Turbo Steroid Moves And Other Factors

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Yes, that’s what they’re called…

Right around noontime in Asia, in the Hong Kong market, everyone breaks for meals practically at the same time. This slows the already meager Asian gold trade stream to a trickle. Someone has gotten hip to this herd activity and begun intensive algorithmic trading, shoving the price of gold one way or another almost at will. By the time work resumes in Asia, and before the rest of the world’s traders have rolled out of bed, the “damage” is done.

This is a new phenomenon, beginning as recently as October 31 of this year, although now an effort is under way to assess trading history earlier in the year, and to see if “tests” were run to measure the viability of the approach.

The strategy apparently is a way to profit off the current volatility in the dollar-yen trade. How long this attack will work is not certain, but it seems as if staggering lunch hours is a fairly simple solution. And, naturally, the dollar-yen volatility won’t last forever.

Anyway, that accounts for unaccountable rises and drops in gold prices that begin in the Asian futures markets but do drag the spot market along, which cannot resist.

In other news, the U.S. gauge of leading economic indicators rose 0.9% in October after rising 0.7% in September. The October reading was well above prognosticators’ consensus figures of around 0.6%.

Yesterday Bloomberg reported that starts for U.S. single-family homes rose for a second straight month in October and building permits neared a 6-1/2-year high, suggesting the housing market was still on a recovery path.

Inflation also rose in the U.S. in October 0.2%. All measures, no matter what is included or excluded, show price firming.

Manufacturing activity in the mid-Atlantic region also improved significantly. As high-tech knowledge becomes a fact of life in U.S. manufacturing, the Northeast and the Pacific states will be important bell weathers in factory output since those regions have such highly educated workforces.

All the gauges tell us that the U.S. economy is robust and the trend-line is up. Will they tell the Fed that rates should be raised soon? Very soon? Or will the central bank stick to its timetable of later next year?

The answers to those questions are, of course, key for understanding the direction of gold prices. Whether in New York, London or Hong Kong at lunch time, the digestion of the above-cited data will lend a new tone to prices Friday and for the shortened trading week surrounding Thanksgiving.

Gary S. Wagner - Executive Producer