It remains to be seen as to what kind of “legs” this USD rally may have, and it’s implications with respect to the price of gold.
We’ve been over the “theory” as to why the Fed would prefer a lower price in gold as the US Dollar devaluation continues, but of course that’s all it’s been – theory. I fully understand the “short selling” in the paper market by Ben’s friends on the street, but to consider some kind of “global conspiracy” to keep the price “in line” with a sliding US Dollar would be a stretch for sure.
Looking at recent price movement we are “once again” in a position where both the U.S Dollar as well as gold have been falling together ( more or less ) where as just today, a decent “inverse” move with the dollar up and gold down another 17 bucks.
The analogy of “turning around a big cruise ship” as opposed to a motor boat comes to mind in that….these things play out day-to-day but are really moving on a much larger scale over a much longer period of time – and it does take time to turn that ship around. More time than most traders can bear.
It’s my view that anyone “building positions” in the precious metals around this area of price and time ( and lower ) shouldn’t really get into “to much trouble” looking longer term. It’s certainly not a trade, and it’s a big, big boat to turn so….weather or not you can take/manage the drawdown and slug it out is always a matter of ones personal trading / account / exposure / leverage etc…
Looking at specific “price levels” in an attempt to “nail it” on an asset worth 1300.00 bucks is a fools game, as fluxuation’s of 50 bucks here and there would apear normal ( % wise ) when trading “anything” of lesser value.
A really nice spike in the U.S dollar today ( considering I’ve been long for days now ) with several trades paying off well. As well (specifically) foreseen weakness in GBP coming to fruition here overnight. I invite anyone who isn’t already following on twitter or “the comments section” here at the blog to join/follow as there are lots of great info from other traders here as well.
Im in! I’m “offically” LONG USD as of this moment….and will take my lumps / if / when they come. Small orders across the board – ANY PAIR!
It’s been interesting to see this move higher in USD in line with “risk on” activity in markets today but then again not so unusual. We’ve seen equities and USD running in tandem several times over the past few months as hot money from Japan is converted in / and out of US in order to buy and sell stocks.
THERE HAS STILL BEEN NO REAL MOVE TOWARDS SAFETY.
Glad it’s the weekend here as I’ll be diving / snorkeling. Have a great weekend everyone!
If you’re having trouble accepting the general idea that the U.S Federal Reserve will continue its assault on the U.S Dollar ( devaluing USD providing considerable relief to the current government debt obligations) then I can’t imagine you’ll be particularly thrilled with the following breakdown on gold and silver.
There is no greater enemy to the Fed than a rising price in gold or silver.
Against a backdrop of such extreme money printing and currency devaluation in the U.S, if left to reflect its true value” (as we’ve seen with respect to the price of gold priced in Yen) the price of gold would now be significantly higher – and I mean SIGNIFICANTLY HIGHER than we see reflected in the current “paper market”.
When ever Uncle Ben gets nervous about the price creeping higher, he simply calls his buddies at JP Morgan, sends them a couple suitcases of freshly printed U.S toilet paper and POOF!
JP Morgan piles in even further “short” (via naked short contracts placed at the CME / COMEX) and the “paper price” continues to flounder/move lower. Ben keeps printing useless fiat paper – and the continued “illusion of prosperity” runs across televisions country-wide.
As I understand it ( and please forgive me if I’m way off ) there is considerably more silver/gold current sold “short” than physical / actual metal currently “above ground” on the entire planet Earth, and as informed investors now look to take “actual delivery” of the physical as opposed to just “trading in the paper market” we are about to see some serious fireworks.
Many heavy hitters have already suggested that The Comex may soon be looking at default. (CME Group is the largest futures exchange in the world. Many commodities, of which gold is one, are traded on this exchange. The gold exchange – which is often still referred to as the Comex, its original name prior to being bought by the CME – is the largest gold exchange by volume in the world).
Take it for what it’s worth as JP Morgan is now under investigation by the FBI and other authorities – this all may fall into the category of “conspiracy theory” if one chooses to just bury their head in the sand.
Your head would absolutely spin if we jump up another “rung on the ladder” to discuss the London Bullion Markets, The Bank of International Settlements and The Fractional Gold System – let alone where China fits in.
If you consider the massive easing / devaluation of the Japanese Yen some months ago, and put yourself in the shoes of an average Japanese investor waking up, morning after morning – only to see the price of Gold (priced in Yen of course ) going through the roof, you’d almost think you’d entered the Twilight Zone.
This doesn’t make any sense! I thought the price of Gold was going down, down down. What gives?
When traded “against” a currency that is rapidly losing it’s value ( via rapid printing / easing such as the methods currently being used by the U.S Fed) , it only makes sense that a hard asset ( such as Gold) which cannot be duplicated/printed/ reproduced “should” rise in value substantially – as in the simplest sense – you’ll need a whole lot more of that “local currency” in order to purchase it right?
The example seen in Japan is exactly what one would expect to see – when a currency is rapidly debased in value, and then compared / traded against something that “cannot” be artificially created. Currency value down = Gold price up.
So what the hell has been going on in the U.S then? Why do I see the value of Gold taken to the cleaners AS WELL my USD / purchasing power getting smashed? How can this be?
I get this question a lot – a whole lot. Should I buy gold? Is gold going back up?
Interestingly, if you zoom out to a much longer time frame chart (maybe a weekly and even a monthly chart) you’ll see that Gold has suffered recently – yes…..but is “still” in an uptrend (pending it slows down and looks to reverse in and around this area sometime soon).
I would have to consider 1155.00 as a level of considerable importance and significance.
But please keep in mind (as we’ve discussed with respect to long-term charts) that turns on a weekly chart can take “literally” weeks, and weeks to stop then consolidate and finally turn to reverse course. Even at that ( considering we are looking at an asset that costs 1190.oo dollars) a hundred dollars here, a hundred dollars there – these aren’t “large swings” percentage wise. Putting an exact number on it is a fools game.
More important than the question of “should I buy gold?” would be the matter of “how do I buy gold?”
Don’t charge in there looking to call it a “trade” as you’ll likely miss on nailing an entry, but rather “build” a position over time “smoothing out” this volatility and not sweating the 50 buck swings.
Patience is your greatest asset here. You really can’t rush this one.
I suggested some months ago to buy gold and gold related stocks. Since then the price of gold, and performance of the related miners has gone nowhere but down…and down….and then down even more.
I lost $1500.00 bucks in options that expire today – likely the largest “losing trade” I’ve made in many months.
Putting this in perspective – I see $1500.00 (+/-) flash on my screens a few times a week (if not daily) as it represents “peanuts” in the grand scheme of things. I spent about a week watching the trade go against me before I put it aside in the “whatever” category and got on with my work – banking some of the best returns of my life over the same period of time via the currency trading.
The plain fact of the matter is… regardless of price – in the current “print til you can’t print anymore” environment – there is absolutely no reason to own gold. There is no fear. There is no “need to store value” while stocks are blasting to the moon! People (including myself) are making money hand over fist in a number of areas as gold bugs continue to debate/rationalize/haggle the reasons as to why their “all in bets” on the shiny metal haven’t made them rich – but more so bust their accounts.
Its foolish investing. It’s gambling. It’s naive and its completely irresponsible.
Bottom line – gold will make it’s move when stocks and “risk” tanks. And from what I gather – the FED is gonna work pretty damn hard to make sure that doesn’t happen……. anytime soon.
I do plan to “re enter” and take another shot at gold and related names – but as seen a week ago when gold popped some 30 bucks on the big DOW DOWN DAY – it looks pretty obvious to me that we won’t see a move in gold – until we see some serious fear enter the market – regardless of where the USD is at.
The SDR is an international reserve asset, created by the IMF in 1969 to supplement its member countries official reserves.
Its value is based on a basket of four key international currencies, and SDRs can be exchanged for freely usable currencies. With a general SDR allocation that took effect on August 28 and a special allocation on September 9, 2009, the amount of SDRs increased from SDR 21.4 billion to around SDR 204 billion (equivalent to about $310 billion, converted using the rate of August 20,2012).
So in other words – the U.S has a printing press, the ECB has a printing press, Japan’s of course, Great Britain’s got one and the freakin International Monetary Fund ( operated primarily by a small group of “financial elite) can rattle off “SDR’s” and distribute them (as freely tradeable currency) to its members – at will.
This will clearly be the next step in resolving the current global financial crisis as the printing continues.
With everyone devaluing their currencies at the same time ( and Central Banks suppressing the value of gold as a price spike would undermine the entire plan) it’s very likely that the next “crisis” event will simply be “papered over” with the issuance of “SDR’s” and the “can kicking” will continue down the “global road”.
Anyone expecting some “massive rise in the price of gold” overnight – is likely in for a longer wait in that……the “paper game” has miles to go before your “$7000 oz” will be realized. As well – if you live in the U.S, I’d look forward to any large profits being made subject to a “newly formed gold tax” – likely in the neighborhood of 80%.
Have you considered that “the power’s that be” already have this worked out?
Hammer: Hammer candlesticks form when a security moves significantly lower after the open, but rallies to close well above the intraday low. The resulting candlestick looks like a square lollipop with a long stick. If this candlestick forms during a decline, then it is called a Hammer.
Has Gold Finally Bottomed?
I’ll be the last one to call it as I am relatively new to the world of gold – but can tell you it’s been a complete and total grind for the past few months. This particular candlestick formation is usually a pretty good sign that buying interest has started to creep back in. Usually a trader will wait for an additional days candle to form (ideally closing above the high of the hammer) before entry.
If it provides any relief going into the weekend – I for one have considerable confidence that we should see some higher prices moving forward.
So I’m a fat cat on Wall Street – that’s just seen two straight days of retail investment pour into markets like liquid butta.
Can you get your head wrapped around the profits created (today alone) with respect to anyone who’d bought over the past two days and had a stop on their trade? Even a full 10% stop – completely annihilated!
As well for those newbies still trying to make a buck trading EUR/USD – because your broker offers teeny-weeny pip spreads and the ability to scalp / short-term trade. No shit! – any wonder why?
You have now been liquidated on your 2k starter account as EUR/USD dives a full 250 pips!
So….has anything changed? Is the Europe story on the mend? Has the world lost its interest in gold?
Everything is exactly the same as it’s always been – as retail investment continues to fuel the engine of the massive steam roller smashing you to bits.
Definition of ‘Divergence’ – When the price of an asset (or an indicator) index or other related asset move in opposite directions. In technical analysis, traders make transaction decisions by identifying situations of divergence, where the price of a stock and a set of relevant indicators, such as the money flow index (MFI), are moving in opposite directions (thank you Investopedia).
We all see divergence a little differently depending on what you trade and what you watch. Some traders look for divergence within a specific area of focus (for example if the price of gold is skyrocketing, but the gold miners are taking a bath) and some (like myself) look for divergence across markets (divergence when I see both equities going down as well as the dollar – as well as gold!). Obviously in a situation like this – something isn’t right.
Divergence can often signal that a significant change in direction is in store – for at least one of the assets involved.
If you’ve been following the price of gold as of late, you will see that it has come down considerably in recent days. If you’ve been following the dollar you’ll notice that it too (over the past 3 days) has been falling alongside gold – as well market leader Apple Inc. – down more than 50 bucks over the same time frame.
Ask yourself – if gold (and Apple) are priced in dollars…and the dollar is falling…shouldn’t the price of these two assets be going up? – something’s got to give.
Looking out at larger time frames (I am talking a weekly chart) often helps in spotting the “odd man out”. As well – a good solid “recap” of the fundamentals driving price action in each given asset.
Ben is printing dollars like confetti – that’s not changing anytime soon. (dollar down)
Demand for gold is (and always will be) high – I don’t see that changing anytime soon. (gold down?….ummm)
Apple is the most valuable company well……..ever! (apple down?…ummm)
In this example it looks far more likely that both gold and Apple are merely “pulling back” with larger uptrend to continue as the dollar continues its slide into the basement. The divergence here (and how to trade it) points to buying opportunities in both equities and gold – and a continued downward trade on the dollar.