Short-Covering Rally Ends With A Bang

November 10, 2014 - 4:41pm

 by Gary Wagner

As we projected, the short-covering rally we saw late last week flopped. In fact, it wasn't really a short-covering rally, but rather a small uptick that was seized upon by opportunistic buyers who bid gold up and then sold out at the first quavering moment.

No fundamentals are in place to help with the promise of a big gold rally. (Unless you count eastern Ukraine.)

Equities once more are headed up, their rally pounding across the battlefield. Last week we compared the equities to a wild horse and gold to salmon swimming upstream. Nothing has changed.

U.S. crude and Brent are continuing their slide, although a further decline will now play cat-and-mouse with production costs, winter weather and stockpiles. Dollar strength weighed on energy prices and gold, but not to the extent that believers in lower prices for both commodities did.

One thing further buoying the stock markets today is a wider opening of China's investment apparatus to outside traders and investors. Wall Street gets it right because, after all, despite all the talk of Chinese "reserves," the greatest reserves in the world lie in private American hands, followed closely by Europe. That money is always looking to make money. When we say private, we mean non-governmental hands. So, if a certain bank or corporation invests in China, it will make money.

"The gold market still looks vulnerable,'' Simon Weeks, head of precious metals at Bank of Nova Scotia, said. "There are a lot of people who'd prefer to see positive economic data, equities higher, ETFs lower, and I don't think anything's going to change that in the short term."

Russia is now allowing the ruble to float. We think that spells further strength for the dollar. And you all know what that spells for gold.

The momentum of the U.S. economy is driving practically everything worldwide, and in spite of the critics of so-called fiat money, the dollar is one big king, fat and gaining.

EDITOR'S NOTE: Please be aware of this month's travel and holiday schedule, which will cover the period from the 13th through the 30th. Thanksgiving falls within those days. Additionally, during that period, I will be in Indonesia, lecturing to key gold traders there. The time differential will make it necessary for me to send out the regular fundamentals (upper portion) of the newsletter on a at the usual time. Videos timing may be different. You will receive special notification immediately following the release of a new video - on the website. Of course, trade alerts will not not change. I will monitor markets as usual and have all equipment necessary to produce videos. Thank you.

Wishing you as always, good trading,

Gary S. Wagner - Executive Producer

Sentiment Indicator:

Gold Forecast: Proper Action

Approximately one hour prior to the open of Comex gold we sent out a special trade alert recommending that our subscribers initiate short positions in gold. Traders that took that call should be short roughly at 1167. I also suggested placing a protective buy stop at 1183. Therefore:
Maintain current short position at 1167
Maintain current stop at 1183

Gold Market Forecast

As traders began the week in Australia, gold opened much weaker, with absolutely no follow-through evident from Friday's dramatic $38 rise.

Initially on Friday I looked at the possibility that the recent low at 1131 would find support and we might see some sort of a bounce and higher pricing in gold.

Very quickly, as the day progressed, it was quite evident that that was not to be and we saw an overall deterioration in gold prices.

That prompted our trade alert which we sent out approximately an hour to an hour and a half prior to the opening of gold in New York.

Today's video is a must-see report as I will go over in complete detail the current trade we are in. We will speak about the activity that led up to the trade. We will look at our current stop placement in detail and why we positioned our stop at that price point. Lastly and most importantly we will look at our exit strategy and our goal for this current trade.