From the Trading Desk
After failing at its 100 day moving average yet again last week, gold has now traded lower for five consecutive sessions. Dating back to June of this year, the 100 day moving average has forcefully rejected gold on three separate moves up. It certainly looks like someone is trying to protect this level. US Mint data showed that gold coin sales totaled 147,500 toz during the month of September, this is up more than 100% from the same time period last year. While demand for gold is certainly up, this huge increase is probably more a function of the lack of fabricated silver in the market. Most silver is either delayed multiple months or completely sold out so physical investors are forced to switch funds that would be going to silver into gold instead. Gold remains stuck in a range with $1,146.50 (100 DMA) as the ceiling and psychological support of $1,100 as the floor.
Below is a post I made to an article on Seeking Alpha. It explains where my thinking is at present; http://seekingalpha.com/article/3542546-gold-what-is-going-on#comment-61108106
Dollar up, gold down; since the 2011 timeframe you mentioned when gold started to falter.
To have a weaker dollar, which we should because of the lousy economic data, would by default mean a higher Yen, Euro, Pound, etc. that make up the Dollar Index. Japan and Europe, which make up 71% approximately of the Index, are in worse shape than the U.S. with their Debt to GDP ratios.
Right now it is “perception” that is causing money to “flow” to U.S. treasuries, viewed as a more liquid safe haven than gold at present and this should continue a bit longer as we continue the deflationary credit contraction that has only been delayed by bouts of Fed QE here. Perception is the key here. If you live in many of these other countries, like even Russia or Latin America, and see the problems forming there, who do you look to for safety? Answer: U.S.
I still see gold under $1,000 but see a push to $850 possibly but I will write my “all in” article at $900 gold and have good reasoning for it that I will share as to why. I do have one fear that the deflationary episode can be worse than I even think it can be, which could possibly alter my thinking, but I am confident the Fed will implement more QE and yes, this time it will be different for gold when/if this occurs.
My last article here on Seeking Alpha called that $25 move up in gold a “dead cat bounce” and even though I ticked off some cat lovers who don’t understand investment terminology with my title, the timing couldn’t have been better.
http://tinyurl.com/prz… (my daily thoughts)
Nice to see you talk about the deflationary aspect of things. You don’t get that too many places as most don’t understand it (especially the Peter Schiff, Mike Maloney, John Williams and Gerald Celente crowd who continually call for the dollar to crash, hyperinflation and buy gold, buy gold, buy gold). Disclosure: I sell gold for a living.
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
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.