone. That should, in a normal world, tend to support the Dollar at the expense of the Euro.

The flip side is if we get a much weaker than anticipated jobs number. In that case, we would expect to see the Dollar weaken somewhat and gold move higher as traders would then begin to doubt the Fed's stated intention to taper anywhere near the extent to which is already in the market.

In other words, it will take some sort of strong negative surprise on the employment front to shift the current mindset that the poor numbers the first two months of this year were due a large extent to the inclement and record setting cold weather. If we were to get such a thing, traders might begin to believe that a trend towards weaker hiring is underway and that would be enough to halt any upward movement in the Dollar.

We shall see what we get tomorrow. One thing I can guarantee is that the HFT crowd will be making lots of money off of the rest of us. They are the human equivalent of spotted deer ticks.