Holding Patterns
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Submitted by Gary S. Wagner on Friday, February 21, 2014 - 16:21.
Holding Patterns
There are a number of conflicting currents pushing gold lower, higher, then lower again as the afternoon wears on in New York.
Although not a dire factor, events in the Ukraine have been lending some support to gold. The situation there, in spite of the needless violence of recent days, seems to be on the road to resolution.
Also, as gold pushes higher buyers in Asia, most particularly in China, back off physical purchasing waiting to see what might happen next. While many physical purchasers are not technically-minded in the true sense, they have a built in calculus or trigonometric reaction to prices and often react to what professionals term a "psychological" resistance level.
A psychological resistance level is an imaginary barrier that has little to do with the charts we generate and study here at The Gold Forecast, for instance. Big round numbers are the most potent of those resistance levels. Even though a true technical level might be 1304, many buyers (and some traders) will choose 1300 as an important level.
In simple terms, they play mind games with themselves.
Generally, today markets are up slightly or off slightly depending on where you look. U.S. equities are up less than 1/10th of a percent, crude is down, the dollar is down and the 10-year bond is down.
Gold and silver are following that same modest up-pattern at the moment. But both are off their earlier highs quite significantly. Gold began bumping into its current resistance level of 1330 (no, not a psychological level but a real technical resistance level) and silver is up 2 cents, significantly off its high of 22.06, hit shortly after 1:30 in New York.
On a more fundamental level, gold has been taking its cues this week from softer economic data reflected via certain private and government indices around the world. But even those are sending mixed messages.
China's manufacturing has been down. France, ditto. But Germany is up, the U.S. is neutral, and it appears that consumer confidence is up everywhere except Japan, which appears to be in a permanently dour mood when it comes to spending. Here's a good question to ponder: why don't Japanese people want to spend money? (Hint: think retirement.)
As to the U.S., yesterday's data showed that existing home sales fell 5.1% in January, compared with a 0.8% drop in December. Some experts have said that the drop is not due to the extremely bad winter the U.S. has been experiencing. Hard to swallow that argument. Who are you going to believe? Them or your lying eyes?
Finally... sometimes markets become directionless. Fridays are a good day for that in the United States, particularly in the precious metals markets.
Physical buying is done for the moment in Asia, Europe and pretty much in New York. No one wants to stake out a big spot or futures contract and fret until markets open in Asia Monday morning.
So, the people left trading in late Friday floor work are technical guys, small traders looking to lay low with no position over the weekend, or just folks who wish they had been able to quit early.
As always, wishing you good trading,
Gary S. Wagner - Executive Producer