-- Posted Wednesday, 3 June 2009 | Digg This Article
| | Source: GoldSeek.com
Aug Gold: Open= 983.2 High= 992.1 Low= 961.5 Last= 965.3 -19.1
August gold prices traded to a new high on this leg and then failed miserably to hold up against a robust move in the US dollar index. Bullish sentiment of the dollar reached 13% recently, meaning that 87% of traders were bearish. A market with that type of condition can only keep going down for so long before the movement exhausts itself.
The reversal today may have been prompted by reports that Asian monetary authorities have signaled their intentions to continue buying US dollar denominated assets even if the credit rating of the US is downgraded. After the Japanese and British had their credit ratings cut recently, many felt it was only a matter of time before the US would face similar pressure.
With the BRIC nations meeting in a few weeks to discuss the global currency reserve situation and Treasury Secretary Timothy Geithner’s humiliation in Beijing this past weekend, it would appear that perhaps the market has priced in as much poor news of the US dollar as possible for now. Thursday and Friday could bring fresh news though, with the initial jobless claims figure released tomorrow AM and then April’s unemployment figures on Friday. Expectations are for jobless claims around 532,000.
Gold bulls will be wholly disappointed that the $1,000 level was not breached before a major correction occurred, but such is life. There are quite few fundamental reasons to be bullish of the US dollar over the near term, even if nations continue to buy US assets. While China continues to buy treasuries in order to protect its own interests, it is using available cash surplus to buy commodity reserves to protect against future inflation. China also is beginning to trade in local currencies, such as the Brazilian Real in order to reduce exposure to the dollar.
Support at $960 held today but it would not be too surprising to see prices head lower until the technical picture recovers. Support comes in near $943 and $930, which represent the 38.2% and 50% Fibonacci retracement levels respectively.
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-- Posted Wednesday, 3 June 2009 | Digg This Article | Source: GoldSeek.com
