The Austerity Flimflam
As expected, there was profit-taking and chart consolidation today in the precious markets that were also affected by a stronger dollar and some steam going out of the physical market as prices began around 1425 per ounce. The physical purchasing weakness seems to center around small buyers - perhaps relatives of young people about to marry - since "small gold bars" were in short supply. There is still a brisk market in larger, jewelry-grade gold in India, China and places such as Indonesia and Malaysia.
As of 4:45 PM, New York time, gold was down about $11.00, 6.70 of which is attributable to the fatter dollar.
Strikingly, hedge funds are steadily increasing their bullion and futures holdings now that gold has bounced off the week of disaster we experienced just a short time ago. "Given the price action, this rise in holdings was pretty surprising," said Dan Denbow, a fund manager at the $1 billion USAA Precious Metals & Minerals Fund in San Antonio. This seems to support John Paulson's point of view that gold had become egregiously oversold.
The stronger dollar was precipitated by weak manufacturing news from China as well as (finally) news of economic weakness from Germany. Hovering as background music is the continuing struggle in Great Britain, also due to austerity.
The bickering has begun over Europe's nearly insane policy. A sampling of headlines and articles from around the world is amusing and instructive.
The Times Of London on its Economics front page ran a headline that said: Europe's age of austerity is heading to its final act, Jose Barroso warns. (Barroso is president of the European Commission."
The Washington Post said: Austerity has been tried and found wanting in practice. Instead of expansion and growth, Europe has been driven back into recession.
The BBC's European edition proclaimed: The policy of austerity first authored in Berlin never had a consensus behind it, but it now lies widely discredited. The French government does not believe in it.
George Osborne, Britain's Chancellor of the Exchequer, fired back at critics at the IMF who said austerity might bring an "explosion" to affected economies. You can count on austerity easing in Europe soon. It may not go away, but some cuts will be restored and relief services to those suffering with the second worst unemployment rate in Europe's history (the worst was right before the Nazis took over in Germany) will flow. Europe is deceptive because only the fringe poor - generally of non-European ethnic backgrounds - appear poor. Otherwise, Europeans appear rich.
Be that as it may, when Europe joins the rest of the major economic players on the world stage as a responsible member of the cast, more fuel will be added to the inflation flames (small as those flames may be right now).
And we know that inflation is... good for gold. Meanwhile some arch-manipulators have exited their short positions in gold while beginning to probe - by using talking points - whether bullion will go lower. Any shock that Goldman Sachs has followed this strategy with their gain of 10% in the last 45 days?
As always, wishing you good trading,
Gary S. Wagner - Executive Producer
Market Forecast: .Today’s downside move in the precious metals markets was largely attributed to outside forces. A firmer US dollar and weaker crude oil prices collectively added pressure to both gold and silver. The US economic data did not contain any revealing insights that would propel the market higher. On a technical basis as you will see in today’s video we will look at key levels of support and resistance to gain some insight as to our current trade in gold. I’ve not been comfortable nor bullish on silver over the recent days as it failed to make any kind of upside move in tandem with gold. Today’s downward move in silver did hit our initial stop and therefore we are neutral currently and are silver Outlook, and still long gold@1414.
Maintain Long gold @ 1414 stop below 1400 (1386 recommended)
Long Silver @ 23.32 stop hit @ 22.72
COT LINK See previous weeks in Historical Commitments of Traders Reports.
Gary S. Wagner - Executive Producer