-- Posted Thursday, 11 June 2009 | | Source: GoldSeek.com
Dollar Volatility
Gold likes to tie itself to outside themes. It appears that the US Dollar is gold’s “theme of the day”. Gold doesn’t seem to have tied itself to crude oil or stock prices, as both have rallied sharply. In fact crude oil is making yearly highs and stock indices are very close to doing so.
So what does this mean? It means that gold is not just yet buying into the inflation theme since crude oil has doubled in price in under a year and is, as I am writing this report making a new high for 2009. Stocks in most cases have recently made yearly highs. The Dollar however is going sideways to lower, which gives it a neutral to bearish short term bias.
So gold is marking time, which is what gold has normally done in past summers. The problem I’m having is that nothing is typical this year. Crude Oil prices are running up, interest rates are moving up as they have in the 10-year note, which just hit 4%, a new high for the year and stock indices look with a convoluted bullish view at the economy.
The one temporary constant seems to be gold’s relationship to the Dollar. It has an inverse relationship right now and as long as the market stays and keeps focused on this, it becomes a tool to trade off of. The most recent low in June Dollar Index is 78.375. If this price is violated, gold should rally. If gold breaks when or if the Dollar breaks down through this price, this relationship ends.
Seasonal Story
The chart below was supplied by The Moore Research Institute.
The Seasonal Gold Chart above displays gold price movement in two ways. It goes back 15-years to get a more current average of prices and back 35-years showing a longer averaged time frame. Historically speaking, prices trends are fairly erratic in summer months. It’s at summer’s end that uptrends often grab hold.
Keep in mind that the above chart is simply a road map of what prices have done going back over a 35-year period. Divergence can occur, but isn’t likely too last too long given market tendencies.
Daily Chart
In past week’s letters I had been bullish. Last week I pointed out that the 992.1 level looked as though it had the potential to create a top and that prices might retreat back down to the 18-Day Moving Average of Closes since Stochastics had lost their embedded status. Here is last week’s chart.
As the chart above shows, Stochastics lost their embedded status only to regain and then lose the embedded status again. At that was occurring, in my Twice Daily Update I wrote that the “line in the sand” as I called it was $992.1. Without the market immediately moving back up and over that price, a Bull Trap was being laid that I felt could cause gold to fall back to its 18-Day Moving Average of Closes.
That as you can see on the chart below is exactly what has occurred.
Conclusion and Reccomendation
Last night those who read my Twice Daily Recommendation report went short August Gold near 958.4 and took profit against 950 on their position.
I remain bearish as long as 964.5 is not taken out.
My thoughts remain that short sales against the 18-Day Moving Average of Closes, currently at 958.7 make sense with a stop over the last Swingline High, shown as 964.5 on the above chart.
Given the Dollar is in a trading range, not a trend just does mean that movements in the Dollar will influence this trade on a day to day basis.
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-- Posted Thursday, 11 June 2009 | Digg This Article
| Source: GoldSeek.com
