Filed under: Trader Dan Norcini
Dear Friends,
Gold came under selling pressure in the face of a much weaker Dollar and a surging Euro, occurrences which would normally be expected to lend buying support to the metal but which for today worked against it based on the flavor du jour of trader taste.
Euro gold was the culprit as it took a very big hit dropping off some 23 euros from yesterday’s closing mark which followed on the heels of the initial weakness it experienced once word got out that Portugal’s bond sale went off okay. That had traders buying Europe and reversing trades put on that were attempting to take advantage of the worries associated with the at that time future bond sales. Europeans were in effect selling gold due to friendly feelings towards risk on that continent. Weakness in Euro gold spilled over to US Dollar priced gold which had been mounting an impressive move off its worst levels and had actually climbed into positive territory shortly before the close of pit session trading.
In response to an earlier email, I advised the writer that it is almost an exercise in futility in attempting to grasp what the mindset of the hedge fund community is going to be on any given day. Today they were back in love with the Euro – tomorrow the world could be coming to an end and they will rudely dump it and whisper sweet croonings into the ears of the US Dollar swearing their undying fealty to it. Stick with the long term trends and ignore the short term noise.
The real picture is that official sector related selling is evident on the charts just below the $1400 level in gold and with the uncertainty and confusion among traders as to the ever-changing sentiment towards Europe and towards the US in terms of economic improvement or lack thereof, there is not yet enough conviction-oriented buying in gold to take it through the upside ceiling which is being imposed.
Bulls will have to take it up and through $1400 to kick out a significant number of shorts. They had done some great work in getting it back above $1380 but that fell apart within 30 minutes of today’s pit session close.
I mentioned in an email a short time ago, that the days of gold trading nearly tick for tick in the inverse with the US Dollar are behind us. It is still going to be strongly influenced by the Dollar, do not mistake what I am saying, but it has been moving independently of the Dollar for some time now as Europe has come to the forefront of investors’ minds. We can see that when fears associated with European sovereign debt issues recede, gold is tending to experience selling pressure. When those same fears revive, gold moves higher.
It is all quite confusing attempting to decipher this volatile mess but this same uncertainty is being reflected in the price charts which show gold finding support on forays below $1360 but selling as it moves towards $1400. In effect, the confusion and lack of conviction or loss of confidence is leading to a range trade in the metal.
You see something similar to this being reflected in the long bond market where the FED and its tomfoolery have created a yo-yo market which keeps popping up whenever they come in and monkey with the long end of the curve only to experience selling pressure tied to the same thing that is pushing the Euro higher – namely, better feelings towards risk and a lack of desire to engage in safe haven trades. The interest rate market is a joke and foreign holders of US Treasuries are not going to be drawing much comfort from the fact that it is being propped up by more and more by freshly minted “binary digits”. When I see the Dollar dropping lower as longer term interest move lower, thanks to the boyz at the Fed, that tells me that not only are foreign holders of that debt watching it lose value as the dollar declines but if they desire to buy more of the same, they are going to get a LOWER RATE OF RETURN for their troubles. I don’t know about you, but that sure fires me up and makes me want to immediately rush out and load up on a couple $billion in long dated bonds from Uncle Sam.
I will submit that the actions of the Western Central Banks and their constant interference in the markets and their adventures in money printing are solely and completely responsible for the maddening volatility that we are now experiencing in our markets. They are the ones who create the conditions that lead to conflicts between fundamental factors which shift nearly day by day as they move in or sit by planning their next move. Traders position themselves on one side of a market only to be caught completely off guard as an ECB or a Fed steps in and does its thing. That leads to a panic out of one side of a market and a rush onto the other side in an attempt to recapture losses or maximize gains. Such actions trigger price signals on the computer algorithms of the hedge funds and in they come full speed ahead or out they go heading for the hills. The next day the fundamentals shift back and the entire process is then reversed.
The truth is what we are witnessing is just another battle in the long war between the Central Banks of the West and the Speculators. The former are attempting to create a world in their own image and form (Central bankers all have god complexes) while the latter are attempting to cipher through the factors that lead to movements in price through which they can hopefully profit. Speculators do not distort markets – true specs respond to changes in fundamental supply and demand factors. Central Bankers are the ones who distort and wrest markets into contorted, horrid creatures that honest viewers can sometimes barely recognize.
Silver could not recapture $30 and thus is now moving back down towards the bottom of its trading range. Support still lies near $28.50 with better buying expected near $28.
The HUI is once again not providing the least bit of help to the metals as it continues its anchor-like effect on the rest of the complex. Hedgies can make money by shorting the hell out of those shares and buying the metals with their ratio spread trades and do it over and over again until they are forced out by another surge in the bullion markets.
We will have to see how physical demand for both metals continues on dips in price. Thus far Asia has been active.
The CCI took a breather today after yesterday’s stellar performance. It still looks strong on the price chart and at this point is giving no evidence of topping. There are some negative divergence signals on some of the oscillators but strength in the grains in particular is helping to maintain the overall bullish pattern. Copper is running into a bit of difficulty at the $4.40 level and crude is thus far unable to best $92 on a closing basis. I am watching oil to see if it can indeed push past $92 and close there to set it up for a run towards $95.
Any further strength in the energy markets will be favorable for gold.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2011/01/January1311Gold.pdf
Gold came under selling pressure in the face of a much weaker Dollar and a surging Euro, occurrences which would normally be expected to lend buying support to the metal but which for today worked against it based on the flavor du jour of trader taste.
Euro gold was the culprit as it took a very big hit dropping off some 23 euros from yesterday’s closing mark which followed on the heels of the initial weakness it experienced once word got out that Portugal’s bond sale went off okay. That had traders buying Europe and reversing trades put on that were attempting to take advantage of the worries associated with the at that time future bond sales. Europeans were in effect selling gold due to friendly feelings towards risk on that continent. Weakness in Euro gold spilled over to US Dollar priced gold which had been mounting an impressive move off its worst levels and had actually climbed into positive territory shortly before the close of pit session trading.
In response to an earlier email, I advised the writer that it is almost an exercise in futility in attempting to grasp what the mindset of the hedge fund community is going to be on any given day. Today they were back in love with the Euro – tomorrow the world could be coming to an end and they will rudely dump it and whisper sweet croonings into the ears of the US Dollar swearing their undying fealty to it. Stick with the long term trends and ignore the short term noise.
The real picture is that official sector related selling is evident on the charts just below the $1400 level in gold and with the uncertainty and confusion among traders as to the ever-changing sentiment towards Europe and towards the US in terms of economic improvement or lack thereof, there is not yet enough conviction-oriented buying in gold to take it through the upside ceiling which is being imposed.
Bulls will have to take it up and through $1400 to kick out a significant number of shorts. They had done some great work in getting it back above $1380 but that fell apart within 30 minutes of today’s pit session close.
I mentioned in an email a short time ago, that the days of gold trading nearly tick for tick in the inverse with the US Dollar are behind us. It is still going to be strongly influenced by the Dollar, do not mistake what I am saying, but it has been moving independently of the Dollar for some time now as Europe has come to the forefront of investors’ minds. We can see that when fears associated with European sovereign debt issues recede, gold is tending to experience selling pressure. When those same fears revive, gold moves higher.
It is all quite confusing attempting to decipher this volatile mess but this same uncertainty is being reflected in the price charts which show gold finding support on forays below $1360 but selling as it moves towards $1400. In effect, the confusion and lack of conviction or loss of confidence is leading to a range trade in the metal.
You see something similar to this being reflected in the long bond market where the FED and its tomfoolery have created a yo-yo market which keeps popping up whenever they come in and monkey with the long end of the curve only to experience selling pressure tied to the same thing that is pushing the Euro higher – namely, better feelings towards risk and a lack of desire to engage in safe haven trades. The interest rate market is a joke and foreign holders of US Treasuries are not going to be drawing much comfort from the fact that it is being propped up by more and more by freshly minted “binary digits”. When I see the Dollar dropping lower as longer term interest move lower, thanks to the boyz at the Fed, that tells me that not only are foreign holders of that debt watching it lose value as the dollar declines but if they desire to buy more of the same, they are going to get a LOWER RATE OF RETURN for their troubles. I don’t know about you, but that sure fires me up and makes me want to immediately rush out and load up on a couple $billion in long dated bonds from Uncle Sam.
I will submit that the actions of the Western Central Banks and their constant interference in the markets and their adventures in money printing are solely and completely responsible for the maddening volatility that we are now experiencing in our markets. They are the ones who create the conditions that lead to conflicts between fundamental factors which shift nearly day by day as they move in or sit by planning their next move. Traders position themselves on one side of a market only to be caught completely off guard as an ECB or a Fed steps in and does its thing. That leads to a panic out of one side of a market and a rush onto the other side in an attempt to recapture losses or maximize gains. Such actions trigger price signals on the computer algorithms of the hedge funds and in they come full speed ahead or out they go heading for the hills. The next day the fundamentals shift back and the entire process is then reversed.
The truth is what we are witnessing is just another battle in the long war between the Central Banks of the West and the Speculators. The former are attempting to create a world in their own image and form (Central bankers all have god complexes) while the latter are attempting to cipher through the factors that lead to movements in price through which they can hopefully profit. Speculators do not distort markets – true specs respond to changes in fundamental supply and demand factors. Central Bankers are the ones who distort and wrest markets into contorted, horrid creatures that honest viewers can sometimes barely recognize.
Silver could not recapture $30 and thus is now moving back down towards the bottom of its trading range. Support still lies near $28.50 with better buying expected near $28.
The HUI is once again not providing the least bit of help to the metals as it continues its anchor-like effect on the rest of the complex. Hedgies can make money by shorting the hell out of those shares and buying the metals with their ratio spread trades and do it over and over again until they are forced out by another surge in the bullion markets.
We will have to see how physical demand for both metals continues on dips in price. Thus far Asia has been active.
The CCI took a breather today after yesterday’s stellar performance. It still looks strong on the price chart and at this point is giving no evidence of topping. There are some negative divergence signals on some of the oscillators but strength in the grains in particular is helping to maintain the overall bullish pattern. Copper is running into a bit of difficulty at the $4.40 level and crude is thus far unable to best $92 on a closing basis. I am watching oil to see if it can indeed push past $92 and close there to set it up for a run towards $95.
Any further strength in the energy markets will be favorable for gold.
DAN'S CHART:
http://jsmineset.com/wp-content/uploads/2011/01/January1311Gold.pdf
No comments:
Post a Comment