Waiting For The Winds

One of the things sailors on the open ocean fear most - after a violent storm - is ending up becalmed. No wind, no breath, no movement.

The gold market has fairly much discounted the brouhaha in Ukraine. (There may have been a touch of haven demand today.) Yes, the rhetoric is like a spicy tuna roll with extra wasabi, but we're thinking that the Russians are speaking foolishly while acting wisely. So far, anyway.

By this time, both Moscow and the West have weighed up the ramifications of a Russian action beyond Crimea and the countervailing sanctions that would surely be imposed. The bottom line is that Russia, besides becoming a pariah, would suffer an enormous economic hit that could take decades to recover from.

There was also a modest amount of short covering today, but real bargain hunters are shy of stepping in just yet to propel gold back above 1300.

Physical demand in Asia, which tends to provide some support at lowered prices, failed to emerge after Tuesday's drop as buyers expect more price declines. Demand has been quiet in the world's top buyer, China, as a weaker renminbi made it more expensive to buy dollar-denominated gold. The renminbi hit a 16-month low against the dollar today.

So, where do we go from here?

The West has no clear impulse to impose sanctions right now. The Russians are cogitating on what might happen to them should sanctions be imposed. China is not offering buying support. India can't offer it. And U.S. economic data is a B-minus, a good enough grade to keep the big engine--that-might moving but not a high enough grade so that gold prices collapse.

While you know from other portions of the newsletter that there are distinctive technical signals, there are also certain levels - based on technical analysis - at which people emotionally start buying (or selling) gold. eyes wide open, everyone.  

As always, wishing you good trading,