Today is starting off to be somewhat of a strange session as the fallout from yesterday’s FOMC meeting continues. Additionally, Yellen’s testimony about the balance sheet reduction seems to be producing some different sort of money flows.
Thus far I am noticing something unusual in the sense that nearly all of the major markets are down. We have all of the major currencies lower against the US Dollar with the only exception being the British Pound and that is only slightly higher. Stocks are down hard at the moment or should I say, the stock futures. Bonds and notes are lower. Crude oil and its products are lower. The grains are all lower. All of the metals, such as gold, silver, platinum and copper are lower. About the only thing higher at the moment is the US Dollar.
Even gold and interest rates are moving in the same direction!
I get the sense that whatever it was that the Fed and Yellen mentioned about the balance sheet yesterday that has spooked traders, it is producing some liquidity issues at the moment. It is almost as if the trading world is worried about the lack of new money being injected into the markets down the road.
Look at that big spike off of yesterday’s session low and the upside follow-through thus far today. The Dollar moving higher while stocks are selling off is not something we have seen recently. Generally we see the Yen getting a strong haven bid during such times and have seen the majors take on a generally positive note during equity market weakness. That is different today and is why I am taking notice. Something is going on – I am just not quite sure what the reason behind it is. But we are seeing it on the charts and in the price action.
Now, whether this is the start of something or just a couple of days of some money movement and lifting of positions for money management reasons is unclear. Let’s see where things head.
For now, gold has lost important downside chart support.
That support was the confluence of the 50-day moving average and the horizontal level near $1260. Unless it can recover before the session ends today, the chart picture will have shifted. Current technical posture below $1260 is negative. As you can see, technical indicators #1 and #2 are negative. In the ADX, the line has turned lower indicating that the fledging uptrend towards $1300 has stalled out. Bulls still have control over the market as the +DMI is above the -DMI but that could change the longer price remains below the $1260 zone. Gold will need to climb back above today’s high to prevent some deeper losses.
Keep in mind that there are a great number of large speculative longs in the gold futures market whose positions are going to be dropper deeper and deeper into the red the further the losses for gold become.
More and more it looks as if $1300 has been confirmed as powerful resistance. Lest it should be misconstrued as me stating that the gold conspiracy cult is correct that the feds are manipulating the price of gold by employing the bullion banks to do so let me make it perfectly clear that I categorically reject that foolish claim. It is one thing to point out a strong overhead resistance zone being reinforced by powerful commercial selling. That happens ALL THE TIME in the futures markets. It is another thing to claim that this selling is tied to some goofy conspiracy theory, especially with the US Dollar sitting at levels near 97.
The gold price suppression scheme made sense and was credible many years ago when the US Dollar was plumbing the depths of 70 on the USDX chart and threatening to take the world’s Reserve Currency into a black hole sparking a crisis of confidence. It is altogether another thing to continue to advocate such a theory when the problem in the minds of some is not that the Dollar is too weak, but rather that the Dollar is too strong!
Back to that chart however – $1300 and the region just below it has been confirmed as a good level by Commercial hedging interests to lock in gold prices. Until such time that price can clear this level, that is the current ceiling in the range that has held gold since April.