From the Trading Desk
The USD, which is at a two month high against the euro and a three week high against a basket of currencies, continues to dictate the direction of the precious metals. Gold has traded lower for five consecutive sessions now and finally broke decisively below its 50 day moving average, a level that it more or less held above for the prior three days. Unable to attract bids in the face of the strong dollar, gold collapsed to finish on the lows in the mid-$1,220s today. Next support is coming in at in the $1,210 – $1,213 area, a double bottom from back in late March/early April and also where the 100 day moving average is waiting. Silver finally broke cleanly below its 50 day moving average today as well and will look to consolidate and find support at $16.
In my last article I wrote for Seeking Alpha, Enjoy the Gold Bull While You Can, I gave a range of where I thought silver and gold could go. For gold it was $1,300 – $1,400 and we hit just above $1,300. For silver it was $17-$18 and we hit $18. I made reference in that article and constantly in my Current Thoughts here that the dollar still matters as an indicator for where gold would go next. In that article I also gave warnings on mining stock holdings saying the following;
I don’t have a problem being in cash for now and soon taking a position in the Direxion Daily Gold Miners Index Bear 3x Shares ETF (DUST) or the Direxion Daily Junior Gold Miners Index Bear 3x Shares ETF (JDST), but there is plenty of time to profit in these if I am right about a coming reversal.
The dollar was higher today and both gold and silver took it on the chin again. It’s going to take a move over 86-88 with the dollar for gold to get knocked down more. Since nothing goes straight down, we might see a bounce but I will tell you this, there is some momentum down in the miners right now. This is occurring with an overall higher stock market and if we get a reversal in stocks, the gold miners could get hammered more.
Gold will weather this better despite the downturn today but is still overall weak right now. Same goes with silver. Copper, which I mentioned yesterday as being quite week, got a little boost today with the labor union issues that are developing. Platinum can be affected too.
I still think the dollar can move much higher and this will trump any labor issues for the metals, whether copper, platinum, gold or silver. See yesterday’s Current Thoughts and my past article referenced above for reasons why.
Related posts
About Doug EberhardtDoug Eberhardt is a 28 year financial services veteran and precious metals broker selling gold and silver at 1% over wholesale cost. Doug has written a book to help investors understand how gold and silver fit into a diversified portfolio, how to buy gold and silver, and what metals to buy. The book; “Buy Gold and Silver Safely” is available by clicking here Contact phone number for Buy Gold and Silver Safely is 888-604-6534
Disclosure:
Commodity Futures Trading Commission Futures and Options trading has large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the futures and options markets. Don’t trade with capital you can’t afford to lose. This is neither a solicitation nor an offer to Purchase/Sell futures or options. No representation is being made that any account will or is likely to achieve gains or losses similar to those discussed in this outlook. The past track record of any trading system or methodology is not necessarily indicative of future results.
All trades, patterns, charts, systems, etc. discussed in this outlook and the product materials are for illustrative purposes only and not to be construed as specific advisory recommendations. All ideas and material presented are entirely those of the author.