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.
Doug 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
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