Attack Of The Mutant Dollar

When the dollar grows this strong, it's almost impossible to resist. As the trading day winds down, the dollar has pulled gold down over $9.00. The dollar is up against the euro by about 0.70%, unusual in some respects because it's clear that the Fed is going to keep rates where they are for some time to come, and certainly the Europeans can't lower interest rates unless they go negative.

Even very robust regular trading wasn't enough for gold to counter-attack against the dollar's superior forces. On the "regular" side of the equation, gold would have been up over $5.00.

As it is, gold is down overall by $4.00. Silver is suffering a similar fate, dragged down by the dollar's strength. However, platinum and palladium, despite the dollar, both had enough regular trading momentum to push to the upside.

Shockingly, crude oil is down yet again today by big percentages - 4.6% on settlement, although it has recovered a small bit in late afternoon trading. Nevertheless, it is flirting madly with the $82 level. Almost more remarkably, North Sea Brent seems ready to dive below the $85 mark.

The decline in oil prices is punishing the energy sector stocks. What had looked like a positive day on Wall Street turned negative as the closing bell approached.

An important development is occurring in gold futures. Gold futures rose to the highest in almost four weeks as concern that economic growth is slowing spurred demand for a haven asset. Often, the near-term futures contract will reflect a hedge against rising spot prices as traders maneuver against bigger movements in the present. Currently the spread between spot and the December futures contract is slightly more than a dollar, reflecting, it seems, a belief that gold is going keep its traction as a safe haven bet.

This is in reaction to what is shaping up to be a worldwide economic slowdown. The biggest question is how well the U.S. - and to a lesser extent China - can weather the coming squalls. Europe and a number of second-world developing economies will have trouble riding it out. Russia is in trouble. Brazil is showing signs of growth stress.

Germany cut its growth forecasts today while investor confidence there fell to the lowest level in two years as recession concerns continue to grow.

Yet, as we will see in the technical portions of this email, gold is bumping against fairly clear-cut resistance levels. The question is if it can break on through those levels.

As always, wishing you good trading,