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Syrian Breather
As we wait for word on what will happen next on the Middle Eastern front, traders decided to take some profits in gold after this morning's spot rise to 1430 and head for the sidelines. Our intelligence has it that there are not a lot of new shorts entering the market, but that world events are becoming so edgy that a good deal of money is sitting out.
Of course, you wouldn't know it from the rebounding equities markets.There is a breather of sorts today, though, as resolutions are prepared for UN consideration and some national parliaments. But it is true for gold.
Silver is another story. It surely has benefited from the run up to military action in Syria, and it shared in the profit-taking move that affected gold. However, since about half of silver's price is contingent upon physical use, it should be noted that those in the physical market are describing the white metal as oversold.
A strengthening U.S. dollar today also hurt the precious sector, with the greenback knocking gold down about 0.35% while regular trading was pulling it up about 0.44%. That gives a scant 0.09% gain at 4:30 NY time. The drop in silver was split evenly between the dollar-strength effect and the regular trading drop.
Additionally, for those who move in the currency-gold-crude trade triangle, today was an excellent day to buy either straight crude or Brent. That bandwagon is crowded although, like all historical narratives, the Syria crisis will come and go. Much of the money for oil trading, as for today's rise in equities, is flowing out of Middle Eastern exchanges into American safe havens. The Dubai index has slipped 7% this week.
Legendary commodities trader Jim Rogers noted, "No matter how well the plans are made, strange things happen in war and who knows what unintended consequence will come."
Housing data in the U.S. was overshadowed by geopolitical tensions and so met a muted market response. The news isn't great from a nationalistic view, but it is good for gold.
The National Association of Realtors reported that U.S. pending home sales fell 1.3% in July, more than consensus forecasts for a 0.5% fall after a 0.4% loss in June. This would seem to be another brick in the wall that will keep the Fed from executing QE3 tapering in September.
Even though there has been some buying by gold trusts, physical demand is ebbing in Asia as prices run higher along a trend-line.
For a few days, it will be all Syria all the time. So, other news will take a backseat.
"We are seeing the risk profile for the credit market shift in favor of gold in the near term until the contour of the Syria crisis is better understood," said Ed Lashinski, director of global strategy and execution for RBC Capital Markets' futures group.
Wishing you as always good trading,
Gary S. Wagner Market Forecast:As we have watched this market rally off of its lows at 1280, it has been characterized by its aggressive rallies followed by sideways market activity (consolidation). However today’s trading activity has been a little bit different. After reaching an intraday high of 1435 we have seen the market backfill, and retrace as price move back to unchanged on the day. Whether or not this is significant can only be determined as price unfolds in the future. Although I’m not extremely concerned, diligence and a watchful eye is absolutely necessary in this area. As long as gold can trade effectively above $1400 I believe it’s forming a base that will move it to its current major resistance above 1435. Today’s show will look at upper-level resistance areas, both major and minor to determine possible price points for our exit strategy. Silver has had a much larger single day correction than gold. After moving to an intraday high of 25.24 the market has backed off substantially and is currently trading $.16 lower on the day at 24.47. As you know from our recent shows over the last few weeks we have identified this price point is a major resistance area for silver. As I do believe silver should move in tandem with gold we will also apply diligence in viewing the market to exit our current trade at the proper time.
Proper Action:
Maintain Long Gold @ 1401.80 Stop below 1382
Maintain Long Silver @ 24.29 Stop below 22.90
Gold COT
Silver COT
COT LINK See previous weeks in Historical Commitments of Traders Reports.
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Gary S. Wagner - Executive Producer